Trouble is in the air. In June, India’s national carrier — Air India — declared that it had nearly run out of money and that payment of employees’ salaries would be delayed by 15 days. The Air Corporation Employees Union, the Aviation Industry Employees Guild and the Indian Aircraft Technicians Association threatened a “no pay, no work” agitation. Meanwhile, some 300 contractual security and commercial staff went on strike June 1 to demand that sacked contract staff be taken back. Though the strike was withdrawn on June 10 after intervention by the Central Labor Commissioner, the dispute continues to simmer.

Air India is wholly owned by the government, and a $3 billion bailout package is being negotiated. (The company lost nearly $1 billion in 2008-09.) But this is only one flashpoint in a series of labor agitations and strikes that is sweeping the country. “Trade unions: up in arms again?” asks a headline in business magazine Business India. In a recent cover story titled, “The Summer of Discontent,” business weekly Businessworld writes: “Over the past four to six months, there has been a steady increase in the number of labor disputes and flash strikes.”

In April this year, another labor dispute hit the headlines, although in an indirect way. Mud and pebbles were found in the fuel tank of industrialist Anil Ambani’s helicopter. Ambani, who is fighting several corporate battles, alleged sabotage and a conspiracy to murder. It later turned out that the “sabotage” was orchestrated by some workers of the firm responsible for maintaining the Ambani chopper. According to the Mumbai police, the incident was a result of a dispute between the non-technical staff union of the maintenance firm and the management. The stage-managed sabotage was an attempt to gain publicity for their grievances.

In some cases, threats of violence have led to actual killing. On September 22 last year, Lalit Kishore Chaudhary, CEO of Graziano Transmissioni India, the Indian unit of an Italian auto component maker, was clubbed to death by a group of 200 factory workers. The workers had been fired for alleged acts of indiscipline and were protesting outside the gates of the factory near Delhi. When Chaudhary came out to reason with them, he was attacked and murdered. This should be a warning to management, said Oscar Fernandes, then Union labor minister, who later apologized for his insensitive remark. But militant labor had clearly acquired one more advocate.

Other incidents have not attracted as much attention, but the list keeps growing longer. Consider these examples:

  • In April, at Pantnagar in the state of Uttaranchal, workers of Swiss multinational Nestle went on strike after the management removed two probationers for unsatisfactory performance. The strike was called off after three weeks but the peace seems fragile. Pantnagar has been a beacon for several large companies, who have been attracted by a plethora of state-level incentives. According to business daily Business Standard, “Other managers said such incidents may have far-reaching consequences. If today it is Nestle, such strikes can knock at our doors also.”
  • At the Mahindra & Mahindra utility vehicles plant at Nashik, in Maharashtra, workers went on a 15-day strike in April. The apparent issue: the suspension of the trade union president who had allegedly threatened the chief security officer of the unit. The real issue: a delayed wage agreement.
  • At Hyundai Motor India, subsidiary of the South Korean auto maker, workers went on a 18-day strike at the end of April to demand recognition of the employees’ union. The company has debated moving the Tamil Nadu-based plant to Europe. (Most of the production is for export.)
  • At tire maker MRF, the Arakkonam (Tamil Nadu) unit was closed for most of May. The main problem was rival unions clamoring for recognition.
  • In December last year, 250,000 workers from 59 jute mills in West Bengal went on an 18-day strike over the issue of unpaid compensation. The agitation was called off after the mill owners agreed to pay US$10 to every worker.

Unions representing labor groups including coal workers, oil sector employees, bank staff and telecom workers have been demanding higher wages or protesting against proposed privatization. “There has been a bunching of labor unrest in the past few months,” says Manish Sabharwal, chairman of TeamLease Services, a human resources services provider.

Puzzling Statistics

Still, the numbers tell a different story. According to the Union government’s Labor Bureau, the total number of man days lost because of strikes and lockouts in January-March 2009 was 473,433. In the same period of 2008 and 2007, the numbers were 983,573 and 16,412,962. If anything, this should show a huge decline in the incidence of strikes and lockouts. The catch is that these figures are still provisional; data collection and compilation in India moves at a glacial pace. The final figures for 2002, 2003, 2004 and 2005 paint a somewhat different picture. The Labor Bureau numbers for these years are 9.66 million, 3.21 million, 4.83 million and 10.80 million respectively.

“Disputes have gone up since 2008, but the data are still being compiled for that period,” writes Businessworld, quoting additional secretary in the Union ministry for labor and employment S. Krishnan. “Figures do not reflect the trend, as often disputes are not being reported. Closures are taking place, layoffs are happening, but either workers are accepting it quietly or the units they were working for were very small.”

The problem is partly caused by job losses in the economic slowdown and the uncertainty they have engendered. According to two surveys conducted by the Labor Bureau to assess the impact of the economic slowdown on employment in India for the quarters October-December 2008 and January-March 2009, there was a decline of about 0.5 million in employment in the earlier period. In the second, there was an increase of 0.25 million. The survey covered certain specific sectors. “The employment in the selected sectors during March 2009 remains lower than employment in September 2008, when the (total) figure was 16.2 million,” says the survey.

The Labor Bureau found that the effect of the slowdown was far greater on contract workers. While there was no change in the January-March 2009 period, there was a sharp slump of 3.88% during October-December 2008. Workers in the construction industry — which accounts for a large proportion of contract labor — were not surveyed because of “non availability of any sampling frame” and “difficulties in the collection of data”. Including this sector may have presented a grimmer picture.

The share of organized sector employment in total employment has been falling — from 7.3% in 1993-94 to 5.8% in 2004-05. In absolute numbers, too, employment in this sector has gone down, from 27.7 million in 2001 to 27 million in 2003, according to a survey by the National Sample Survey Organization. “Organized employment is down from 10% to 7% of the labor force because of slow non-farm job creation in rural areas and a labor law regime that breeds informality,” says Sabharwal of TeamLease. He says this is the reason why India hasn’t seen an increase in labor militancy. “The decline of militant unions is an unintended consequence of an undesirable decline of organized employment,” he explains.

Rajesh Chakrabarti, a professor of finance at the Hyderabad-based Indian School of Business (ISB), says that agitations may have increased, but you can’t call it the return of militant unionism. “I don’t think there is a trend of militancy,” he says. “Whatever we hear about now is still a set of sporadic low-scale incidents. Labor is no longer that strong in India to wage a major sustained militant movement. But, taken together, small incidents can do damage as well.”

Militant Unions

India saw militant trade unionism in the 1970s and 1980s. In 1974, the president of the All-India Railwaymen’s Federation, George Fernandes, led what is now known as the Great Indian Railway Strike. It was brutally repressed and was one of the events that led to the imposition of the Emergency by late Prime Minister Indira Gandhi. Some 40 million man days were lost in 1974 and the Gandhi government was voted out in 1977. In 1981, Datta Samant led Mumbai’s textile workers on a prolonged strike. It destroyed the industry; almost all the textile mills have moved out of the city now. But it nearly brought down the government and established the clout of the labor leaders. “The 1970s and 1980s were decades of stagnation, and therefore militant labor unions fought for benefits, permanency, tight work rules and much else,” says Sabharwal of TeamLease. “But union leaders like Datta Samant destroyed the livelihoods of millions in Mumbai’s textile industry.”

The business environment has changed dramatically since those days. Liberalization, which saw a resurgence after 1992, introduced competition, and managements could no longer afford to pander to union demands. Public sector undertakings descended from their pedestal of the “temples of modern India.” Says Chakrabarti of ISB: “The trend towards privatization in the public sector is an issue.” The growth of the private sector has meant some degree of fragmentation of unions. Fernandes in 1974 could command 1.5 million railway employees. Today’s steel industry unions, for example, pull in many directions as there is no cohesive national-level organization. Some of the new units don’t even have unions.

The rise of the IT industry and the emergence of knowledge workers contributed further to a decline in trade unionism. Though there have been efforts to unionize IT employees — the Bangalore-based UNITES (Union for Information & Technology Enabled Services), for example — they have not made much headway. Add to this the increase in outsourcing and reduced staff at the core companies. The result is that except for areas such as banking — where the majority of banks are still government-owned — there are very few powerful pan-India unions. The political parties have their trade union arms, of course — the Center of Indian Trade Unions (CITU) of the left and the Indian National Trade Union Congress (INTUC), for instance. But they have not moved with the times; they have been unable to woo younger workers.

Part of the reason is that workers’ issues and concerns have changed. “Now the issues are about job uncertainty and safety net and training/skilling of labor to take on new roles in a changing environment and with new technology,” says Chakrabarti of ISB. “Casualization of the workforce [using labor contractors instead of offering employment] has become quite widespread. Unions understandably resist this but do not appear to be too effective at it.” According to Sabharwal of TeamLease, “The relentless march of India’s progress is captured in the labor market issues that matter. The labor market issues that resonate with the youth today are employability, certification, assessment, funding training, apprenticeship and paths to formal employment. The unions also don’t realize that the ground is shifting under them; more than 50% of CITU’s membership is now unorganized or informal labor, which does not believe that job preservation is a form of job creation.”

“Increasingly, the interests of the labor and the union leaders have diverged,” says Chakrabarti of ISB. “Unions seek to block any change just to maintain their importance. Many of the changes, though initiated by management, help labor as well. People often see that, and unions find dropping enrolment.”

The old guard of union leaders doesn’t seem to have realized that times are changing. CITU president M. K. Pandhe makes no apologies for increasing confrontation. “What is wrong in being militant?” he asks. His constituents may feel differently. “Militancy can cause trouble, particularly if violence is involved,” says Chakrabarti of ISB. “Increasingly, public opinion is becoming less dedicated to union issues as people find them less effective in protecting labor interests. So militancy becomes a high-risk gamble for unions. Victory can recover their lost power but loss can be devastating.” Adds Sabharwal of TeamLease: “Unions must realize they have to be part of the solution and not the problem. The criminalization of politics and the politicization of labor unions have gone hand in hand, and this has greatly reduced their soft power. So they exercise brute force, which is undermining their credibility.”

Reforming Labor Law

There is a danger in this. One of the key reforms still left undone is in the area of labor laws. Industry wants more freedom to hire and fire. Its demands include a ban on flash strikes; a reduction in the number of labor laws (a recent study shows that there are 55 central laws and more than 100 state laws); closure without prior permission of units employing up to 1,000 employees (against 100 at present); greater use of contract labor in non-core areas; and a different dispensation for special economic zones to compete in the export market with China (where it is far easier to close shop and sack employees).

Some of the current labor laws are archaic. But irresponsible and militant trade unionism could tilt the balance the wrong way. “This is an unclear area,” says Sabharwal of TeamLease. “Everybody recognizes that India’s labor laws encourage the substitution of people with machines and breed unorganized employment. But policymakers are not able to deal with the optics of labor reform where people have begun to view labor reforms as anti-poor while they actually are the opposite.

“I think we will see a lot of movement on skill development, benefits, minimum wages, etc., but core labor laws around hiring, tenure etc will take longer. In the interim, the transmission losses between how the law is written, interpreted, practiced and enforced will continue to increase…. Reforms since 1991 have focused on the sins of commission (license raj, tariffs, price control etc). But if this government lives up to its promise of fixing the sins of omission (infrastructure and education), we will see the youth well positioned to take advantage of the extraordinary opportunities that India will offer. This does not mean that there will not be isolated labor conflicts. But I don’t think there will be mass labor unrest.”

“Labor reforms are a pillar of the overall reforms that needs significant action,” adds Chakrabarti of ISB. “Briefly put, the reforms are likely to make firing easier but provide protection for people who lose jobs. Naturally, if implemented, they would further erode the powers of the unions as collective bargaining agencies.”

There are some in industry who realize that corporate managements have to go that extra mile. Writing in business daily The Economic Times, Tata Sons director R. Gopalakrishnan gives it an international perspective. “Managing worker dissatisfaction will be the next leadership challenge globally,” he says. “Managements have enjoyed exceptional labor relations for two decades: Industrial unrest (strikes and lockouts) during 1992-2007 is drastically lower than 1977-1992 — by 80% in the UK, S. Korea and Japan and 60% in India and the U.S. After three decades of Reagan-Thatcher super-capitalism, a new generation which has no experience of tough labor power is now leading enterprises. Unionists like Arthur Scargill in the UK, George Meany and Walter Reuther in the U.S. or Datta Samant in India have all been forgotten. Many countries all over the world have experienced unprecedented growth in the last decade but skeptics doubt whether labor got its share. In the words of one union leader: ‘The time for corporate dictatorships is over. This is our time.'”