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Changing role of trade unions

April 22, 2005

The curtain has at last come down on one of the most famous marquees in the motorcar industry, with MG Rover finally shutting down production earlier this month.

A company that once employed 40,000 people in the British Midlands, with an equal number employed in the factories of suppliers, had been forced to scale down its operations over the years.

But even skeletal operations with 4,000 people has now ceased. It is an example of what destructive trade unionism can do to an industry.

Arthur Scargil in the 1980s set out to destroy industry in the Midlands with his brand of militant and destructive trade unionism. Finally Mrs Thatcher stood up to him and showed him the limits to which trade unions could push industry.

She privatised industries and Scargil lost his power base, which was mainly in public sector heavy industries. Successive governments in Britain after Mrs Thatcher have refused to bail out public sector undertakings with subsidies and grants.

This has resulted in Britain transforming itself from being the sick man of Europe to one of the more dynamic economies in the West.

In India too we have had examples of the Arthur Scargil brand of trade unionism. What Datta Samant did to the cotton textile and engineering industries in Mumbai was equally devastating.

Almost all the textile mills in the city closed because of the unreasonable demands made by trade unions under Datta Samant. India has the advantages of (a) growing both long staple and short staple cotton and (b) a huge domestic market.

We could have been the cotton textile source for the whole world. But battling militant trade unions, on the one hand, while coping with price controls imposed by unimaginative governments and textile quotas imposed by foreign governments, on the other, proved too much for our textile industry.

It did not have the necessary financial and managerial resources, and it failed to modernise and remain competitive in terms of quality and cost. So it declined and became terminally ill.

Trade unions are a legitimate system for organising workers and to voice their rights and grievances. Without them companies would become either too paternalistic or too dictatorial.

Responsible unions help to create a middle path in the relationship between management and labour while maintaining the responsibilities of the former and the dignity of the latter.

Where things go wrong is when the management becomes authoritarian, especially in owner/family-managed companies, or when a trade union leader allows emotion and ego to overcome reason.

Fortunately today, workers have become better informed and aware of the economic forces that impact their industry. The media has helped to create much greater economic awareness.

So it is not so easy to mislead them. Managements too have become more sensitive and skilled in handling relationships with employees. This is true of even family-owned and managed businesses.

TVS in the South is a prime example of how a large family-managed industrial group has successfully managed its relationship with employees through enlightened management. There are more such examples in other parts of the country.

Perhaps the labour departments of governments at the state and the Centre should sponsor the institutes of management to do case studies of companies that have built up such successful relationships. Instead of merely administering rules and labour laws, these government departments could also act as apostles of good practices in the field.

As the skill levels and educational qualifications of employees advance, the role and significance of trade unions tend to diminish. This is because (a) employees are able to represent their own case and (b) managements are more sensitive to the needs of individual employees, whose intellectual skills become almost uniquely valuable.

This is already happening in the sunrise industries based on brainpower such as IT and telecommunications. Another phenomenon in these modern industries is that employees have greater opportunity and tendency to move from one company to another, not only because of better terms of employment but also because of their yearning to learn new skills.

This appetite for learning is something remarkable, especially in the IT industry. In fact, people in that industry are more bothered about what they can learn in a company than about how much they earn.

This phenomenon is facilitated by the fact that there are plenty of employment opportunities in IT and it is a young industry. That is why one does not notice any union flags in the Silicon Valley of India/Bangalore's Electronic City.

Trade unions have declined in their importance even in the UK, the original home of trade unions. The UK's Labour Party was formed by socialist leaders of trade unions.

Today, Tony Blair does not have to depend on trade unions as much as his predecessors had to do in the 1980s and 90s. The Labour Party's appeal to the public is based on key policy issues such as spending on the National Health Service and the education system, rather than anything to do with labour policy.

In the US, trade unions are powerful in negotiations with individual employers, but have no significant political clout although they generally support the Democratic Party.

The same is the case in Japan. Even in Germany, France, and Italy, the role of trade unions has become more focused on negotiations with employers rather than on politics.

The privatisation or corporatisation of many public services such as electricity and water supply has accelerated this shift. Hopefully the same shift in the character and role of trade unions will happen in India -- even in places like Kerala and Bengal, as employment starts to move to more intellect-based activities and public sector industries are privatised.

Responsible trade union leaders with a long-term vision will adapt their policies to suit the new realities.

Correspondingly, there has also been a change in the attitude of management, even in family-managed companies. They are now better educated and many of them have been exposed to international education and international markets.

They realise the dignity of human beings more than their previous generation and therefore are less prone to treat employees in a scurvy manner. More and more companies are investing in management training and development.

This has also helped to create much better awareness of the aspirations of workmen, among the managers.

Yet the last vestiges of negative union practices continue to persist in monopolistic public services like the state transport undertakings, state electricity boards, etc.

The only way to correct this is to corporatise or privatise these undertakings or open them up to competition. A prime example of the change that is possible is what has happened in aviation.

Once airline services were opened up to competition, the whole scene changed. Instead of treating passengers with the indifference typical of a public sector employee, Indian Airlines staff learnt even to smile while greeting passengers.

In addition, we have created some world-class private carriers in the domestic market who are now set to take wing on international routes. Even the railways can be privatised.

The rail track in each region can be owned and operated by a company, which then allows competing companies to run their trains on these tracks. Similarly, there is no reason why urban bus services cannot be made more efficient by opening them up to competition.

Today they are run as monopolies due to pressure from unionised labour. For example, in Mumbai the urban bus service is cross-subsidised by BEST Electric Supply services.

The important point is that unionised labour accounts for only a small portion of the total workforce. It should not stand in the way of policies that generate employment for the larger group outside trade union control. In the end, that is what will benefit everyone.

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There's no doubt that trade unions have helped to make what's today a better workplace. But things have changed; employers have realized the value of ...


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