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HomeEconomicsCan labour unions form a holy alliance with India’s IT sector?

Can labour unions form a holy alliance with India’s IT sector?

By Jatin Bavishi

About four decades back, the popular Bollywood actor Amitabh Bachchan struck an immediate chord with the working class population with his portrayal of a leader fighting against the dreadful working conditions of his time. Labour unrest had, in fact, become a recurring phenomenon in the first half of that decade. It was an important reason which forced the proclamation of a statewide emergency in 1975. Forty-two years down the line, India is witnessing another wave of protests, but this time it is led by the highly-skilled IT (Information Technology) sector employees.

IT Sector in distress

An audio recording between the HR manager and an employee of Tech Mahindra went viral last week in which the employee was given less than 24 hours to hand over his resignation. It was declared as a part of the ‘cost optimisation’ and ‘restructuring’ exercise of the company. Since IT sector employees are protected by a slew of labour laws, companies find it beneficial to ask employees to terminate their services voluntarily. This helps them avoid paying compensation to the workers. Even the offer letters that employees sign are crafted in ways that dilute labour protection. There are clauses giving companies the right to revoke the services of an employee at any moment.

We might criticise the IT sector for it, but the truth is that the sector is slowing down. The management is forced to change their ways. A lot of us would empathise with principles of good corporate governance, but a substantial part of the brunt is borne by the workers.

Unionisation and different opinions

Friedrich Hayek in the 1980s blamed unions for economic stagnation. He saw their presence as a drag on productivity and abandoned genuine market processes. Robert Solow, who was an ardent supporter of free markets, surprisingly supported some form of labour association. He believed that it led to an increase in efficiency of workers as they feel a sense of security and fairness in the unions.

A reconciliation between the two diverging views was attempted by G Vijay of Hyderabad University. He saw Hayek’s pessimism and Solow’s optimism in the context of the different phases of a business cycle. India is currently witnessing a downward trend in the IT sector. This is due to Artificial Intelligence (AI) and Machine Learning (ML) along with a reorganisation of the European Union (EU) and US’s focus on their domestic economies.

Protests as a symbolic gesture

IT sector was seen as the poster boy of liberalised India. For a decade and a half, it drove our growth engine. What made it remarkable was its belief in competence, technology and efficiency. It beckoned youngsters with not just high wages but also a plethora of stock options and derivatives which augmented their real rate of returns. For some employees, that phase is almost over. In May 2017, a handful of them even took out a protest march in Chennai. Most IT employees are petrified to unionise fearing job loss and difficulty in finding jobs in the future, but the fact that some did unionise sends a strong symbolic gesture.

Industry leaders have condemned such unionisation arguing along the lines of Hayek. Layoffs are a usual part of annual appraisals but what is missed here is that IT is generating much fewer jobs than before. This has made these white collared workers seek recourse in Robert Solow. It can be contended that changes in the business organisation would create new jobs, but the question is how many workers can re-skill themselves, and if so, at what rate.

A Clarion Call

In June 2017, Infosys co-founder N R Narayana Murthy appealed to senior executives to take pay cuts to prevent mass layoffs. This may also be important since pay gaps between subordinates and superiors are diverging across the world. According to a study by the Hay Group, this disparity in India is 52% on average.

The high pay for executives can be defended on grounds of the stakes that their decisions carry, but job loss for people can lead to anxiety and depressions. Protests are integral to the democratic process but the current spree of labour unrest is a clarion call to look into the matter lest the volatility goes out of hands.


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