FINANCIAL CRISIS AND LABOUR- A NOTE

Source: BMS      Date: 7/22/2012 2:18:52 PM

Before G20 meeting in Washington, PM of India met top corporate leaders and leading Industry Associations. Previously as per the advice of corporates, interest rates were reduced, credit policy was softened. FM acts as the spokesperson of industrialists. But the corresponding consultation with the other social partner viz. workers represented by the trade unions did not take place. Centre did not find time to meet Trade Unions and workers. Stiglitz- “Costs should be born by those who created it, just as polluter pays, a principle in environmental economics”, “those who created the problem are now the Doctors offering the prescriptions”.

Only workers can overcome the pains of recession, not the corporates. Thousands of dedicated bank workers saved their institutions and country from crisis. Hence Industry can be saved by saving workers. “We need an economic rescue plan for working people and the real economy that deliver decent work and productive enterprises”, said Juan Somavia, ILO Director General.

Any restructuring of capitalism will be at the expense of labour. After first industrial revolution in Europe, there were rampant labour abuses like seven day work a week, child labour, absence of minimum safety standards at work place etc. Today the same hire and fire policy in private sector is blindly promoted by Government in the name of flexible labour policies. Previously job security was the primary concern of job seekers. Reforms made compensation the driving factor for job hunters. Crisis sees return of job security concerns of the job seekers.

Labour suffers for mismanagement by top people in the Industry. IN UK, heads of banks resigned showing a culture of accountability. On the contrary in India, irresponsible heads make lowest line workers scapegoats. Companies around the world are laying-off hundreds of thousands of workers. Businesses has already cut another 2,40,000 jobs. MNCs are planning to cut costs by trimming staffs and reducing shifts. They prepare either lay off permanent workers or slice their incomes. In the west labour employment sector is under severe strain with retrenching of labour from enterprises and worsening job losses, reflecting deep and prolonged recession. People working in sectors like construction, automotive, tourism, finance, services and real estate will be hit hardest first, says ILO.

US labour Department released its latest information about the mounting weekly applications for unemployment benefits. Claims for unemployment insurance have now passed the half million mark in US. The Sun micro system in US is laying-off 6000 of its employees. British telecom operator BT Groups would be slashing 10000 jobs. The SMEs of UK have started reducing the number of their workers. 1/4th of enterprises are thinking in such lines. In recent weeks factories in South China are being closed which has dominated the local news. China’s largest toy manufacturer laid off 7000 of its workers. Americans found themselves losing jobs, little disposable income, default in mortgages. Workers worry about job losses. US reported its largest monthly job loss in 5 1/2 years. Labour dept in US said there were 1,59,000 fewer jobs in economy in September than in August 2008. Seven year high unemployment in US. Unemployment is rising. The number of Americans joining the unemployment rolls surged to the highest in 16 years, up more than 5,40,000 the US Labour Dept. said. Massive layoffs and economic despair driven suicides. US economy lost about 5,30,000 jobs during November. The three auto companies together have more than 3.5 lakh jobs and millions of others that depend on the industry. The combination of incompetent management, dogmatic unions, and imprudent regulations are affecting auto industry.

Unemployment figures in France jumped by 49000 in October largest jump in 15 years. France has the highest unemployment rates in Europe. Canada is suffering its worst month of job losses since 1982 raising the unemployment rate to 6.3%. Ontario the Canada’s largest province and its manufacturing base, was especially hard hit.

Do not import unemployment from outside the country. Labour force was growing faster than population growth. 20000 workers are to lose job in knit wear industry in Tirupur, Tamil Nadu. The textile and clothing sector in the country provides direct employment to 35 million people, a study by CRISIL said in 2007. At least 7 lakh jobs are expected to have been lost in the textile and clothing sector, due to an estimated two percent decline in production since April this year which is attributed to the slow down in domestic demand and a decline in exports. The job loss was mostly in the smaller units in the spinning, garmenting and hand processing segments; many of which have scaled down production or closed down. 50% of the textile goods produced was for exports and the main markets were the US, the EU and Japan. Textile imports by the US from India came down by 1.56%. The exports to EU and Japan also have the same trend. Unemployment in IT sector is an expected corollary of the external crisis. One and a half lakh people in Kerala may lose jobs mainly in the unorganised traditional sectors and plantations. There will be substantial reduction in the number of work days. Many units have reduced number of shifts.

Decision to invest PF amount in private institutions should be cancelled. Indian Government decided to invest Rs. 1,20,000 crores from PF fund in the mutual funds of private institutions. HSBC, ICICI and Reliance each are given Rs.30000 along with SBI. Reliance was included at the last moment as a consideration for the role played through Samajvadi Party in the non confidence motion against the UPA Government. If India’s pension fund and PF were entrusted to the global fund managers, we can imagine what would have happened. US lost $ 2 trillion of retirement funds in the stock market crash. Savings of employers who were heading for retrenchment had been wiped out. India should not put PF and Pension Funds in stock markets. Scrap new pension scheme. Withdraw private pension funds and Pension Fund Regulatory and Development Authority Bill. Three pending bills on banking and insurance sectors and for pension fund reforms to be reconsidered.

In the guise of recession, industry may resort to knee jerk actions such as large scale lay offs. Assocham issued a statement that corporates in India will cut their work force by 25-30% due to global recession, with in next 10 days as a part of their cost cutting measures to stay afloat. The sectors they pointed out include IT enabled services, aviation, steel, financial services, real estate, cement and construction. But this statement was termed as irresponsible by Union minister of state for Commerce and Planning Commission Deputy Chairman. Indian Prime Minister had asked industrialists to avoid knee jerk reactions and advised that industry must bear in mind its societal obligations in coping with the effects of this crisis.

Largest private carrier in India, Jet Airways sacked about 1000 staffers. Largest lay off in India’s civil aviation industry, mostly women employees. Women are bearing the brunt of job cuts to the industry to stay profitable. But subsequently due to objection from trade unions and public, the Jet Airways employees were reinstated. Air India is planning to ask 15000 of its employees to take leave without pay for years. The story of jet airways is classical of the approach of Government’s lack of vision. Government on one hand trying to bail out private airliners with sops and concessions, but on the other hand doing nothing to protect jobs of its employees.

There is insensitivity of private enterprises that leads to forgetting the social responsibility of corporate citizens. Here the ideal of Chennai based banking software company is worth mentioning. It has employed a number of well qualified physically challenged professionals and turned down offers from MNCs. In China capital flow was into unskilled labour intensive industries. Thus they became major suppliers of light industry goods to the world.

Salary cuts:- or puting caps on wages- Millions of wage and small salary earners are reeling under food price inflation. Kingfisher slashed drastically the salary of trainee pilots.

Many soft ware majors have put on hold promotions.

Reforms discourage Unions that protect workers. Trade Unions in India have opposed Government stand on reforms.

John Steinbeck portrayed in “The Grapes of Wrath” the perils of recession of 1930s- Farm income halved, industrial production reduced at 40%, 1/4th of Americans were unemployed, hungry and homeless crowded in the streets, thousands went in search of jobs, a million rural labourers were displaced, coal and textile industries were first to suffer among Industrial and manufacturing workers affect homeless families in Arkansas huddled in caves and in California in sewers. Suicide rate reached the highest and birth rate lowest, demonstrations of unemployed and the homeless shock many cities in 1930s business people laid off workers in high numbers. Then US waged a protectionist war against other countries with high trade tariffs.

Wage price spirals similar to the ones that triggered inflation in the 1970s. Emphasis on capital intensive manufacturing rather than labour intensive. This leads to rise in wages of skilled labour. The non unionised foreign companies in the US give 40% less in salary.

Arjun Sengupta said, only some people who were extremely poor and were spending less than Rs.12 a day moved out of poverty to just one stage above and joined the ranks of the 77% in 2004-05, but they still live below Rs.20 a day. The other 23% (the rich and not the BPL) provided a market larger than most other economies of the world and attracted world investors and traders. But the 77% who were bypassed comprises the poorest of the country’s people. Most of them are illiterate or have only primary level education, and suffer from malnutrition and ill health. Most of them are unemployed or belong to the working poor, or self-employed unorganised working class. This will require a programme of social security that provides protection for health and life and accident insurance, maternity benefit, pension and a minimum level of employment insurance, a minimum social security scheme that will cover more than 360 million unorganised workers, at a cost that will amount to 0.5 per cent of GDP.

The new Unorganised Sector Workers Social Security Act will meet only partially the requirements of a fraction of the unorganised workers. There has to be a second look at this scheme and modify it to cover the whole of the unorganised sector within a few years. A programme to stimulate this overwhelming unorganised sector of the economy will increase domestic demand and domestic production, reviving economic growth.
C.K. Saji Narayanan

 
[email protected] Bharatiya Mazdoor Sangh