Sunday, Sep 25, 2022

Just an apology?

Noida tragedy is labour vs labour. Militant trade unionism is creating a huge underclass

Oscar Fernandes’s deployment of the old trick — a politician saying sorry after saying something unforgivable — is relevant only in terms of how his party and his government decide to treat him. He is apparently being talked to by Congress heavyweights. Whether that’s enough censure for a minister who, following the murder of a CEO by sacked employees, attempted a variation on the class war thesis — violence by the “disaffected” is a “natural” outcome — is open to question. As is what employers, Indian and global, are making of this country’s labour minister’s advice that they should treat murdered corporate managers as a “warning”.

But Fernandes, no matter how the Congress plays this now, will escape punishment for the worst thing he said. “People are employed on contract basis. There’s disparity in wages of permanent workers and contract workers. There’s simmering discontent among workers… Companies tend to hire people as contracts even when they are in a position to make permanent appointments.”

The dismissed employees of Graziano Transmissioni’s India unit had been agitating, among other things, for permanent worker status. So are millions of contract workers in India. And they are in this state because politicians like Fernandes and major trade union leaders who are coddled by politicians have conspired against India’s working class. The labour minister was being hypocritical or ignorant when he made that statement, and he will get away with it because the political class prefers hypocrisy and ignorance on this issue. Then they can blame capital, frame questions in terms of capital vs labour conflicts. The Noida tragedy is symptomatic of a labour vs labour conflict in India.

There are roughly 400 million employees in India. Major trade unions (CITU, AITUC, INTUC, BMS, HMS) account for just over 19 million of them. A whole raft of protective labour laws applies to these unionised, mostly organised sector workers. There are around 80 million workers in contractual jobs. There’s a contract labour law. But the law as it has been framed applies to less than a million; there are around 300,000 contract workers in the organised sector. There’s a minimum wage law, too. The wage rates here are set politically, ignoring the huge supply of labour. So minimum wages are enforced for less than 10 per cent of the workforce.

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It should be clear even from this labour law summary characterised by extreme brevity that a lot of regulatory energy in India is spent on a very small part of the workforce. CITU, AITUC, INTUC, BMS, HMS are in the game of holding on to their membership bases among this privileged working class or trying to trade up — the attempt, for example, to unionise BPO employees — and leveraging these collectives for unions’ political allies. Have you ever heard union leaders who declaim against American imperialism march to Parliament in support of workers at construction sites? These workers in most cases are not provided with basic safety equipment like hard hats and harnesses. They are the story of India’s employment creation.

The argument often made by economic liberals in India that labour laws prevent job creation is not true. Jobs are being created in India. But thanks to labour laws, they are the wrong kind of jobs. Most non-white collar job creation in India over the last decade is in informal employment. Informal employment accounts for more than 90 per cent of total job creation. And in the temporary employment category, more than 95 per cent of job creation is informal temporary employment.

Of course, a job is better than unemployment. But these are jobs that provide workers no on-the-job training, no or little work safety and, most dangerously and sadly, they offer huge arbitration opportunities for those who trade in labour supply.


Employing a worker under the panoply of labour laws is too costly for employers. Those who supply labour make an offer that says regulatory hassles of labour law-compliance can be avoided by employing workers whose minimum rights and understandable aspirations can basically be ignored.

But while giving jobs under labour laws may be uncompetitive for employers, they don’t necessarily love informal employment. Leftwing commentators don’t believe this. But it’s true. Employers have to cope with very low commitment because every informal employee is desperate to move to formal employment. Also, quality of work varies enormously in informal employment.

Given a chance, employees and employers will gladly take a regulation-wise less burdensome system of formal employment. But that would mean revisiting the whole labour law edifice. And that in turn would mean taking on the union-led formally employed labour aristocracy. This section, and not profiteering capitalists, has the most to lose if the formal employment sector becomes less formal and informal employment becomes less informal. This is a conflict between two sets of working classes and the smaller section is winning.


Political economists explain this by saying in democracies well-organised minorities capture the policy space at the expense of unorganised majorities. But that doesn’t explain why unions aren’t speaking for India’s working underclass. Unless you are an airhead conservative, you would agree that trade unions are not per se undesirable in modern, capitalist democracies. The question is what should trade unions work for? Surely, more jobs and better jobs. Nothing’s more in the interest of labour than any system that creates a lot of non-exploitative jobs.

Therefore, the ugliest truth highlighted by the Noida tragedy is not that India’s capitalism is ruthless but that India’s labour leaders are. They are ruthless in protecting insiders, in preserving existing privileges of a few and in denying better opportunities to millions.

Oscar Fernandes is minister for labour, that means all labour. He should tell us what kind of warning India’s labour leaders should receive.

First published on: 25-09-2008 at 11:15:44 pm
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