Field notes on industrial wages in India

FIELD NOTES ON INDUSTRIAL WAGES IN INDIA by Deepak Lal Series: Studies in Employment and Rural Development No. 65 Division: Employment and Rural Development Department: Development Fconomics Development Policy Staff International Bank for Reconstruction and Development This paper was prepared as part of the research on the India component of RPO 671-84 on "Wage Trends and Structures in Developing Countries". It is based on interviews with a number of industrial firms (both large and small scale) in India. The purpose of these interviews was to see to what extent the considerations concerning problems of monitoring job performance providing adequate incentives and the adequate provision of firm specific human capital were factors in the wage determination process in the modern industrial sector in India. These interviews were thus meant to provide some weak "tests" of the so-called modern neo-classical theories of industrial wage-structures. As much of the work on industrial wages in developing countries has relied on a priori hypotheses, these interviews can be taken as being novel in so far as they attempt to ascertain what factors industrial producers in fact take into account in determining the wages of their employees. Washington, D,C., September 1980 FIELD NOTES ON INDUSTRIAL WAGES IN INDIA Table of Contents Page No. INTRODUCTION I. LARGE SCALE SHOE-MAKING, PUNJAB ......................... 1 II. LARGE SCALE OIL MILL U.P. ............................... 6 III. SMALL SCALE SOAP FACTORY ............................... 9 IV. LARGE PETRO-CHEMICAL PLANT .............................. 12 V. LARGE INDUSTRIAL HOUSE (CONGLEMERATE) ................... 16 VI. A LARGE PRINTING PRESS IN DELHI ......................... 19 VII. SMALL-SCALE PRINTING PRESS - DELHI ...................... 20 VIII. LABOUR LAWYER ........................................... 21 IX. TYRE AND FOAM RUBBER PLANT AND PLANTATIONS .............. 23 X. MISCELLANEOUS ........................................... 26 (a) Public Sector ................................... 26 (b) TU's and Industrial Estates ..................... 26 (c) Shipping ........................................ 27 APPENDIX I INTRODUCTION The attached field notes are based on interviews which I conducted in India during February/March 1980, in connection with RPO 671-84. The basic purpose was to see to what extent the recruitment,training policies,payment systems, and labour management problems of Indian industry could be provided with the cost minimising tvDe of exnlanations offered by modern neo-classical theories of internal labour markets, which are surveved in my article on "Theories of Industrial Wage Structures - A Review." Indian Journal of Industrial Relations, October 1979. The sample w9s not derived in any systematic manner. Some effort was made to interview large and small firms in some of the SSE research projects bore - holes. Otherwise my own contacts with variousidustrialists determined who (and what?!) I saw. Furthermore, of the more than 20 interviews I sought, some proved infructuous, in others not much new emerged. The attached notes, therefore cover the firms which provided material which I found interesting. The dominant impression, which I hope emerges is that firms are behaving as cost-minimisers, but at least in India and for the firms surveyed, the major costs seem to be those attached to "troublemakers", and.the resulting iMIediments to maintainirglabour discipline because of the existing complex legislation granting various legal rights to industrial labour and trade unions. The industries, firm size and geographical location are mentioned at the start of each summary. But the names of the firms and the individuals who talked to me have been suppressed in the interests of confidentiality. If anyone can nevertheless still identify a particular firm, he should (a) keep this knowledge to himself and (b) let me know, so I can try further disguises! I. LARGE SCALE SHOE-MARING, PUNJAB The company has two main factories. The one in Punjab employing about 1500 people and the bigger one in UP employing about 12,000 people. The Punjab factory specialises in producing canvass shoes. All workers in the factory are on piece rates. The factory was set up after Independence, at the request of PM Nehru and Rehabilitation minister Mehr Chand Khanna to absorb refugees from W. Punjab who were encamped in tents in the area. Most of the existing labour force dates from then. This has been supplemented by labour drawn from nearby villages and some from migrants from Eastern UP. The initial labour had no skills whatsoever in shoe-making, as before Partition most of them were traders or farmers. The company therefore got 26 senior operatives from their Pantnagar factory to train these workers. The training took about 6-8 months, for non-machine operatives and about 26- monts for machine operatives . Since then,any new labour that is required either through natural wastage or because of turnover is usually hired through existing workers. This is particularly so for new machine operators who are recruited chiefly from amongst the children of existing operators. The training of these operators takeabout 3 years. They are paid Rs 300 in their first year of training, 400 next year 500 in the third year and Rs 600-800 when they are fully trained. The machine operators get on average 1/2 the wages of their non-machine brethren. There does seem to be some pinching of trained labour from the factory by other shoe producers in the region. This applies to all classes of labour. The commonest method is to pay somewhat more to the operators raided from the firm. As the personal characteristics of the company's workers . seem to be fairly well known, to outsiders, they normally raid the best workers -2- who are most often then used to train other workers in their new employment. However, the company does not attempt to counter this loss of trained labour by offering to raise the wages of the departing labourer as this would tend to upset their wage-scales, (and those which are linked) particularly those in their major factory in Pantnagar. So their policy is to train more workers than they need to take care of this unavoidable raiding of some of their trained workers. The workers who were refugees and are not machine - operatives look upon their company employment as only part - time employment, of about 6 hrs. a day. Most of them have also set themselves up in trade and other small businesses. Also as refugees they were given houses worth about Rs 3,000 each in the area, soon after partition. The value of each of these houses is now nearly Rs60,000. These non-mechanical workers (looking upon their company employment as part time) do not evince any interest in upgrading their skills to become machine operatives as they "don't-think it would be worth the energy expended"! (More likely the opportunity cost of their time - in non company pursuits - is higher than the marginal increases in income that extra training would entail), similarly, the workers who have nearby rural link; also have farm incomes and they too look upon their company employment as only part time. The only workers who are wholly 'dependent upon company employment for income ("because they do not seem very enterprising") are those from East UP. They have set themselves up illegally in a shanty town on government land and are "praying that Sanjay Gandhi will take notice of their slum and clear it. For them they will be able to get a gift of some land and a house in a nearby resettlement colony." Some workers have left the firm, to set themselves up as small scale shoe producers, and the firm has encouraged them by giving them 6-8 months salary to finance start up costs, and by giving them sub-contracting orders for certain materials required in the factory. -3- The major influence on the level of wages is trade union activity and government legislation. The minimum wage itself is irrelevant as actual wages are well above this floor. More serious,from the viewpoint of the management,are the ievere legal difficulties in sacking workers. The legal procedures require that,first there must be an administrative pro- cedure in the factory to suspend the worker. This normally takes about 6-8 months and during this period the worker is entitled to 60-80% of their normal wage,. After this, the worker can appeal to a labour tribunal, which even though staffadby judges has in the past held against employers in over 80% of the cases adjudicated. This procedure can take upto a year. Even after this, the sacked worker caiappeal to the High court where the case can dr2gon for upto 10 years. Thus there are grave difficulties in the management's ability to sack workers. Knowing this, the TU's can demand wage rises roughly in keeping with the employers ability to pay. As long as business is buoyant,as it has been in what is still a sellers market, management is likely to agree to a wage rise. The firm now has a CPI linked DA payment, bonus, as well as a 3 yearly general wage adjustment. The structure of blue collar wages has not altered, though the differactiaLbetween workers and managerial staff has dwindled from 20 to 1 to 2 to 1, and this is now causing problems amongst white collar workers. The managementh response to the difficulty in sacking workers has been to raise productivity by not replacing workers lost through retirement or turnover. They have virtually not recruited anyone for the last few years. Of course, the rise in productivity is used by the unions to demand wage rises, but this does not worry the management as they can finance these wage rises out of the productivity increase. These productivity increases at a faster rate than wage rises are essential in order to compete with the small-scale shoe sector, which does not suffer for the same TU -4- disabilities and often does not pay excise taxes. Their wage costs are usually 1/3 of those in firms like the one being examined. Many large shoe firms have therefore become essentially marketing agents for the output of the small-scale sector in a kind of putting out system. Our firm too buys in about 10-20% of its output from the small-scale sector, but apart from quality control, does not negotiate on the input prices (particularly wage costs) of its sub.-contractor. It merely negotiates the purchase price of the shoes. This is because as a subsidiary of a multinational it is susceptible to hostile propaganda if it was suggested that it was using "sweated" labour in producing its shoes CPhotographs and an article in the Washington Post could do us immense damage if it showed poor informal sector "mochis" producing shoes which we sold")! Political factors have intruded into TU activity. After the last change in government, a union affiliated to the new government's party tried to start a strike on the grounds that the traditional union did not represent the workers. But when a secret ballot was held, most workers supported the traditional union and refused to accept a strike. The strike instigators tried intimidation but were then sacked as they were rounded up by the police and then had police records against them (which would make it difficult for them to get jobs in the future). Various politicians, the labour commissioner and administrators then tried to put pressure on ths' management to reinstate these workers, but the management held firm. In his view,part of the industrial relations problems were due to "namby pamby" management. Thus in a nearby factory the management did not hold firm on its claim that it was not able to pay higher wages, as the workers soon found out that it could and would. Since then, labour troubles have never ceased in that firm. -5- By contrast, some employers are learning how to play the TU gane in an environment where TU's are politically aligned and hence the various unions at the factory level can be played off one against another. Thus in a nearby factory, the management engineered a strike amongst its mainly communist workers. This, because of the. attendant disorder which led to police cases, as well as the corruption of politicians and administrators (hostile to the Communists) enabled them to sack nearly the whole of their work force, and replace it by workers belonging to a more pliable Union! They have separate piece rates for group work and individual work. Normally a good worker should be able to earn more from individual rather than group work, and this tendency is apparent in their Pantnagar factory. In Punjab, however, as the workers look upon their employment in the firm as only part time, they are not willing to "expend the extra energy" required to earn a higher income though individual piece rates. Also when they set up the factory they took over the wage scales from their UP factory wholesale/ The firm .exports some but not much of its output mainly to N. America and Europe. They find it difficult to compete with Korea, Taiwan Hongkong and the Philippines in S.E. Asia. They have not made a study of the factors involved,even thoughhe felt that they should be competitive because of 'lower labour costs, Against this however, is the fact that their other inputs, particularly the canvas (which forms the major part nearly 60% of the costs of shoes they produce) is priced wpll. Above thp Tarl a nricp, 1n the domestic market, At the same time the various government controls imply time consuming delays in obtaining the requisite machinery. Furthermore the cost of shipping shoes from India to N. America is 3 times that from S.E. Asia because of the rates set by the shipping conferences. -6- II. LARGE SCALE OIL MILL U.P. The factory was established in 1964. Most of the labour, except for supervisors and skilled operators was recruited locally. The initial wages paid to unskilled labour were determined by the going wage in the area, This labour force was then provided on the job training in the factory, For seniskilled workers, where they take on people in trades such as potters, plumbers, electricians from those who have an ITI certificate, it takes nearly 4-6 years for them to be fully trained. The wages the firm 'pays are markedly higher than those for similar workers in the region and as a result voluntary separations at all levels are virtually non-existent. The firm, ft was claimed was also a model employer,which w .as-born. put by, the fact that the,plant level union which they themselves had help organise had refused to become affiliated with any of the other unions in the area (most of which were associated with the CPI (M) union CITU), The wage structure which was set up initially,has since then evolved on the basis of a CPI index linked DA scheme and a 3 year collective bargaining procedure with the plant level union. They claimed that, the differentials particularly between blue and white collared workers had narrowed over the years, New workers are usually hired as temporaries and in recruiting the permanent workers, preference is showito the temporaries., There is an internal promotion ladder for blue collar workers and an active policy to persuade the better ones to upgrade their skills, Though in the company's other oil mills the shop floor supervisors are mainly workers promoted from within the unskilled and semi-skilled labour force, in the UP factory they are still the original supervisors imported froqn, -the other comranV's mills in 1964. However, they are now thinking of "screening"j newworkers for "Dotential supervisory material", though they are worried that if they get too many with supervisory talents they might have a problem of "too many chiefs and no -7- Indians 1% T some of the company's oil factories the supervisors arejunior white collared workers (rainly chemical engineers) The supervisors are responsible for maintaining shop floor discipline as well as monitorin&,individual worker performance which determines their promotion prospects. There is some tendency for blue collared supervisors to identify with their wards and therefore not fulfill their disciplinary and monitoring functions adequately. Hence they are tentatively considering the use of white collared workers as supervisors. Their normal channels of recruitment for new workers are informal. They rarely use the employment exchanges as for every unskilled job advertised they would get about 400 applicants, who would then seek to exert considerable pressures through politicians etc. to be hired. They do not have a policy of giving a preference to members of existing workers or recruiting workers through the existing members of the blue collar labour force, as they fear this mright be taken to mean that the union to which all their workers belong would have either a veto or an important say in their hiring policies, which they want to maintain as a management prerogative. The major channels of informal recruitement are other factory managers local administrative officials and their own white collar workers. They now find that the educational qualifications of job-seekers for even unskilled jobs is rising. There was even a B.S,C, agriculture graduate who wanted a job as a shop floor cleaner but the manager would not even consider him because he thought "it would be such a waste". (or would he be likely to be a misfit afd hence'a possibJTTfrouble maker?) uey. prefer at least matriculates for even unskilled jobs, and find that many of those who are more highly qualified try and suppress the information of their qualifications above matriculation. -8- Their major problem with the labour force is indiscipline,for which they find that the unions are quite useful. They have their own administrative procedures for dealirg with indiscipline, which he described as being like a "railway line, along which there are various signals, which the worker himself activates, The first stage is just an informal "talking to"' to someone on the TU executive that Mr. X is not behaving properly. If he doesn't take the hiirthen they go on to all the formal procedures laid down. Currently they have 7 workers suspended. But the procedures are long drawn out, and take a minimum of 4-5 years and could take as long as 10,going upto the Supreme Court, which in recent years has consistently held against the employers. Generally, however the workers and the local TU do not like to go through the official channels of adjudication, and at least as regards wage negotiations and individual workers grievances they have always preferred, and settled through, plant level bilateral negotiations. The TU has .also resisted all attempts by politicians to infiltrate the union, as the workers feel they get a more just deal from the management than they would' get from official channels. Thus as far as they are concerned they are happy with their TU and would want to create one even if none existed. -9 III. SMALL SCALE SOAP FACTORY The elder owner was the interviewee. He has been in the soaD business for over 40 years. He learnt the trade first as a soap technologist and then in his own factory in Lyallpur in WestPakistan, After partition in 1947 he and his 6 brothers started up a soap factory in Delhi from scratch. They worked in the factory themselves, as the scale of their operations (given their limited capital) was not large enough to employ any hired workers. As they prospered, and the scale of their operations grew they began to hire workers, and before splitting up into 6-8 units in the 60's they employed over 200 workers in their factory. However, they soon found that as this large work force would require registration under the Factories Act (and not merely the Shop Act under which they had hitherto functioned) with all its concomittant harassment from various inspectors etc - they split their operations into 8 separate factories. His factory now employs about 8-10 workers, most of whom are unskilled, He initially recruited his workers from the Punjab, as the most important characteristic for a soap worker is evidently brawn. However, the skills involved in soap making are easily acquired. The owner himself imparts the necessary on-the-job training, which he says enables a worker to become cognisant with the required processes within a fortnight. Once a worker learr the secrets of soap-making, it is relatively easy for him to set up as an independent small-scale soap manufaturer as the minimal capital requirements are only of the order of Rs 2-4,000. He found that given the natural entreprenurial flair of his Punjabi workers, a large proportion of them were.leaving his firm after two to three years and setting themselves up in business, -10- To reduce this labour turnover (and presumably to also reduce the number of future competitors!), he decided to change his area of recruitment to the UP, The workers from this area he maintained lacked curiosity, and were not keen to learn about any other process in soap-making apart from the one they were hired for, They were also reluctant to switch from their usual task to another one in case the need for such a switch arose because of absenteeism. As such they were clearly not entreprenurial material and his labour turnover was greatly reduced! Most of the current recruitment, particularly for temporary workers (which were usually required in the busy summer and monsoon season when absenteeism amongst the regular labour force was at its highest - most of them it seemed went back to their villages) was done through existing members of the work force. The reason why this made sense was (i) as most unskilled workers were close substitutes, it did not make sense to go through any elaborate screening process, (ii) some tasks, like clearing the liquid in huge vats, required three men to work as a team rotating a pole. Relatives or others known to existing workers seemed to fit in much more easily into the existing teams; (iii) the workers were initially recruited as temporaries, or as Mr. Sachdeva put it "were given a try", and paid daily wages. If they did not come up to scratch they were not rehired the next day. Once a worker had been working for 50 days then under the Shop Act, (which applied to all small scale business), the worker became permanent in the sense that he could not be fired without a lengthy bureaucratic procedure, and even then, as the owner said, quite often he would refuse to leave. This difficulty in firing bad or redundant workers (for instance in the lean winter months) was further accentuated by the activities of an - 11 - industrial area wide trade union, For though none of the units in the industrial estate where this factory was situated came under the factory Acts, and its resulting labour (including Trade Union) legislation, politicians had nevertheless set up an industrial estate wide union. This was now quite important in determining wages and working conditions. Its main weapon '(apart from strikes), was the use of goondas to initimidate reclacitrant manufacturers. Thus, though his unt and most others were not legally required to either pay an annual bonus to their workers, or to put them on an incremental time scale (as they did not came under the factories Act), he and other producers in the estate had in fact to provide both of these. Thus he paid a month and a half's salary as bonus,.and also his existing worker's were on an incremental time scale, on which their salaries rose by Rs20/year. Finally, even though the minimum wage was much higher than the rate at which he could obtain unskilled workers, the existence of the union meant that it enforced the minimum wage. This had recently been raised from Rsl75 to Rs240 per month, and his and other industrial estate workers were now insisting on being paid this wage, even though it was higher than that demanded by substitute labour. That this trade union activity was no figment of his imagination was underscored for me when towards the end of the interview, a worker appeared with a petition signed (or more accurately "thumbed") by most of the industrial estate's workers demanding the higher minimum wage. The owner claimed that these higher wages had already driven some small scale soap manufacturers to the wall, 11 -- 12 - The industrial estate union whilst active in promoting workers wage and other demands did not according to the owner attempt to conciliate in disputes between the employers and workers, about the latters performance and quality of work. Apart from these labour problems, which he said had become worse after the Emergency and especially durirg the last year of Janta party rule, the other major problem his firm faced was related to credit. It appears that most of his input suppliers extend him free credit for upto one-two weeks, after which he has to pay them interest at the informal "bazaar" interest rate currently about 18% p.a. By contrast on his sales, (because of the competitive nature of the industry) he has to extend upto two months free credit. The resulting liquidity problems, he claimed, could not be eased by borrowing from the commercial banks (whose interest rates are controlled and well below the bazar rate),as these banks refused to lend to the small- scale sector, even when they offered to put up their fixed capital stock as collateral. IV. LARGE PETRO-CHEMICAL PLANT Company is 12 years old; makes petrochemicals. Has a total labour force of 1350 of which 1250 are in Bombay. 900 in production and the rest in clerical and managerial tasks. In addition uses contractors for providing semi-skilled labour for coLstruction, transport and other ancillary activities for which the use of contractual labour is allowed by law. The contractual labour receives on average a 1/4 of the earnings of equivalent regular workers in the factory. The company has a plant and firm level union (whose promotion was encouraged by the company, to preempt the possibility of the workers being taken over by one of the larger and politicised unions). The union is independent and not affiliated to any of the large TU federations. - 13 - It does however hire an outside advisor, who is a TU leader, but the latter does not take any part in the union's actual negotiations with the management. The company pays wages (earnings) which are near the top of the earnings hierarchy in India (close to those paid by multinational subsidiaries). This is so for the following reasons. The company is involved in a continuous process industry, which moreover is extremely hazardous as the petrochemicas are explosive and also likely to catch fire. Accidents (or sabotage) can cause serious damage to property, life.and hence to Drofits. Also it takes about 2 to 3 days to shut down the plant and another similar period to restart it in the event of a strike. Unlike W, Europe and N. America, the ensuing shortfall in production cannot be made good by intertemporal bartering E outputs with other plants in the area producing identical outputs as there are (i) few such plants (ii) most of these plants (unlike in W. Europe and N. America) rarely have excess capacity to make up the temporary shortfall of a competitor and (iii) even when the above conditions are met there is rarely a common ±nfrastructure e.g. pipes to ship ethylene, propelene etc, to transfer the product speedily. Hence the costs to the firm in lost profits of a strike threat or sabotage (particularly "negligence" which leads to an explosion or a fire) are extremely high. This greatly increases the bargaining power of the workers and the management therefore has always been willing to "buy out" workers in the face of a strike, threat. The resulting high wages (as well as rises in them) do not necessarily affect profitability (as yet) in India, because given the general supply shortages in the economy it is a sellers market and higher production costs can always be passed on in higher prices, In any - 14 - case the firm has always been highly profitable since its inception. Contractor's labour however is paid a wage determined by the unorganized sector wage. They don't have any legal limitations on wage payments and as each contractor normally has only 40-50 workers, it is difficult for these workers to organize. These workers are also used on periodic (1 1/2 - 2 yearly) shutdowns for maintenance (as well as unanticipated breakdowns). Essentially most of the jobs which do not require continuity in the performance of tasks in the continuous processes in the plant are contracted out. On average, on any day there will be about 600 contract labourers working. Every year, however, there is pressure to make some of these contract workers permanent and some are given this status. That however, immediately puts them within the TU with consequent rise in their wages. Once certain jobs/tasks which were previously filled with cotract laboul are thus made permanent under this pressure, it is not possible to make any reversal, as the TU's would not stand for it. When they recruited their initial labour force, personnel policy was a secondary consideration as compared with the problem of getting the plant functioning on time. Hence little or no screening of workers for reliability or discipline was done. For new recruits,too,it is difficult to screen for a potential "troublemaker". Their costs to the firm can be very high as it is virtually impossible to sack or discipline a worker. However, the TU has helped in maintaining discipline. During the lengthy procedure involved in sacking a worker, it is not possible to put him off the payroll unless it is a very grave offense (e,g. a cashier embezzling company funds). They have not attempted to "screen" workers by using existing workers as a channel of recruitment. However, recently they have decided to give some weightage to one son/daughter of existing employees in hiring new workers, But as - 15 - this is across the board, it cannot be used to screen for likely "trouble- makers". In hiring workers, initially they relied entirely on tests administered by the firm itself, This was in part because there was then no certificate available for technical skills for occupation like welders, electricians etc. The firm level tests consist of asking the applicant to perform certain tasks of his trade. More recently they do place some emphasis on certification, but still rely primarily on their own firm level tests. Though they get applicants througi the employment exchanges, they have no obligation to recruit solely through this channel. They also use advertisements and more (unspecified) informal channels of recruitment. He felt that in the industry,despite its high wage relative to other Indian wages, wagawere still lower than these of potential international competitors in OECD countries or NIC's like Korea, Taiwan, Hongkong. So at the moment despite TU pressure etc. level of wages was not a problem in competing or selling output in domestic or foreign markets. Thought it was. academic to consider whether if there were no TU's in India, it would still be advantageous to create one in the firm. Felt however, that some employer -employee consultative agency would still be required to communicate with their workforce. It was now almost impossible to deny workers the minimum bonus of 8%, irrespective of the company's profitability. It didntt affect them so much because they had always been profitable. Thought that workerswould not accept stock options in lieu of bonus (or provident fund), as there were tax disadvantages (as compared with provident funds held in govt. securities) and also in India equities do not seem to have been a good hedge against inflation. Furthermore, as ICI found in UK, workers are - 16 - reluctant to hold stocks.. They sell their options with inimical effects on the company's share price. Hence management, too, is not in favour of stock options. Though provident funds had to be held in approved government securities which yielded about 7 1/2% p.a. return (which was not a good return given current rates of inflation), nevertheless given tax concessions to both the contributions as well as the income from government securities, probably the return was better than on other assets. It was particularly beneficial for higher paid workers. That most of their workers were highly paid is shown by the returns which companies have to submit showing the number of employees who earn more that Rs3000/month. Now at least 30 of their blue collar workers (indluding workers who get overtime), fall into this category. For them clearly the provident fund tax breaks are important. V. LARGE INDUSTRIAL HOUSE (CONGLOMERATE) Ability to pay of the company and TU militancy in the area are the major determinants of the level of wages in different areas of the country in which they operate. Thus a sweeper in Kerala gets Rsl,000 p. month whilst a B.A, clerk in some other state will only be paid Rs 300 p.a. Furthermore, in some states they have to pay bonus of 40%, which is twice the legal maximum, It is not, as if these labour costs do not matter in their industries. Thus in one of their plants wage costs are double what they are in another with a consequent large reduction in profits He admitted that there would be some level of wage demands (say Rs 3,000/pm for a sweeper in Kerala) at which they would prefer a strike, rather than giving into wage demands. But admitted even then would have at some stage to balance the costs of foregone output and profits during the strike as against the wages demanded. - 17 - In locational decisions the conglomerate rarely took account of wage costs, but they do look at the strike proneness of the area. However, paradoxically, higher wages paid by larger units do not seem to buy labour peace, as their higher wages give workers in these industries greater staying power during a strike, and they thus have more days lost through strikes than smaller units. Could give no good reason why they didn't in that case stand firm on ot paying higher wages in the first place. Claimed PM Morarji Desai asked the same question when he complained to him about labour demands in a particular state. W. Bengal and Kerala were the worst for industrial relations and trade union militancy. Gujarat was the best. Felt this was due to the different regional traditions, which led to S. Indians making better civil servant.i, those from Rajasthan are better businessmen and so forth. It is virtually impossible to sack or discipline a worker. Hence they take great care to screen permanent workers. This screening is done through police reports, district magistrates, other employers, and reliable own workers. But still the "screening" is not perfect. Moreover legislation is loaded in favour of workers. It is very difficult, if workers take care in the form of their disruption, to prove charges which could lead to sacking workers. Increasingly,even in recruitment, union pressure particularly in favour of itsons of the soil," often confined to a limited geographical area near the plant, is becoming important. (large firm must have some important factor of production which it can use/buy more cheaply that others - capital, managerial/ entreprenurial skills etc. - other factrrs of production e.g. labour costs then may not be so significant). They have clear promotional ladders for both production and white collared workers. Most higher level workers have risen through the ranks. Their companies provide requisite in-house training to allow workers to upgrade their - 18 skills. Increasingly unions are also involved in laying down rules such as seniority etc. for promotions. Hence can rarely use internal promotion ladders as a means of maintaining labour discipline. Net outcome is that they find that compared even to the operations of their plants in the UK. (with all its supposed TU militancy and TU rights), it is more difficult to manage labour in India. Very much more so than, of course, their plants in other LDCs. Productivity deals are not made by the unions. Even for workers on piece rates they find that workers will not work extra to get the money they need, because they are frightened of the sanctions of their unions. As a result, even though manual wages are loer in India, he finds from comparative data from their S.E. Asia plants that taking account of productivity, Indian labour is more expensive and they would not be able to export labour-intensive products without subsidies. They don't use contract labour as it is not allowed by law. He would also not like to use casual labour to fill permanent jobs as he thinks that would be immoral and inhumane! Both in their domestic and international operations, they are rarely concerned with exports, which are merely a residual. The man aim is to service the domestic market. In India they find that relative to existing capacities,the domestic market is so large (excess demand) that they export only when there is some temporary excess supply. If, however, there were no constraints on expanding domestic capacity then they would be willing to set up plants specifically for export (as in S. Korea); but unless labour costs came down, they would have to balance the allowable capacity expansion in the domestic (presumably protected) market with any export obligation. - 19 - VI. A LARGE PRINTING PRESS IN DELHI Once again argued that labour problems mainly due to trade union activity. He did not think the wages he had to pay were too high if workers did the amount of work they were meant to do. T.U. activity mainly to prevent management from enforcing shop floor discipline. Did not recruit workers from outside Delhi. Also did not recruit trainees through government training schemes, as found them worthless. Usually tried to recruit workers who were already trained and had at least 2-3 years experience. He first said that these .workers were recruited through advertisements Then after probing admitted few of them were recruited in this way. Usually if there was a vacancy he asked existing workers to tempt away a worker in another firm by paying new recruit about Rs20/pm more than in the old firm. Did not have any clear entry points as a result, and wage for each new recruit was fixed on the basis of individual bargaining with the workers. So had diverse rates for people doing similar jobs (e.g. compositors), Most workers were permanent and on a time scale. Also received bonus and other usual organized sector perquisites. Very hard to sack workers. Though he had not done so, some presses were now following a policy of keeping their labour force as temporaries to avoid the problems associated with labour management under the aegis of TU's. Claimed not worthwhile going to labour courts to sort out labour disputes, as these were dilatory and corrupt and usually in favour of labour's demands. Hence prudent to settle with workers outside the legal labour system. In the past, Muslim workers used to bring their kin to be trained in the trade at a young age. These were the best workers. But this system had now collapsed. Qnce again confirmed the difficulty of obtaining official credit. He was relying on secured deposits from the public for his credit needs. -29 - Claimed these (at market interest rates) were no more expensive than bank credit, if account was taken of dilatoriness and bribery involved in getting official credit. VII. SMALL-SCALE PRINTING PRESS - DELHI The press has 10lr12 workers. The workers need to be trained for upto 2-5 years. The firm takes apprentice traineesfrom a training institute in Delhi. It pays them roughly half the rate of fully trained workers during their period of on the job training. There is a tendency for workers who have been trained to leave and take up slightly more renumerative jobs in the industry in other firms, But firm doesn't try to reduce the resulting turnover by raising their wages. They do occasionally recruit through their own workers whom they trust. In all cases the new worker is provided purely on the job training - as the firm doesn't think there is much value in the theoretical training offered by the training institutes. Some of the workers who have left them have set up their own presses, which only require an investment of about RslO,000. There is a fairly powerful industry wide union which enforces the minimum wage even though the firm does not come under the factory acts. The union is also active in seeking to redress workers grievances, It is not possible to sack a permanent worker legally. The firm usually tries out a worker for about a forthnight and then offers him a two month temporary contract (as after that period,provident funds etc. have to be paid for the workers), After that the worker becomes permanent. There is no special region from which they prefer to recruit workers. Whilst S. Indians are better at English and hence more useful in composition etc, still their different way of speaking emmakes it difficult for them to get on with other workers-both blue and white collared. The wages of printing workers in Madras were about 1/2 these in Delhi. - 21 - Credit is a problem. The banks are reluctant to lend against second hand machinery as its value is difficult to ascertain-(problems of moral hazard). There is a large amount of second hand machinery trades, essentially through dalals. The scale is often registered at the book value, even though the market price paid is often higher. Printing machinery evidently survives for over 50 years. The price of old imported second hand machinery is about the same as that of new machines produced by BMT and other machine producers locally. VIII. LABOUR LAWYER Scope of labour legislation covers almost all aspects of a worker's life, except for the provision of social services and pension rights (which she thought was a serious lacuna in the existing system). Most disputes that go to court are not about wages per se as these tend to be usually settled on the shop floor. Most of the legal cases concern termination of individual worker's services, and increasingly closures of whole plants and disputes about working conditions e.g. travel allowance, housing, rent allowances etc. Amongst various industries in the multinational and capital intensive industries the disputes are usually about working conditions, rarely about wages and termination of employment. The wage disputes are most often amongst the sweated labour industries. Increasingly wholesale closures are being used to get around the difficulty of terminating individual workers employment, as the latter procedure -is long drawn out, and may take upto 4-5 years. The Supreme Court has however recently held that an employer's right of closure (and lock out) of the plant is exactly the same as his right to carry on business. As a result if employers want to get rid of a militant or troublesome worker, they can close the plant and then only rehire the workers who were not militant or troublesome. The onus is then on the workers who were not hired to fight a case in the court - 22 - against the legality of the initial closure. Thus whilst I was there she was preparing a brief in a case where she claimed the firm had closed down its plant because it wanted to substitute piece rates for time rates for its workers, which naturally the workers were unwilling to accept. After the closure it could (and had) hired fresh workers on piece rates. Most of the labour leaders are full time professionals. They tend to be militant workers who have been sacked by their employers. Politicians are also getting involved with the movement (particularly opposition politicians). Actual workers rarely became TU leaders, for they are (according to her) too ground down and afraid of the repercussions on their job prospects in the factories in which they are currently working. Because of the split in the TU movement along diverse political lines, an important source of dispute (apart from that concerning the question of 'bonus' being a normal part of the wage) is the recognition of unions. Managers are resisting introduction of secret balloting to determine which union represents workers in a particular plant, because the existing practice whereby they get some government official to interview a few members and on that basis recognise a particular union, gives them greater flexibility in playing one union against another and thereby getting the most pliable union recognised in their firm. Most court judgments tend to enforce the existing industry and regional norm in labour disputes. She claimed however that, most employers . have not accepted the TU movement and hence are willing to fight in cases even where they are probably likely to lose (because the dispute concerns practices which are sub-normal in terms of industry cum regional practices), because they can thereby harass the workers. This might explain why employers say most court decision go against them. - 23 - IX. TYRE AND FOAM RUBBER PLANT AND PLANTATIONS The firm owns coffe, tea and rubber plantations,and foam rubber plants in Madras, Bangalore and Bombay and a tyre plant in Madras. Latter is the oldest of its plants and was begun in the early 40's; of the other plants, the foam rubber plant in Madras is the oldest-established in 1960. The labour force in the Madras tyre factory is about 2,000, in the foam rubber plant it is 250, whilst in the Bangalore and Bombay foam rubber plants it is about 75-100. The labour for both the tyre and foam rubber plants was recruited from Kerala, through the semi-feudal connections of the owners family members. In the initial years a familial relationship was maintained with these workers. However, as the firm grew and along with it the number of workers employed by each factory, it was no longer possible for the owner's family to maintain this relationship. This led to a surprising resentment amongst the "semi-feudal" workers who had come with the family from Kerala,. They charged that the owners had become too big for their boots. These disaffected workers became the core of militants who organised a militant trade union and amalgamated it with the CPM's national union the CITU. This process of the radicalizing of the semi-feudal workers who had come from Kerala happened independently in both the Madras tyre and foam factories. Subsequently, they have recruited workers locally, in part through existing members of the labour force, but also through advertisements and from workers who appear at the factory gate. They are usually initially hired as temporaries, and "tried out", after which they are made permanent. Both the factories are essentially involved in batch goods production. They have a wage scale on which the worker progresses with time (annual increments). Their earnings are determined by a payment system which combines elements of both time and piece rates. The latter are paid in the form of department level bonuses for output levels which are greater than some 'norm' --24 - (for which the workers receive a time rate). In their batch good production, piece rates are in principle possible and initially they predominated. However, as with the introduction of new and more productive machinery, output rose automatical' if the same piece rates had been maintained,wage payments would have grown dis- proportionately. To avoid the necessary continual negotiation of piece rates with the unions, they moved to the time cum piece rate system. The wage paid for unskilled labour is pretty close (in Madras) to the supply price of labour of Rs 5-5.50/day. This supply price (despite high inflation) does not seem to have altered over the years. Once made permanent, unskilled workers (who with a couple of months on the job training become semi- skilled in the firm's operations) get about Rs 8-8.80/day. This then rises in annual increments to about Rs 14-15/day. There seems to be no problem in recruiting these unskilled workers, Workers with middle level skills, like boilermen, welders etc. are increasingly in short supply, They have tended to overcome these supply problems by paying higher wages to these workers to attract them from other firms. But they are never recruitted at the maximum scale wage for these workers. They naturally then- progress to higher wages in the wage scale. Supervisory positions are not filled fror within the ranks of the firms production workers. These are normally recruited by advertisement and personal contact. They too are on scale wages. In recruitment they, rarely worry about experience, as for sem-skilled and middle level skilled jobs a worker with some experience is likely to have been sacked by someone else for being a "troublemaker". Other firms references for such workers are meaningless, as in order to get rid of a troublemaker, the other firm would be willing to give the sacked worker a glowing referene. --25 - The reason why a sacked worker with experience is likely to be a "lemon", is linked to the practice of paying scale wages both for semi - and middle level skilled workers, and the practice of firms to usually have entry points at the lower or middle levels of the relevant wage scales. This means that a worker with some years experience in a firm will be earning a wage which could not be replicated by the entry level wages in another firm. It is for this reason that, workers fear termination of service more than anything else and are willing to fight lo.ng drawn battles to prevent this from happening. Most of the workers in their Bombay factory were recruited through the recommendation of another firm (and its workers and personnel manager) in the same industrial area. The older owner was a director of this firm, and hence trusted the judgment of its personnel manager. Most of their industrial disputes have been about wages. These have never gone to the courts. They had a 1-year strike in Madras (in their foam rubber plant) which they rode out, and did not give in to the owrkers demands. Though, once the workers came back to work, some extra wages were given, but no compensation was paid for their earnings foregone during the strike. In their plantations, there are no wage scales at all. The single time cum piece rate is negotiated industry wide through collective bargaining. The level of wages differs from state to state. They had to concede various rights such as those to housing etc. because of legislation. But felt these would not have been granted if it hadn't been made the law. Basically, there was a plentiful supply of substitute labour (which doesn't require any plant level skills) and hence they do need to tie the plantation's labour force down through scale wages and other benefits. TU's certainly had an effect in the rate of increase in wages in all their plants, but not on the wage structure. They have never accepted any negotiation on differentials. - 26 - He thought that,on the whole, despite all the legislation etc., balance of bargaining power still favoured the employers, as workers rarely had sufficient resources to fight the necessary long drawn out legal battle through various stages i1i the courts. X. MISCELLANEOUS (a) Public Sector: Public enterprises fall into 4 groups. 1st (like Mazagaon docks) covering roughly 60-70 thousand workers have grossly distorted wage structure. Thus in Mazag-aon docks a turner will get a basic pay of Rs 300/m plus D.A. of nearly Rs 2300/m. In the second group which covers nearly 12-16 lakh workers, i.e. the bulk, attempts are being made to rationalise wage structures in line with the attached guidelines. (Appendix 1) The 3rd group consists of enterprises which are covered by the Civil Service pay systems and hence the 3rd Pay Commission's awards apply. These are enterprises created by hiving off previous civil service depts. e.g. civil supplies which became the Food Corporation of India. Finally, there .are a number of enterprises like Modern Bakeries where wage levels etc. are close to unorganised sector wage levels. In Eastern India, all engineering units, private and public, are covered by the same wage agreement. Similarly in Bangalore all the public sector units are covered by the same wage agreement. Some of these e.g. steel are available in printed form. Others can be obtained from the files of BPE. Wage agreements if registered under the Industrial Dispute Acts are justiciable. This doesn't apply to managerial and supervisory staff. (b) TUrs and Industrial Estates 1. Not proper TU leaders in industrial areas, Are dropouts - ex workers - who have made a profession out of agitation. Get some money from workers, but no proper register etc.kept. Involved with goondas. - 27 - 2. Often there is a difference between the actual wage paid and the "official" wage. Workers made to sign on a blank voucher, which then states the official wage has been paid, even though the actual wage is lower. (c) Shipping Used to have labour contractors in shipping, This was then made illegal by government legislation and a tripartite body of government,employees and employers set up a roster of applicants and laid down minimum wages. Initially latter differed from company to company. Later became uniform in the industry. APPENDIX I Guidelines Laid Down for Wage Settlements in the Public Sector 1. A four year settlement 2. 10% as the cost of settlement 3. 35 to 75 range of fitment benefits 4. Minimum wage linked to 300 cost of living index somewhere around 385 to 395. 5. The revision of Dearness Allowance on quarterly basis for workers, half yearly basis for officers 6. All settlements in full and final agreement in respect of pending demands of a monetary nature. 7. 1.30 per point shift as the rate of Dearness Allowance. 8. All other fringe benefits which being newly introduced which go in the personal pay package of an employee not to cost along with the pay and D.A. benefits - 10 .. ... ..... ..