Saturday, September 19, 2009

Let’s protect workers, not jobs

Anyone travelling in India by air must have got a sinking feeling last week when the Congress leader, Sanjay Nirupam, demanded that Jet Airways be nationalized. He raised the spectre of the ugly days when Indian Airlines had a monopoly of the skies before 1991. This would have effectively turned Jet Airlines from one of the world’s best airlines to one of the worst. Naresh Goyal, Jet’s founder, on the other hand, was scared of his pilots forming a union because of his memory of the 1974 Air India pilots’ strike which started the decline and fall of Air India.

The trouble in Jet Airways began when some of its pilots wanted to form a union. The management said 'no', and sacked two of the leaders. In response, the other pilots went on ‘mass sick leave’, which left tens of thousands of passengers stranded, wondering who to blame for their undeserved suffering. This comes at a time when the aviation industry is going through very tough times and Jet Airways has reported a loss of over Rs.200 crore in the last quarter. The strike added another Rs 200 crores to its losses.

The Mumbai High Court ruled the strike illegal. After the dispute was settled last week end, Justice D.Y. Chandrachud, refused to drop the charges against the pilots. Reflecting the angry public mood, he wanted to prosecute the pilots for contempt of court. “Employees of public utility services…cannot hold the public to ransom”, said the judge. The pilots’ lawyer argued, “Pilots are an emotional lot and have a sensitive task”. The judge countered, “Even doctors and judges have sensitive jobs”.

The right to form a union is part of every democracy but should pilots, who earn Rs 3-4 lakhs a month, be equated with down trodden labour? Should persons who perform essential services in public transport, military, police, and hospitals, be allowed to disrupt services? The judge obviously does not think so.

The Jet Airways affaire is an opportunity to revisit our archaic labour laws which hurt the interest of 90% of India’s employees while protecting an aristocracy like the pilots. Of course, labour laws are needed, but they should protect workers, not jobs. All governments try to prevent job losses but they never succeed. Companies have to survive in dynamic market conditions. In a downturn, orders are reduced from customers and the only choice before a company is to reduce its workforce or go bankrupt. Sensible countries, like those in Scandinavia, give employers the freedom to hire and lay-off workers based on market dynamics. They protect workers who lose jobs through a well designed safety net of unemployment insurance and re-training. .

India’s labour laws do the opposite—they protect jobs, not workers. They assume that a job is for a lifetime, and do not allow employers flexibility to lay-off workers in a downturn. Thus, Indian companies avoid hiring permanent employees, and 90% of India’s workers have ended up in the informal sector without any benefits or safety net. This is one of the reasons that the manufacturing sector has not become an engine of mass employment in India as it has in the Far East.

The answer is not to equate income security with job security. Let us begin by raising job retrenchment costs from the present15 days’ salary for every year worked to 45 or even 60 days. Second, amend Provident Fund rules so that employees can access their retirement accounts when they lose jobs. Third, raise the contribution to Provident Fund in order to provide a softer landing to job losers. Fourth, cover unemployed workers under a universal health insurance, such as the excellent RSBY (Rashtriya Swasth Bima Yojana). Finally, companies should pay for worker re-training and inflict pain on all employees before laying-off some—e.g. cut executive salaries by 50% (as Jet Airways has done) and worker salaries by 25%. Unions will object of course, but the reform of unions has to be part of the solution.

The Jet Airways strike has presented us with a mirror to look at our labour laws, showing how we deceive ourselves, thinking that we are protecting labour when we are only protecting an aristocracy like the pilots.


vikramhegde said...

Sir, I would like to differ with you on the following grounds-

a) the action of Jet in removing the leaders of the union is an unfair practice as per the ID Act, though the Bombay High Court declared that they may not be workmen? who then are the workmen in that industry. Is it that they have allowed the Cabin crew, ground crew or any other technicians to unionize?

b) If an industry hires someone for more than 240 days in a year, then that person is deemed to be a permanent employee. If industries are resorting to hiring informal labour for their core activities then it is in violation of the law. An industry does not have an excuse for avoiding hiring permanent labor.

That said I completely agree with you regarding the archaic labor laws which protect only the creamy layer of workers.

In additions to the excellent changes you have suggested to the PF and health insurance, I would like to add that Unions can take up progressive activities like employment exchanges and re training programs.

Anonymous said...

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This applies to Congress pseudo-secularist pseudo-democracy also.

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Unknown said...

Amen to that!!

JB Singh said...

Allowing emergency access to PF resource is understandable, but by increasing retrenchment costs is'nt the company being inflicted by a greater economic cost when it lays of workers ? And do the labour laws really provide cover to such highly paid people ?

Anonymous said...

Dear Mr. Das,
I liked this article very much. You clearly state the problem and present pratical solutions. I don't know who is advising the government on these issues. I hope they were listening to you :-).


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