Dr Bharat Jhunjhunwala
Maruti Suzuki is speeding up its manufacturing facility in Gujarat. It is only natural that a company will try to locate such that it can have access to cheap labour. The flip side of ‘cheap labour’, however, can be worker’s oppression. The British procured indigo cheap from India because Indian labour was cheap-courtesy their oppression. Multinational Companies are locating their manufacturing facilities in China because the Government does not tolerate industrial unrest much. It becomes easy for companies to pay less and extract more work with government backing.
I used to run a card board factory in a small town of Uttar Pradesh. The unit was established near a sugar factory to use bagasse as raw material. Workers of the card board factory soon made a trade union, influenced as they were by the goings on in the nearby sugar factory. Workers were paid minimum wages as per law. However, the workers were totally disinterested in the works. They would openly tell me, “Remove me if you wish, but I will work only as I do.” They knew that it was difficult, if not impossible, to dismiss a worker because of the labour laws. It became difficult for me to face competition from newer factories because they were not pulled down by such labour troubles. They were mostly employing casual labours who were both cheaper and more alert towards their works. Ultimately I incurred losses. Expensive and inefficient workers led to closure of the factory in a competitive environment.
Similar pressures appear to be at work at the Maruti factory at Manesar. More than one-half of the profits of Suzuki Japan are earned in India. There was pressure on the India outfit to maintain, if not increase, these profits. Japanese nationals were given key positions in management considering the importance of the India operations. They did not understand the culture of Indian workers, it seems. They expected workers to be alert, fast and committed to the work. In contrast Indian workers mostly follow the ‘do as you please’ policy. Indian society believes in friction as regulator. Pressures of competition were operating at the same time. Competitor companies were bringing in new models. It was necessary for Maruti to keep its cost of production low to face this challenge. Maruti was using casual labour in large numbers to attain this objective. The Company opposed formation of a trade union. It had bought off the union leader during the previous strike leaving the workers high and dry. The workers were feeling pressures from all sides-wages were low, pressure of work was high, there was less communication with the management and the Company was adept at buying out the leaders of the trade unions depriving the workers of any legitimate voice. A small argument between a worker and a supervisor got blown up and resulted in death of a manager due to this simmering tension.
Globalization has made the problem yet more difficult. Say, the Government of India provided protection to the trade union at Maruti to secure the welfare of the workers. The casual labour system was abolished as provided in law of the country. The cost of production of Maruti would have increased. In such circumstance, Maruti would be inclined to leave Haryana and move to a state where the government does not implement the labour laws. Or it may move to Bangladesh or Vietnam. Such is being done my companies the world over. Caterpillar, the manufacturer of bulldozers, asked its employees at its London factory to accept wages of $ 16.50 per hour against $ 35 that was prevailing. The employees did not agree. Thereupon Caterpillar declared lockout at its London facility and moved production to its Indiana unit in the United States. American major General Electric has closed old units and moved production to newer factories where old agreements with labour are not applicable. A long and militant strike took place in the textile mills of Mumbai in the eighties under the leadership of Datta Samant. Today these factories have moved to Gujarat. This could happen because companies could move production to low wage states or countries. Implication is that the wages of all workers have to necessarily come down to the global minimum.
Maruti’s migration to Gujarat could be seen as the latest episode of this global race to the bottom. The Company has to pay more to purchase peaceful work in Haryana hence it is migrating to Gujarat. Objective of the Company is to produce cars at the least cost. Low cost labour helps here. The other factor is good governance. Let us say the Company has to pay huge bribes to sundry state government officials, false cases may be lodged on not paying the grease money, water and roads be badly managed, time taken in land allotment be large and refunds of sales taxes be obtained with much difficulty, in such case also the cost of production will increase. Many Multinational Corporations are now shifting back their high-end manufacturing facilities back to the United States from China. They have found that the increase costs due to bad governance are more than the savings from cheap labour. Therefore, migration of Maruti to Gujarat is to be condemned if it is in search of cheap labour; but commended if it is due to good governance.
We will have to revisit the impact of globalization on the common man. Globalization opens up the global markets and increases demand for our labour. But it does the same for other low wage countries as well. This leads to the lower wage countries emerging ahead. We must accept globalization only in such calibrated manner that it does not lead to decline in wages for our workers. We will have to impose import duties and provide export subsidies to enable our companies to pay higher wages and yet remain competitive in the global marketplace. Fruits of globalization should accrue not only to the employers but also to the employees.
The best way to ensure welfare of our workers is to increase demand for labour. This can be done by providing tax breaks to companies using higher number of workers than the industry norm. Employment subsidies can be provided to smaller factories. Workers would have sought another employment instead of bearing the pressure at work and accepting low wages at Maruti had the job market been buoyant.
Labour laws may be simplified after the impact of these job-creating policies is clearly manifest in the economy and wages show a rising tendency. Employers may be given the right to hire and fire and to start or close down factories in that circumstance because the workers would easily get another job. Companies would be able to manage their work force as per requirements of the global market without adversely affecting the workers. Such a policy will be beneficial for both the employees and employers. However, multinational corporations are likely to oppose this as it will restrict their ability to make large profits from short-term employment of cheap labour.
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