Driving a wedge: How the pandemic increased the trust deficit between labour and industry

The Economic Times, November 24, 2020

With factory units closing, economic activity at a halt, loss of jobs and many struggling to get home, the Covid shock strained relations further between labour and industry.

Faced with mounting pressures of shut units, overhead expenses, and no money to pay salaries or rent, employers had resorted to a slew of layoffs and salary revisions across the board. Workers and employees were distraught and pointed to the Government order on layoffs and salary cuts.

In fact, according to the Centre for Monitoring Indian Economy (CMIE) estimates, an overwhelming 122million people in India lost their jobs in April alone. Not surprisingly, small traders and wage labourers had accounted for most of such losses. The months that followed saw a spate of similar measures being rolled out by companies when survival, in itself, was being questioned.

A health crisis that had metamorphosed into an economic disaster, COVID-19 also brought back the spotlight on a subject that has been a bone of contention for long – the (widening) relationship between labour and the industry.

The pandemic narrated this story in a way which perhaps no one ever could have thought of and brought the plight of workers starkly to the fore. Heart Wrenching visuals of migrant labourers finding all possible ways and means to get home during the lockdown became etched in everyone’s memory as asymbol of pain, struggle and suffering experienced in this time.

To say that the pandemic worsened the friction between the labour and the industry would hardly be a stretch. Issues around wages, lack of transparency, hours of work, overtime payments and basic amenities have played up all along as factors creating a rift and consequent souring of relations for the warring sides.

COVID-19 broadened the gap in this equation, fueled by a host of accompanying factors which only lessened the trust reposed in the management. “We saw how workers had to go back to their base locations, and in quite a few cases, it was quite a traumatic experience for them. It is obvious to assume that these hardships faced by the migrant workforce as they witnessed the lockdown period and subsequently, their movement to their base locations impacted the psyche, instilling a sense of fear and creating an apparent trust deficit,” reasons Yasir Ahmad, Partner, PwC India.

The shock called Covid

Ahmad feels social issues like wages, benefits, leaves, overtime etc, are more pronounced in the smaller enterprises, primarily because of the limited marginsand business visibility in which they operate. Taking a more objective view of the situation, he says the cause of friction cannot be attributed solely to the employers at this point. “With the country in a lockdown state and limited economic activity affecting the supply-demand economic cycle, there were no earnings and hence, no payouts. Again, this was more pronounced on the small scale units, wherein there is little or no cushion’ money as they operate more on a ‘make-take’ basis,” he adds.

Enterprises say that the crisis created the awareness for both labour and industry about their inherent dependence on each other. “Without the right labour, companies cannot continue to deliver as usual. For Workers too, knowing that companies will go the extra mile gives them the belief that their skill and experience is valued,” says Bishan Jain, Director, Goldmedal Electricals, a fast moving electrical goods(FMEG) company.

But has it been as simple as it sounds? Units closed down, economic activity came to a halt, several lost their jobs and many were just left stranded to make ends meet. Clearly, the shock has been too much too handle for a relationship known to be sensitive historically. Bipul Chatterjee, Executive Director, CUTS International doesn’t mince his words when he says that Covid clearly accelerated this underlying friction. “Covid has exacerbated it. Any such shock like Covid or anything related to an economic shock is going to do that. It gave an exogenous shock to our system, making us realise the value of labour as human capital,” he says.

Labour as human capital

Chatterjee elaborates further on his point, sayings capital has to see labour as human capital and not something which is an adversarial relation. Similarly, he says, labour also has to see that capital is needed for the purpose of production and unless new capital is generated through pro􀂄t, the production function doesn’t work.

“This very basic economic structure is missing in our discourse. Instead of looking at the amount we are spending on labour as a cost, we can look at it as something that is creating value and profit. Labour Needs to be transformed from the cost-side to the value-side of the pro􀂄t function. It will then be easier to run this discourse and reduce the friction,” he adds.

Incidentally, at a webinar organised in July by CUTS International on labour reforms, trade representatives had also put forth their suggestions on what the change of approach needs to be. Gautam Mody, General Secretary, New Trade Union Initiative had highlighted that industries are focussing more on short-term profits at present instead of growth and sustainability. “The emphasis is on paying for mechanical productivity and risk, but not skills and social security. The focus should instead be on skills, technological advancement and innovation for institutionalising long-term worker well-being to complement enterprise well-being,” he had stated in the release.

Echoing similar sentiments, Saji Narayanan, President, Bharatiya Mazdoor Sangh (BMS) says that the attitudes of both workers and employers needs to be factored in if any real progress has to come by. “Government, employer organisations and trade unions should sit together to build up a congenial atmosphere for a high work culture. Only that can increase industrial productivity, decent work and industrial peace. Together the nation has to get ready to face the new forms of work being brought by Industry 4.0 like gig workers, platform workers, supply chain etc. Sufficient study needs to take place in this direction,” he avers.

Reforms and beyond

Industry experts who spoke to ET Digital aligned on the thought that the subject of labour reform needs to be seen now from a fresh perspective altogether. A core focus on the 18 champion sectors identified by the government for revival of manufacturing in India was mooted as a suggestion that could augur well for the industry. Some sectors in this list include industries such as leather, gems and jewellery, renewable energy, pharma and textiles among others.

Moreover, the doubts that have always existed on whether high investment rates may substitute labour was also addressed sufficiently in the Economic Survey 2018-19. “When examined in the full value chain, capital investment fosters job creation as capital goods production, research and development, and supply chains also generate jobs,” the survey said while also drawing examples from international evidence on the complementarity between capital and labour.

In fact, the entire first chapter of the survey spoke of private investment as the key driver of growth, jobs, exports and demand. High growth rates, it stated, have been sustained only by a model driven by a ‘virtuous cycle’ of savings, investment and exports. “The ‘virtuous cycle’ that we describe fosters job creation by exploiting the complementarity between capital and labour, on the one hand, and by increasing overall productivity and labour productivity, on the other hand,” the chapter explained.

A new dawn?

However, despite the innate significance attached to labour reforms, the pandemic brought about unforeseen changes that did not go down well. Earlier In May, states such as Uttar Pradesh, Madhya Pradesh and Gujarat took to easing labour laws in order to help businesses tide through the period. This move, however, was not considered factoring in the interests and rights of workers adequately enough.

“Four states including Kerala state took ordinance route to bring labour reforms without consulting trade unions. Three state governments have suspended labour laws and 14 state governments have increased working hours from eight hours to up to 12 hours. Thus Labour laws, which could have played a better role in crisis, were distorted,” highlights Narayanan of BMS. This, he says, also 􀂅outed openly the well settled international labour standards set by the International Labour Organisation (ILO). “The grave mistakes in the name of reforms should not have happened. It shows the promotion of a bad industrial relations culture in the country,” he says, forthright in his stance.

So what really is the way forward? Will an outbreak like Covid not stir things up enough to understand what is crucial and what can protect the interests of both? “Covid definitely has fed in our conscientiousness to never say never. Naturally one learning has been the need to move to a more fair and square working environment with no hostility at the workplace,” says Rishi Agrawal, CEO, Avantis Regtech.

Besides this, social security programmes for blue collar workers are extremely important to consider if change is the objective. “We need strong social security programmes which address the issue of labour so that companies too can tide over business cycles without strained relations with labour. The decision of some state governments to allow industry to downsize came as a shock, as normally this is not the official stance taken. If there was strong social security as in the west, this problem would not have been magnified,” reasons Madan Sabnavis, Chief Economist, Care Ratings

Sabnavis stresses on aspects around reskilling of labour and movement to a higher spectrum of jobs as manual labour will expectedly see a diminution in demand due to technology. “It can create a social problem as the volume of low skilled labourers is really large and finding alternatives is difficult. Labour also needs to understand this situation and be more flexible in terms of demands,” he cautions.

Adding to his chain of thought, Ahmad of PwC India is of the view that COVID-19 gave a ready template on key issues that can be in focus while dealing with migrants and even the non-migrant workforce, right from their earnings to savings, accommodation and more. This, in essence, can design policies and regulatory framework more effectively.

Moreover, the pandemic gave way to some insights that may not have ordinarily come by. “Perhaps one of the positive impacts of Covid is that we have taken note of some of the ‘silent’ stakeholders that contribute significantly to our country’s development. It is now up to us to use these learnings well, so that the post Covid era is much better for these stakeholders than what it was pre Covid,” concludes Ahmad.

But will it really be a better era? The Government introduced three separate labour codes in September on industrial relations, occupational safety and social security. These combine the 44 labour laws and center primarily around wages, social security, industrial relations, safety and welfare conditions. However, concerns have been rife that the new codes are pro-business but not necessarily such that take cognisance of the interests of workers. For instance, while it is easier now for establishments beyond 300 workers to hire and fire, the codes make it difficult for trade unions to go on strike. Besides this, even the safety norms have been found to be limited in scope with them being applicable only to workplaces hiring over250 employees. This rules out a large percentage of the informal labour, which work in smaller groups and organisations.

More clarity will come by once these codes are implemented from April 1 next year. However, at present, these only pose further questions on whether the inherent gap between the two sides can ever be bridged.

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