26th November – Editorials/Opinions Analyses

Contents

1. Jobs, exports and the trade pacts link
2. Refining trade union strategies to strike a chord

JOBS, EXPORTS AND THE TRADE PACTS LINK

Context:

India’s economy contracted by 23.9% in the first quarter of 2020-21. According to the Reserve Bank of India (RBI), the Indian economy will further contract by 10% in the July-September quarter.

Relevance:

GS Paper 3: Indian Economy (issues re: planning, mobilisation of resources, growth, development, employment); Inclusive growth and issues therein.

Mains Questions:

1. India needs to shed its exaggerated fears of trade agreements to create new jobs — the country’s biggest challenge. Discuss. 15 marks
2. Among several factors for India’s potential growth, savings rate is the most effective one. Do you agree? What are the other factors available for growth potential? 15 marks

Dimensions of the Article

• Status of unemployment in India
• Challenges to generate more employment
• Measures to create more jobs
• Way forward

Status of unemployment in India

According to Periodic Labour Force Survey Findings 2018-19

• The Labour Force Participation Rate (LFPR) in India has declined to 37.5% in 2018-19 from 39.5% in 2011- 12 (NSSO).
• The Worker Population Ratio (WPR) in India has declined to 35.3% in 2018- 19 from 38.6% in 2011-12 (NSSO).
• Large Gender Gap in labour participation and worker to population ratio:
  • For males, the LFPR is 55.6% whereas for females it is 18.6%.
  • For males, the WPR is 52.3% whereas for females it is 17.6%.
• Average Unemployment rate hovers around 5.8% with male unemployment rate at 6.0% and female at 5.2%.
• Employment status of workers:
  • Rural areas have higher percentage of self-employed people: About 58% of the rural workers and 37% of the urban workers are self-employed.
  • Urban areas have higher percentage of regular wage employees: About 13% of the rural workers and 50% of the urban workers are regular wage/salaried employees.
  • Casual workers in rural areas are more than double of casual workers in urban areas.

Reasons for unemployment

• Economic slowdown: Currently, sectors like auto, real estate, banking, construction, agriculture and MSMEs – all of which contribute a considerable amount towards India’s GDP – are facing a sharp demand slowdown.
• Preference of voluntary unemployment: Voluntary unemployment is preferred over low-paying jobs (especially when one paid high educational fees) i.e. adopting the ‘wait-and-watch’ policy for the right job profile and remuneration.
• Downgrading of employment: i.e. hiring of candidates, with higher but superfluous qualifications, for elementary positions (e.g. news reports of PhD holders applying for peon vacancies)
• Lack of Industry– Academia cohesion: Disparity between colleges’/universities’ curriculums and industry requirements/ expectations.
• Lack of vocational training: which renders many unemployable.

Persistent Challenges to Generate more employment

• Despite improvements over the 2017-18 survey in indicators like Labour Force Participation, Female Participation rate and unemployment rate, experts feel it would be a challenge to retain the falling trend in unemployment rate in 2019-20.
• This skeptism is due to the long nationwide lockdown between March and June to prevent the spread of Covid19, resulting in job losses across sectors. For instance, according to monthly data from the Centre for Monitoring Indian Economy, unemployment rate in India shot up significantly from 7.87% in June 2019 to 23.48% in May 2020.
• Global Employment Scenario: World Employment and Social Outlook: Trends 2020 (WESO) report by ILO.
  • Slow Pace and skewed structure of economic growth in low-income countries: Between 2000 and 2018, the employment share of agricultural and elementary occupations declined by only 6 percentage points in low-income countries.
  • Labour Underutilization: More than 470 million people worldwide lack adequate access to paid work.
  • Shortage of job expected to continue: Global unemployment is projected to increase by around 2.5 million in 2020.
  • Issue of getting decent work: Currently working poverty (a parameter of having decent work) affects one in five of the global working population. (Working Poverty is defined as earning less than USD 3.20 per day in purchasing power parity terms.)
  • Rise is Inequalities: Related to gender, age and geographical location continue to plague the job market, with these factors limiting both individual opportunity and economic growth.
  • Obstacle to women and young people: In 2019, the female labour force participation rate was just 47 per cent, 27 percentage points below the male rate (at 74 per cent). There is strong regional variation in gender disparities in access to employment.
  • Future risks: The rise in trade restrictions and protectionism, which could have a significant impact on employment.

Measures to generate more employment

• According to economic survey 2016-17 Large numbers of good quality jobs can be created only in sectors that are labour intensive, and where India has a comparative advantage, such as apparel, leather goods, value-added agriculture and so on.
• These job-creating sectors depend not only on the domestic market but, significantly, on export markets. More than one-half of the leather goods and one-third of the apparel produced in India are exported to other countries. India, therefore, needs to find more export markets, nurture them, and sustain them amid intense global competition.
• Merchandise exports also create supporting jobs in warehousing, transport, stevedoring, container stations, shipping, ship chandling, ports and export financing. It is therefore very important to encourage and incentivise exports to be able to create many new jobs in the country.
• A recent research study by Arvind Subramanian and Prof. Shoumitro Chatterjee have shown that during the period since 1995, India did exceptionally well not only in exports of services such as information technology but also in the exports of manufactured goods and other merchandise. India was the third fastest growing exporter of manufactured goods in this period with 12% annual growth, after Vietnam and China.
• Shift development focus towards labour intensive sectors to create more jobs, such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments.
• Cluster development to support job creation in micro, small and medium enterprises (MSMEs), with a specific focus on incentivizing these MSMEs to grow bigger to generate more jobs.
• Formalisation of workforce: where growth in jobs must be inclusive and new jobs need to be decent and secure with better work conditions including social security benefits and the right to organise.
• Expansion of the organized sector to create well-paid high productivity jobs.
• Greater focus is required on better and relevant skilling opportunities so as to compete with neighbours and global competitors.
• Expansion in export market by developing Coastal Employment Zones, using better technology, and improving on quality to remain competitive.
• Incentivizing industry: Reducing corporate tax, easing lending norms and relaxing GST rules on a short-term basis are some of the reforms that could give companies more room for hiring and boosting productivity.
• The public investments in health, education, police and judiciary to create many government jobs.
• The government should introduce reforms to quell the wage gap and get more women to become a part of the country’s workforce.
• India will have to shed its service-led structure and transform into an innovation-driven economy and focus on becoming a creator rather than an adopter.

Way forward

Exports are one of the main engines to revive economic growth and create many new jobs. To revive exports, India needs greater and frictionless access to global markets. Protectionism and autarky will take us back several decades. Wisdom lies in learning from the past, being smart and resilient in the present and securing our prosperity in the future.

REFINING TRADE UNION STRATEGIES TO STRIKE A CHORD

Context:

Ten central trade unions (CTUs) have called for a nation-wide strike on November 26, 2020 to condemn what they consider to be the anti-people, and anti-labour economic policies of the government.

Relevance

GS Paper 2: Pressure Groups & Formal, Informal associations (and their role in the polity)

Mains Questions

1. How do pressure groups influence Indian political process? Do you agree with this view that informal pressure groups have emerged as powerful than formal pressure groups in recent years? 15 marks

Dimensions of the Article

• What are the Labour Union?
• History of Labour Unions in India?
• Challenges faced by trade union in capitalistic economy
• Labour Code on Industrial Relations Bill 2015
• What are the issues associated with this bill

What are the Labour Unions?

A labor union, officially known as a “labor organization,” is an entity formed by workers in a particular trade, industry, or company for the purpose of improving pay, benefits, and working conditions. Also called a “trade union” or a “worker’s union,” a labor union selects representatives to negotiate with employers in a process known as collective bargaining.

History of Labour Union in India

Pre-1918: The genesis of the labour movement in India

After the setting up of textile and jute mills coupled with the laying of railways in the 1850s, worker atrocities started to come to light. In 1890, M.N Lokhande established Bombay Mill Hands Association. This was the first organised labour union in India. Features of the labour movements in this era:

• Leadership was provided by social reformers and not by the workers themselves.
• The movements in this era mainly concentrated on the welfare of workers rather than asserting their rights.
• They were organised, but there was no pan India presence.
• A strong intellectual foundation or agenda was missing.
• Their demands revolved around issues like that of women and children workers.

1918-1924: The early trade union phase

This period marked the birth of true trade union movement in India. It was organised along the lines of unions in the industrialised world. AITUC, the oldest trade union federation in India was set up in 1920. It was founded by Lala Lajpat Rai, Joseph Baptista, N.M Joshi and Diwan Chaman Lall. Factors that influenced the growth of the movement:

• Spiralling prices during War and the mass entrenchment of workers that followed it led to low living standards. Also, the wretched working conditions added to their woes. Hence, they sought collective bargaining power through unionisation.
• Development of Home Rule, the emergence of Gandhian leadership and the socio-political conditions led to the nationalist leadership taking interest in the worker’s plight. Workers, in turn, was looking for professional leadership and guidance.
• Russian revolution and other international developments (like setting up of International Labour Organisation in 1919) boosted their morale.

1925-1934: Period of left-wing trade unionism

• This era was marked by increasing militancy and a revolutionary approach. It also saw multiple split-ups in the movement. Leaders like N.M Joshi and V.V Giri was instrumental in moderating the movement and further integrating it with the nationalist mainstream.
• The government was also receptive to the trade union movement. Legislations like the Trade Unions Act, 1926 and the Trade Disputes Act, 1929 gave a fillip to its growth. It bestowed many rights to the unions in return for certain obligations. This period was marked by the dominance of the left. Hence, it may be referred to as the period of left-wing trade unionism.

1935-1938: The Congress interregnum

• This phase was marked by greater unity between different unions. Indian National Congress was in power in most of the provinces by 1937. This led to more and more unions coming forward and getting involved with the nationalist movement. In 1935, AIRTUC merged with AITUC. Different legislations were passed by provincial governments that gave more power and recognition to the trade unions.

1939-1946: Period of labour activism

• The Second World War lowered standard of living for the workers further and this led to the strengthening of the movement. The question of war effort created a rift between the Communists and the Congress. This, coupled with other issues, led to further split in the movement.
• Legislations like Industrial Employment Act, 1946 and Bombay Industrial Relations Act, 1946 contributed to strengthening the trade union movement. In general, the movements got more vocal and involved in the national movement.

1947-present: Post-independence trade unionism

• It was marked by the proliferation of unions. INTUC was formed in May 1947 under the aegis of Sardar Vallabhbhai Patel. Since then, the AITUC has come to be dominated by the Communists. Hind Mazdoor Sabha was formed in 1948 under the banner of Praja Socialist Party. Later on, it came under the influence of Socialists. Bharatiya Mazdoor Sangh was founded in 1955 and is currently affiliated to the BJP.

Problems faced by the trade unions in capitalistic economy

• Uneven growth: They are concentrated in the metropolises, largely catering to organised sector. Rural Agricultural labour and small scale labour are grossly underrepresented.
• Low membership: Trade union membership is growing, but the vast majority of India’s labour is not part of any trade unions. This reduces their collective bargaining power.
• Weak financial position: Membership fees are set too low (25 paise) by the Trade Union Act, 1926. They are particularly disadvantaged against corporate lobbying groups that are flush with cash.
• Political leadership: Careerist politicians and vested political agenda mean that worker interests are side-lined. Since the leadership may not be from the labour force, they are held captive to party politics. This lead to further exploitation.
• The multiplicity of unions: Bargaining power is diluted and it is easy for employers to divert the attention of the labour.
• Inter-union rivalry: There are conflicts of interest and party politics between the unions.
• The problem of recognition: Employers are under no obligation to give them recognition. This means that docile unions get recognition and genuine ones may be side-lined.
• Diverse nature of labour: Most unions don’t have properly differentiated organisational structure to cater to different classes of labour. Eg: Differences between agricultural, formal and informal labour.
• Lack of public support: Especially post 1991, trade unionism is looked down as an impediment to growth and development. This has led to a general ebbing of the movement across the country.

Labour Code on Industrial Relations Bill 2015

Need for the Code:

• It aims to create greater labour market flexibility and discipline in labour to improve upon ease of doing business and also to encourage entrepreneurs to engage in labour-intensive sectors.
• It would replace three laws i.e. Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947.

Provisions of this Code

• It increases the employee limit from 100 to 300 above which, the government approval is needed for layoff/retrenchment/closure this provision has been criticized sharply by the labour groups and trade unions.
• It provides that 10% of workers shall apply (be applicant) for registering a trade union – this has also invited opposition from various worker groups and trade unions.
• For employers employing < 50 employees, the requirement to provide a minimum of 1 months’ notice and retrenchment compensation (severance) is to be removed.

Issues related to new Industrial Code Bill

• Under the new Industrial Relations Code, a trade union can be deregistered for contravention of unspecified provisions of the code. It simply says that deregistration would follow in case of “contravention by the Trade Union of the provisions of this Code”.
• The possibility of deregistering a trade union in this unspecified manner shifts the balance completely in favour of employers, who continue to enjoy protection under the Companies Act. This violates the principles of equality before the law and of natural justice.

Way forward

The New Labour Codes try to bring balance between facilitating employment growth and protecting workers rights. The government should address the apprehensions of trade unions

give more voice to workers so they can live their life with dignity.