group 2_ir & globalization

8/4/2019 Group 2_IR & Globalization

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Economy and Labour force in India


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Indias planned economic development gave a big push to heavyindustrialization which witnessed a phenomenal growth of thepublic sector and establishment of a diversified industrial base.

Still only 52% of the workforce is literate and 60% depends onagriculture. In organized industry, employment has stagnated inrelative terms. The tertiary sector is growing rapidly andaccounts for 23% of employment and 49% GDP.

Together with tertiarization of the economy, there is growingcasualization of employment. This is a major cause for concernfor workers, unions, and government.

Improving the base of education and skills and restructuringagricultural workforce in non-farm rural employment isimperative for addressing the triple curses of unemployment,poverty, and inequality.

Together the issues of labour mobility, both domestic andinternational, labour commitment, work culture, productivityand competitiveness need to be addressed. These aspectscritically influence labour management relations and warrantclose cooperation and collaboration between the two for makingthe economy globally competitive


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Tertiarization economies are those where the servicesector dominates growth in terms of share of employmentand GDP

Casualization refers to the employment of a largepercentage of labour force in casual occupations

Labour Mobility refers to the inflow and outflow of thelabour force from one country to another and withinoccupancies on an annual basis

Labour commitment is a situation wherein a permanentmember of the working force, a committed worker,receives wages and is dependent for making a living on

enterprise management that offers him/her work anddirects his/her activities at the workplace Work Culture deals with the behaviour, values and beliefs,

and assumptions, concerning work, of all people at work,including managers


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The history of Indian Economy and its labourforce in the post independence period can bedivided into 2 phases :

1. The import substitution era postindependence (1947-1991)

2. The era of economic liberalization (1991-present)


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BEFORE LIBERALIZATION AFTER LIBERALIZATION

State sponsored and state mediateddevelopment

Market led and private enterprisedominated

Protected domestic market Competitive market

Budgetary and directory institutionalresource allocation

Competitive capital market led resourceallocation

Su sidies and administered price regime Rational pricing, including user c arges

Welfare state active in la our market La our neutral and investment friendly

state policiesSystematic de-casualization of jo s Fast re-casualization and

contractualization of jo s

Largely government funded social securityand welfare programs for a few

Crisis of sustaina ility of social securitywelfare programs and pressure for

security measures for allSta le governing structure and policyregime

Crisis of governance and fear of politicaland economic insta ility

Sta le, t oug o solete, la our intensivetec nologies

Micro-electronics-led new generationcapital and silk intensive tec nologies

Dominant status of manufacturing T reat if deindustrialization and rapidgrowt of service sector


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Objectives before liberalization:-1. Improve the conditions of labour and welfare

of workers2. Prevention and settlement of industrial

disputes and maintenance of industrial peaceand harmony to avoid disruption of industrialactivity which could adversely affect therealization of plan goals

3. Controlling industrial growth to prevent

concentration of economic power in the handsof a few an reduce income disparities amongindividuals and regions

4. Workers education5. Workers participation in management


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Objectives post liberalization:- Facilitating growth of enterprise and entrepreneurship

and aligning labour policies with economic policies A shift in policy focus from organized labour to

unorganized labour eform labour laws and labour policies in the wake of

globalization A shift in emphasis from job security to income security

and social safety measures Concern for skills development, productivity and

competitiveness eformation in pension policies A shift in the government role from control to

facilitation


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Economic activities are classified into 3 sectors: Primary (agriculture) Secondary (manufacturing) Tertiary (service)

The tertiary sector came into existence postindustrialization and its a major provider of jobs and themain source of GDP and economic growth. In India, sincemid 1980s the service sector has been growing rapidly.

In current scenario, the service sector has 400 millionIndians working, and contributes roughly half of the IndianGDP.

The contribution of the manufacturing sector has gonedown over the years. It currently contributes to 25% of theGDP.

India being an agrarian economy, agriculture forms thelargest part of the GDP. Its contribution stands at 3/5th ofthe current GDP


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2001 2001

Population >1 billion

Labour force/workforce 18 million

Employment in private sector >9 million

Unionize workforce/unionensity

4

Workforce covere by collective 2


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The most common trends in the employment pattern : Declining stability and security in employment Declining labour intensity A growing irregular labour force due to extensive use of

casual, contract, contingent, part-time, temporary, fixed-term, job-sharing, atypical, non-core/peripheral labour

Shift from contract of service to contract for service Increase in home-based work and the consequent blurring

of the gap between work and home when work is at homeand home is at work

Declining and/or extinction of a few occupations and thebirth of a few others

Declining mutual commitment: erosion of the concept ofone person-one skill-one job-one company

Declining influence of trade unions


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the major trends in the labour market are: ecruitment ban/squeeze in the public sector and

government employment Increasing open unemployment Decreasing formal sector employment in formal terms Growing casualization and contractualization of labour Falling employment elasticities Emergence of global chains splitting production processes

into different parts dispersed over several locations Mergers, acquisitions, divestitures, and other ownership

changes and consequential pressure on doing more withless Significant workforce reduction in both public and private

sectors


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To address/redress indigence (poverty),unemployment, inequality and illiteracy, the keyissues and critical challenges before thegovernment are centered on providing work to

all those who seek it. Six challenges have beenidentified and discussed here:

Technology and job creation

Skills development

Labour mobility Labour commitment

Work culture

Productivity and competitiveness


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Technology, global competition and ownershipchanges through privatization and translationalmergers have all resulted in a phenomenon ofdoing more with less and reduction ofworkforce for improving competitiveness

In most areas e.g.. Infrastructure, transport,banking etc. its becoming imperative to useadvanced technology regardless of their impacton employment

New technologies usually displace unskilledworkers and reward skilled workers. They alsoeliminate the dangerous aspect of work.

Firms using advanced technologies shrinkemployment and expand scales of business


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Only 5% of the Indian labour force in the agebracket 20-24 years, has obtained vocationaltraining

Mismatch between skills acquired and skillsrequired

Dearth of skilled professionals

The above points give a macro perspective of

the labour market in India. Competencies fordifferent jobs should be accusedsystematically both in the organized andunorganized sectors


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The government should invest in basiceducation, skills formation and training. Apartfrom achieving literacy for all, vocational skillsprovision should receive urgent attention.

This can be best done through private publicpartnerships with due emphasis on vocationalskills certification and appropriate funding.

Vocational education should be integrated at theschool levels. Also, special care should be takento protect the interest of the vulnerable groupsand to enhance income security for those whoare adversely affected by unemployment or jobloss.


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Worldwide labour migration occurred due toglobalization

Globalization resulted in loss of jobs in some

countries and gain in some Technology has played a large role in labour

migration, resulting in job gain in some sectorsand loss in some sectors

Labour migration was at its peak during the 19

th

century

The current technological advances has reducedjob migration to a large extent, instead ofpeople moving, jobs have been moved


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The labour outflow from India has alwaysbeen in great numbers, prior to liberalizationthe migration was largely in the unskilled

labour sector mainly to the Gulf Post liberalization, a large number of skilled

workers have migrated for large incomes

Even with the dampening of US and European

economies hasnt deterred skilled workersfrom migrating form India


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A committed labour is one who stays in thejob and has served his/her major connectionwith land

He/she is a permanent member of aworkforce of an enterprise and drawslivelihood from that enterprise

There are 4 stages of commitment:

Uncommitted worker

Partially committed or semi-committedworker

Generally committed worker

Specifically committed worker


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Uncommitted worker a temporary worker whoaccepts industrial employment to tide over sometemporary difficulty and returns to the villageafter working for a short time

Partially committed or semi-committed workerlooks at industrial employment as permanent,but remains in contact with the village

Generally committed worker dependent onindustrial employment and has no contact withthe village

Specifically committed worker permanentlyattached to a particular enterprise and aparticular occuaption


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Absenteeism and turnover

Grievances and indiscipline

Poor performance


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Lack of commitment leads to instability in theworkforce and is reflected in absenteeism and highlabour turnover. There are several causes forabsenteeism and turnover, a few being:

Seasonal (need to go back to the village duringcertain times of the year like harvest season)

Personal habits (gambling, alcoholism)

Family problems (polygamy, poverty, sickness etc.)

Push (unfair company policies and practices)

Pull (opportunities for moonlighting or earning abetter livelihood informally by going on leave orchanging jobs)

Factors and customs and traditions (festivals,marriages and other social/family ceremonies)


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In traditional industries absenteeism is tackledby badli labour causal basis

Some industries give incentives for things likepunctuality, regularity to work etc.

Some even use counseling to understand the rootcause of the problems and tackle it better thanbefore

The problem of turnover is handles throughallowances and/or awards for long term servicein case of blue collar workers

For white collar workers the companies havemodified their H policies with employeeexpectations, benchmarking best practices forretention of employees


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Persistence of grievances reduces commitmentand can also lead to indiscipline


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Low labour commitment results in poorperformance

Low labour commitment could be due to the

absence of factors which have to do withquality of supervision, company policies,work environment etc.

Poor performance is often more a function of

will than skill Skill gaps and mismatches are usually

apparent and relatively easier to deal with


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Work culture does not mean worker culture

Its the behaviour, value, beliefs andassumptions of all workers, including

managers, towards work A good work culture is when work is work

ship, the worker is respected, and theworkplace is clean in every sense of the

word


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Firms do not operate in vacuum

From independence till 1970s, India was thesecond largest economic power in the entire

Asia-Pacific belt The assendancy of other Asian economies,

corresponded with the meltdown with Indianeconomy

Indias share in the international trade was

1.5% at the time of independence. Today its0.8%, a little over half its share in 1950s

A comparative table showing the productivityof India has been shown


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Parameter Highest

among 47countries

Lowest

among47countries

India Rankof India

among47countries

Overall productivity GDP(PPP) per person employedin

67,354 4849 4849 47

Overall productivity GDP perperson employed (US$)

84,657 824 824 47

Overall productivity growth(%) change of real GDP perperson employed

6,543 -6.912 5.886 4

Labour productivity (PPP)GDP (PPP) per employee perhour

38.14 2.15 2.15 47

Labour productivity GDP peremployee per hour

47.37 0.37 0.37 47


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Parameter Highest

among 47countries

Lowest

among47countries

India Rankof India

among47countries

Agricultural productivityrelated to GDP (PPP) perperson employed inagriculture

72,117 128 2017 45

Agricultural productivityrelated GDP per person

employed in agriculture

49,084 138 343 45

Productivity in industry (PPP)related GDP (PPP) per personemployed in the industry

80,258 8038 8038 47

Productivity in industryrelated GDP per personemployed in industry

97,306 1366 1366 47

Productivity in services (PPP)related GDP (PPP) per person

employed in services

87,272 6026 10,010 45


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Goldenrulesofcompetitiveness

1. Create a stable and predictable legislative environment

2. Work in a flexible and resilient economic structure

3. Invest in traditional and technological infrastructure

4. Promote private savings and domestic investment

5. Develop aggressiveness on the international markets (exports) as well asattractiveness for foreign direct investment

6. Focus on quality, speed and transparency in government and administration

. aintain a relationship between wage levels, productivity and taxation

8. Preserve the social fabric by reducing wage disparity and strengthening the middle

class

9. Invest heavily in education, especially at the secondary level, and in the lifelongtraining of labour force

10. Balance the economies of proximities and globality to ensure substantial wealth

creation, while preserving the value systems that citizens desire


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I reflects a combination of following:

a) Logic of Competition.

b) Logic of employment-income protection.

c) Logic of industrial peace.


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In order to limit industrial conflict in theinterest of economic development, countrieslike India adopted economic development

strategies based on the import substitutionindustrialization(ISI) model.

These strategies curbed internal & externalcompetition through licensing regulations &

protectionist tariffs to assist local industry. Emphasis was to protect labour in the labour

market & capital in the product market.


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Focus on promoting efficiency, both in terms oflabour market flexibility & labour productivity.

Policies & practices to promote these include:

Elimination or marginalisation of trade unions.

Exemption of export processing zones fromnational labour legislations.

Using selective immigration as a means ofensuring an adequate & flexible supply of labour

Competition based on quality & innovation.governments emphasize on skills training toimprove workers competencies particularlywhere labour shortages occur.


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It represents workers response toemployment instability caused bymanagement & labour market imposed

hardships on workers.Many developing countries have neglected it

7 realized it when there was highest needbut lowest capacity. Hence 20% of the

workers in the world have meaningfulemployment schemes.


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Different combinations of these logics lead todifferences in employment relations patternslike

a) egulated protective(India)b) Constrained Competitive(China)

c) Deregulated Competitive(Philippines)

d) Protective Competitive(Malaysia)

The logics of action framework is a usefulin understanding the nature & direction ofindustrial relations systems.


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It can be traced to period of colonization inthe 16th century.

It is the economic integration across the

globe in terms of free movement of capital,technology, products & people.


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Perceived benefits of globalization are:

Sustained economic growth

Free markets with little or no intervention

from government, result in the most efficient& socially optimal allocation of resources.

It spins competition, increases economicefficiency, creates jobs, consumer prices,

increases economic growth and is generallybeneficial to everyone.


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It is benefitting few & hurting many.

It is another form of imperialism.

It is leading to growing inequalities between

the rich & poor, both at the level ofindividuals & among countries.

It is destroying jobs & local communities.

It is ruthless, rootless, jobless, fruitless.


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The traditional I is not geared up to meet the new marketchallenges in the face of globalization. Some of thefeatures of the given phenomena are:

The institution of trade union is getting weak. Employersare going for unitarism & non-unionism.

The institution of collective bargaining is beingdecentralised & being replaced by unit bargaining,individual bargaining & commercial bargaining.

Disinvestment/ Privatisation & V S are accepted facts ofI .

Changing patterns of Compensation/ ewards management

Fixed/Assured time rate wages are replaced byvariable/performance-based wages. Well paying, secure, low-productive jobs in organised

sectors are replaced by low-paying more insecureproductive jobs in unorganised /self-employed sectors.


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It changes ownership, which may bring outchanges not only in work organization &employment but also in trade union

organization & trade union dynamics. It changes the work organization by

necessitating retraining & redeployment.

It affects the rights of workers & trade

unions, including job/union security, incomesecurity & social security.


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These include :

Making workers the owners through issue ofshares or controlling interest.

Negotiating higher compensation forvoluntary separations.

Safeguarding existing benefits.

Setting up further employment generatingprogrammes.

Proposals for setting up new safety nets thatinclude not only unemployment insurancebut also skills provision for redundantworkers.


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In the sphere of labour laws, it usuallyresults in erosion of the accrued interests ofworkers & trade unions.

The issue often concerns enacting minimalprotective measures to ensure thattransferred public sector/governmentemployees receive similar protection as is

provided in public/government employment.


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Before globalization, pension schemesusually provided defined benefits.

In the post globalization era, it is often

restricted to defined contributions. Thismeans, usually, a reduction in pensionbenefits and an uncertainty concerningfuture provision of pension benefits due to

a)The absence of government guarantees,b)Falling interest rates

c) Investment of pension funds in stockmarkets.


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It is seen in terms of the shift inconsideration of I issues from macro tomicro & from industry to enterprise level.

When the coordination is at the nationallevel or sectoral level, in the event ofindustrial conflict, work in the entireindustry can be paralyzed.

But when the dispute is at the bank level, in

the absence of centralized coordination bytrade unions, only work in that bank isparalysed and other banks function normally.This weakens the bargaining power of unions.


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Earlier, I was the concern of three principalactors : workers & their unions,managers/employers, & the government.

In the post-liberalization era, consumers &the community plays a significant role, hencethe rights of workers/unions take a backseat.


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When the states have adopted pro-investorpolicies, the trade unions are declining inpower & influence.

So, it is important to forge broader allianceswith the society, consumers & communitytheir power will dwindle.


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Gradual withdrawal of the state from itstraditional role of actively supportingorganized labour.

Concern for issues related to competitiveness& flexibility like increase in productivity, costreduction, modernization, retraining &redeployment.

Less emphasis on reinstatement &regularization of dismissed employees.


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In the privates sector, the new young, andfemale workers are less eager to join unions.

New employment opportunities are shrinking

in these sectors.


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In the post-liberalization period, workers arereluctant to go on strikes because of fear ofjob insecurity, concern about the futility ofstrikes.

About 60% of the man days lost in the post-reform period were due to lockouts & lessthan 40% were due to strikes.

Instead of pressing for higher wages &

improved benefits, trade unions are pressingfor maintenance of existing benefits &protection & claims over non-payment ofagreed wages & benefits.


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The bargaining power of trade unions is alsoshrinking.

Also, there is a gradual movement away from

parity to disparity.

group 2_ir & globalization

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