The 20th century’s great management thought leader, Peter Drucker, used to consult CEOs of the largest companies in the world and presidents of nations. Whenever he met any leader, he would always first ask them for their opinions, and not facts. Because smart people know how to find facts that fit their opinions. Drucker comes to mind these days with the government’s moves to reform India’s labour laws. The government and its advisers seem to be moved by ideology, not facts.
The facts on the ground have been revealed by the moving scenes of millions of migrant workers who were abandoned by their employers after Prime Minister Narendra Modi declared a nationwide lockdown. Data about India’s labour regime had been presented by many researchers before, but these figures were ignored. Images of jobless workers and their homeless families scrambling to reach their homes, far away from where they were employed, have starkly revealed now the fragility of their contracts with their employers. The workers were used and discarded.
All Indians with compassion for their fellow citizens must ask: Who will benefit if employers are given even more freedom to hire and fire? The problem is not in the laws. It is in the mindset of those who advocate such reforms. In 2013, the Planning Commission asked Bain & Company to conduct an objective study of enterprises in India. The management consultancy firm was asked to test the hypothesis that the long-term performance of the companies, who treat their employees as long-term assets is better than the ones who consider workers as a burden and as costs to be adjusted, whenever sales drop. The companies were compared with their peers in the same industries. The hypothesis was validated. The companies that invested in their workers, and held on to them as assets, did much better, even though they went through the same dips in the business environment as their peers did.
Around the same time, Maruti, one of India’s most enlightened employers, was shaken by violent unrest. The issue was the treatment of contract workers in a Maruti factory. They were not paid the same wages as permanent workers doing the same work and did not have the same rights to represent their needs to the management because, legally, the contract workers were not the company’s employees.
The Bain study had revealed that the practice of engaging workers through contractors to work alongside permanent skilled workers had permeated all the best employers in the country. In fact, in many companies they accounted for over 50 per cent of the workforce. The unions complained that this was an unfair labour practice. It reduced the cost of workers no doubt. However, the Bain study had revealed that the companies’ profits would be only marginally reduced if all workers were paid similar wages. Employee costs constitute less than 20 per cent of the companies’ costs and, within employee costs, the share of compensation of CEOs and senior executives was often half of the total. (CEO compensation had risen to over 300 times the salary of a worker in many companies; in the early 1990s, it had been less than 20 times.)
While workers within the factories of large employers were not being fairly treated by enlightened employers, conditions of workers outside were worse. Large companies employ very few people. Most of the employment their business generates is outside their factory walls, in tiers of suppliers, down to hundreds of tiny and informal enterprises. Labour laws provide even less protection to these millions of workers outside, whether in payment of their wages, their safety, or their rights of association.
Against this backdrop, unions and employers began a series of dialogues in 2013. They agreed that both sides were interested in the growth of Indian enterprises. They would listen to each other so that they could agree on norms and regulations that would give employers requisite freedom to improve the competitiveness of their enterprises while ensuring fairness for workers.
A truth the dialogue revealed was that the unions were not speaking on behalf of the 4 per cent of India’s fortunate workers in permanent employment in large companies. These unions were asking enlightened employers to consider the conditions of the 96 per cent others — the contract workers within their companies, as well as the masses of workers employed outside. Outsourcing of employment to contractors and outsourcing of production to small firms are strategies for reducing costs. Since India’s social security systems are very weak, masses of workers suffer whenever there is a downturn. The unions appealed to these big businesses to consider all Indian citizens, not only their own employees and shareholders, when they proposed changes in India’s labour law regime.
The Overton window (named after public policy expert, Joseph Overton) is the range of policies politically acceptable to the mainstream population at a given time. The slackening of India’s GDP growth, as well as economists’ data that employment was declining, did not wake up the government to the vulnerability of India’s workers. Nor did the appeals of the unions. After many years of demands by a section of economists and business lobbies for making it even easier for large employers to fire their workers, the Overton window seems to have opened a bit to consider the plight of 96 per cent of India’s workers. It is tragic that pictures of millions of workers abandoned by the system were necessary to wake up many more Indians to speak up against the foolhardy scheme of suspending India’s ineffective labour laws.
India must remain a democracy. Workers, and those who speak on their behalf, must be heard while framing or changing regulations. Their voices must not be silenced by ordinances.
Maira is a former Planning Commission member and author of Transforming Systems: Why the World Needs a New Ethical Toolkit
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