Impact of Liberalization on Trade Union Movement | Commerce & Accountancy Optional Notes for UPSC PDF Download

Introduction

Labour market reforms are a part of the overall economic reforms package and hence there is a demand for labour market flexibility so that it can respond more efficiently to the market signals. However, the impact of these reforms are not very encouraging. 

• Flexibility in the labour market leads to decline in employment, deterioration in the quality of employment, rise in employment of casual, contract and female labour in place of permanent labour. It also encourages medium and large scale factories to sub-contract part of their production to small enterprises to cut on labour costs. All these features weaken the trade unions, widen the scope for labour exploitation and hence have severe repercussions for industrial relations. Hence introducing the flexibility in the labour market in a way that increases productive employment, improves the quality of employment and avoids exploitation is really a difficult task.
• To attract foreign direct investment, changes in the industrial relations system are being demanded. In this context, in some countries export-processing zones have been set up which are free of trade controls. Trade unions in these countries have been banned and wages are low. Safeguards with regard to health, safety and holidays either do not apply or are not enforced. But the study on the conditions of workers in foreign enterprises in China shows that workers have faced serious problems like postponement of wages, extension of work hours, poor standards of occupational safety and health, and non-payment of social security benefits. As a result, unionised labour disputes and strikes have taken place frequently. Introducing the changes in Industrial Relations the labour laws to attract the flows of foreign investments without weakening labourers’ working and living conditions is really difficult. 

• Recently western countries through the World Trade Organisation are trying to impose the social clause on developing countries. Under social clauses, they are insisting on an international trade agreement that links import with conformity to labour standards. Labour standards include not engaging child labourers, observation of minimum wages, equal employment opportunities, environment, safety etc. Trade unions have been opposing these social clauses as they fear that it could be pursued as protection in trading activities and as a political weapon in global politics. If the social clause is accepted it will make the future of industrial relations very uncertain.
• Weakening of trade unions: Increases in the employment of temporary, casual, contract labour and female labour in place of permanent labour creates insecurity among workers. These developments divide the workers and weaken the trade unions. 
• The privatisation of the public sector can also act as a tool for breaking up the organised labour movement. When privatisation leads to job in-security, it might prevent them from participating actively in the trade union activities. So privatisation also will create division among the permanent employees and those who are on contract basis. 
• Taking advantage of tax holidays, interest concessions, subsidies and de-licensing, the companies in the private sector are relocating their production units in backward areas. Labourers employed in such units are casual, temporary, non-unionised and on contract basis . This is adversely affecting industrial relations. 
• Labour-saving technologies have also resulted in distortions in the compensation structure even within the same unit for doing the same work. National federations of labourers are not interested in taking up the cases of contract and casual labourers. This is leading to fragmentation of the labour movement and poor impact on industrial relations.