Why are our labour laws changing?

With the intention of simplification of 44 existing labour laws, the Government of India is trying to legislate four codes on labour – on wages, industrial relations, social security and safety, and on health and working conditions. Simultaneously the government is proposing amendments to the Contract Labour Act, the Factories Act, the Industrial Disputes Act, both at the state level and at the centre. But this is not happening just in our country. Elsewhere across the globe, Emmanuel Macron, the newly elected president of France, amidst continuing protests by trade unions, passed executive orders in August to provide greater freedom to employers to hire and fire and put a simultaneous cap on termination dues and also drastically change the collective bargaining structure in the country. The Brazilian Senate too recently approved a labour reform bill that aims to reduce costs for businesses and allow firms to negotiate contracts freely with employees.

Who is the simplification being done for? Why is it being done?

Governments across the world are claiming that stringent labour laws are harming the economy and is the greatest impediment for job creation and thus an overhaul of the legislative framework is long overdue. The proposed changes are aimed to create jobs and boost the economies. But this is far from the truth. Let us take two steps back and try to understand this.

Reorganisation of Production and the Need for Flexibility

Mass production, perfected by the Fordist mode of production in the 20th century, institutionalised the division of labour, both vertically and horizontally, under one roof. Fordism led to standardisation of the end product. This meant making identical products in large quantities for mass consumption.

Russian Revolution: On the other hand, the Russian Revolution in 1917, exactly a hundred years from now, inspired socialists and trade unionists across the world and number of strikes and protests spiked. In 1916, in Britain alone, 276 thousand workers were involved in strikes which increased to 2,591 thousand workers in 1919.

Workers, under the same roof from the start to the end of the production process, were able to come together and unite against a common adversary, their single monolithic employer. They may have been in different factories, departments, divisions, locations but all workers working for Ford Motors or GE, for example, identified themselves as workers of Ford or GE. This gave rise to powerful militant unions across the industrialised world.

With the consolidation of the Soviet Union, intensified union resistance on one hand and the economic crisis of the 1930s on the other, the economic and political dominance of the US came under threat. The threat worsened with the rise of Japan in Asia as a military power.

Rise of Japan: The great devastation of the Japanese economy during the World War II and the need to rebuild it from scratch led in many cases to the introduction of new technology and new management techniques, to recreate these companies.  Much of the militarized industry converted to peacetime activity.  The top 3 automobile companies, Toyota, Nissan, and Isuzu, moved from producing military trucks to passenger cars.

The restructuring of these industries was met with a friendly international environment of trade, cheap technology and cheap raw materials in the first world, to counter the Soviet bloc. During the Cold War years, Japanese markets were allowed to be closed while the US market was opened to Japanese goods. This gave a competitive edge to Japanese industries. The Toyota model of production changed the way corporations looked at shopfloor management and workplace control, at organisation of production processes, at use of advanced technology and communication. They also a found a new way to look at unions.

Introduction of management practices such as Kaizen, 5S, TPM etc. reorganised the shopfloor and reduced ‘waste’ by increasing work intensity of workers on the shopfloor. Identification of ‘core’ and ‘non-core’ activities in a production process created a possibility of outsourcing the non-core activities to other agencies to increase profit.

Companies began to break down the entire production process into different activities or cost centres and perform complex calculations to determine the cost of performing these activities within its own structure and outside it. Companies outsource the cost centres they see as non-core to cut costs and squeeze in the cost of production. These are standalone firms which provide services only for the ancillary activities. What is identified as core activities in reality are those that generate maximum value or revenue. Those functions or activities that are seen as costs to maintain the core function are then outsourced. For example, maintenance of machinery, canteens for workers, janitorial staff etc. are all seen as non-core and hence outsourced. This created a system of production process that has both vertical connections and horizontal connections that link up to produce the final product but not produce the product in its entirety any more.

From Flexibility to Mobility

The reorganisation of the production process using innovations in technology and communication allowed employers the flexibility to outsource non-core activities to other companies to push costs down. This led to new forms of specialisation.

For example, Sodexo, a French food services and facilities management company, runs the canteen in Tata Motors plants.  Sodexo, then hires contractors to supply workers to them.  Thus, Tata Motors only produces the trucks, Sodexo feeds the workers at the truck plant. But the workers who finally work in the canteen of Tata Motors are never sure whether they work for Tata Motors, or Sodexo (whose uniform they wear), or the labour contractor (who disburses their wage). Each tier is created for the sole purpose of camouflaging the employer-employee relation with the principle employer, Tata Motors, in this case, and cutting cost. So as you go down the tiers, less the cost, and hence lower the wages and cost of social security, higher the job insecurity and higher the hazards at work.

Similarly the security services, janitorial staff are also outsourced to different companies in order to cut costs. This process of pushing wages downward continuously has led to a ‘race to the bottom’ across the world with a concurrent demand for labour law reform to ensure a legal framework that allow corporations access to an unprotected and vulnerable workforce.

The collapse of the Soviet Union in 1991 and the opening up of the economies in the global south in the late 1980s and 1990s led to a boost in this predatory expansion of multinational corporations. They soon started shifting their production centres form the global north to the global south in search of cheaper destinations of productions. This search continues – from one country to another (e.g. from France to India, from India to Bangladesh) from one region to another (from Europe or N America to Asia), from industrial centres to non-industrial centres within a country (from Mumbai, Chennai to Baddi in Himachal Pradesh or Pantnagar in Uttarakhand).

What is the Global Supply Chain?

A global supply chain refers to the network created among different companies producing, handling, and distributing specific products. The buying/sourcing practices determine the conditions of work in the entire supply chain, be it for pharmaceuticals, garments or cars or the even the chocolates that our children eat.

The final seller who buys the products they sell from across the world controls the entire chain. In many sectors today the final seller no longer produces the product. They only buy it from different manufacturers and sell it to the consumers. Thereby the product sold has increasingly got alienated from the manufacturers. The final seller, who buys from the manufacturers, constantly tries to lower the buying price to both lower the cost of the commodity in many cases, especially garments, electronics, and also to increase their profit margin, by squeezing the different layers in the chain. This squeezing ultimately affects the workers at every level in the chain. Thus the global supply chain constantly pushes for irregularisation to lower buying prices.

This push for low costs has created a demand for low cost workers – women, migrant workers, and other vulnerable workers are being hired to replace unionised protected workers, creating condition of unfair competition between suppliers who end up violating basic labour regulations and international labour standards. The need for survival and competition between workers pushes vulnerable workers to accept this race to the bottom. The existing legislative protections won by through trade union struggles and legal battles over the last century today stand as barriers to this competitive race for insecure and low paid jobs, but jobs nonetheless. Employers across the world therefore are using this vulnerability of workers in the face of rising unemployment and pushing for removal of these barriers.

International Guiding Principles: The UN Guiding Principles on Business and Human Rights (UN Guiding Principles) acknowledges this increasing push by corporations for flexibility and right to mobility and has stated that “business has a responsibility to respect labour rights in their operations and governments have the duty to implement and enforce national laws and regulations”; the 2030 Agenda for Sustainable Development also includes Decent Work across global supply chain as its goal. The ILO resolution on decent work in the global supply chains also urges governments to strengthen the tripartite process through collective agreements, international framework agreements; to ensure stricter measures in the labour monitoring system; and calls for strengthening the rights of all workers to organise and form unions across the supply chain.

But these principles are narrow in their scope and can be reduced to paper promises if we change the very structure of labour protection within national legislative framework. In a classic instance of bypassing international convention, India recently ratified the Child Labour convention of the ILO after changing the definition of child labour that allowed for child labour in family enterprises, however hazardous it may be.

The divisions among workers are not real. They have been created to break unity among workers. They have been created to lower standards at work. They have been created to lower wages, make workers work longer hours, make them sick, burnout before their time. Thus the struggle against labour law reform has to go simultaneously with the effort to build strong unions of all workers along the supply chain.

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