Sunday, April 30, 2017

Industrial Relations Notes - Role of State in Industrial Relations

Unit – 3: Role of State and Government in Industrial Relations
Role of State in Industrial relations
In the system of industrial relations, State (Government) acts as a regulator and judge. Further, not only Central Government but the governments at the state and regional level do influence the system of industrial relations, also the other functionaries of the states like the executives and judiciary has a definite impact on the system.
The traditional role of state: Historically the Government has played at least six roles in industrial relations in India. These are:
(i) Laissez Faire: During the nineteenth century, the government played a laissez faire role in industrial relations. It was reluctant to intervene to settle any dispute or indicate any interest in the welfare of the workers. The workers and employers were left alone to manage their affairs.
(ii) Paternalism: By the end of nineteenth century, the laissez faire role of the government was replaced by paternalism. Thinkers like Robert Oven, Ruskin and others attracted the attention of the public and the government towards the inhuman working conditions in factories, mines and plantations. The government tended to make several enactments to govern working conditions, wages & benefits and formation of trade unions.
(iii) Tripartism: Even prior to independence, there existed tripartite form of consultation on the model of the ILO conferences. After independence several such forums were formed. The major tripartite bodies formed included Indian Labour Conference, Standing Labour Committee, Industrial Committees for specific Industries, Short lived National Apex body (1975) etc. The government promotes consultation with concerned parties prior to taking any policy decision in industrial relations to bring out any legislation.

(iv) Encouragement on Voluntarism: The government also promotes voluntarism involving a series of codes to regular labour management relations. These codes include codes of discipline, code of conduct and code of efficiency and welfare. Specifically the code of discipline encourages voluntary arbitration and helps in maintaining discipline at workplace.
(v) Interventionism: The government also plays an interventionist role. The intervention is in the form of conciliation and adjudication. The Industrial Dispute Act, 1947 provides such measures to intervene in industrial disputes.
(vi) Employer: The government also plays the role of the largest employer. The performance of this role influences labour policy also. Obviously the government takes into consideration the interest of public sector while framing its policy.
In recent years, the state has played an important role in regulating industrial relations in various countries. But the extent of its involvement in the process is determined by the level of social and economic development in the country. The mode of State intervention is greatly influenced by the prevailing political system in the country and also economic development. For ex. In a developing country like India, work stoppage to settle claims have more serious consequences than in a developed economy and similarly, a free market economy leave the parties free to settle their relations through strikes and lockouts but in other system it may vary. State intervention is required for building up Sound Industrial Relations. The powers assumed by the state to regulate labour relations differ from country to country. In some countries, it has taken the form of laying down bare-rules for observance by management and workers, while in others the rules cover a wide area of relationship and there is equally greater supervision over the enforcement of these rules. For ex: In UK, the industrial relation system has been marked by the primary of free collective bargaining between the parties. Disputes relating to jurisdiction are mainly on internal matter for the British Trade Union Congress.
In USA, the State has confined itself to enacting legislation for ensuring the workers right to organize and bargain collectively. It constituted on independent authority to administer and interpret legal provisions and decide on complaints regarding unfair labour practices.
Australia has had a long tradition of state regulation in the field of Industrial Relation. The Government intervenes through the Common Wealth Conciliation and arbitration commission for settlement of disputes and also through Industrial Court. There is a fair scope for collective bargaining also.
In India, the role played by the State in the field of INRL has assumed a more direct form. The State has enacted procedural as well as substansive laws to regulate INRL in the country. In a developing country like India state intervention is necessary because of the following reasons:
1)      The labour organizations however numerous are relatively weak. There has been a profound distrust of the employer as a profit seeking exploiter. Therefore, the Government has to play a major role in INRL because it cannot depend long on bipartite negotiations and confrontations between labour and management over the years.
2)      When the labour situation worsens or the law and order situation gets out of hand the state intervenes. As the guardian of the people and of the economy of the country, it has to intervene and adopt INRL policies which will ensure social justice and industrial peace.
3)      The federal nature of the constitution has made it imperative for the state to intervene in labour matters to ensure smooth and continuing production.
4)      The Directive Principles of the Constitution enjoys upon the state to establish a welfare state & to look after the weaker section of the society.
5)      In may therefore be seen that, state intervention in the field of INRL varies according to a nation’s political doctrine, traditions, and economic as well as social conditions. However, state intervention in any form helped in preventing severe exploitation of the classes and has helped in promoting industrial peace.
Constitution of India and Evolution of Labour Policy
The labour policy has been influenced by changing situations of course its core factors have remained unchanged. In India, labour organisations have been relatively weak and lacking trust in employers considering them profit making exploiters. The government visualised that rapid industrial growth and productivity demanded its major role in evolving a suitable framework to prevent industrial disputes. The major source documents of Indian Labour Policy of the government include the following:
(i) The Directives Principles of State Policy
The article 39, 41, 42, 43, and 43A relate to the government’s policy pertaining to the labour.
The Article 39 asserts as follows: “The state shall in particular direct its policy towards securing:
a) That there is equal pay for equal work for both men and women.
b) That the health and strength of workers, men and women, and the tender age of children are not forced by economic necessity to enter avocations, unsuited to their age or strength……..”
The Article 42 specifies as follows: “The state shall make provision for securing just and human conditions of work and maternity relief.”
The Article 43 asserts as follows: “The state shall endeavour to secure by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities and in particular, the state shall endeavour to promote cottage industries on an individual and cooperative basis or rural areas.”
The Article 43A reads as follows: “The state shall take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry.”
Thus, workers participation in management has become a part of the Directive Principles.
(ii) The Plan Documents
First Five Year Plan (1951-56): The first plan recognised the importance of the industrial labour in the fulfilment of planned targets and in creating an economic organisation in the country which would best serve the needs of social justice. The plan envisaged:
a. adequate provision for the basic needs of the workers;
b. securing improved health facilities and wider provision of social securities;
c. providing access to better educational opportunities;
d. improving conditions of work to safeguard the health of labour;
e. the right to recognise and to take lawful action in furtherance of the rights and interests of labour;
f. the right to be treated with consideration by the management and access to impartial machinery if he fails to get a fair deal.
The plan called for the steps to improve productivity, emphasised the need for the bilateral settlement of disputes, provide for state intervention in the event of failure of bilateral processes. The plan document also made a commitment for full and effective implementation of social security measures as also minimum wage legislation. The Industrial Dispute Act was amended, in 1950 itself, providing for a three-tier system of Labour Court, Industrial Tribunals and National Tribunal
Second Five Year Plan (1956-61): The second plan recognised that “creation of industrial democracy is a pre- requisite for the establishment of a socialist society”. It also emphasised the importance of industrial peace. A series of voluntary arrangements were provided through tripartite consultation; code of conduct, code of discipline, workers’ committees, joint management councils, voluntary arbitration, etc. It is a different thing that because these are purely voluntary they were not taken seriously by the parties.
Apart from emphasising workers’ participation in management, a programme of workers’ education was also started in 1958. The need to strengthen the trade union movement and living and fair wage, by linking the wage increase with increases in production were also stressed.
Third Five Year Plan (1961-66): The third plan emphasised the economic and social aspects of industrial peace and elaborated the concept that workers and management were partners in a joint venture to achieve common ends. Adherence to Codes, not going to courts, was emphasised to regulate union-management relations. However this was of little avail.
Fourth Five Year Plan (1969-74): The fourth plan stressed the need to improve legislation concerning safety and welfare of workers, review of workers’ participation in management, workers’ education programmes, arrangements for skills training, labour research, etc. Several new legislation and improvements to existing legislation were made during the period. The Payment of Bonus Act, 1965, Shops and Commercial Establishments Act, and Labour Welfare Fund Act were among the important legislative initiatives during the period. The National Safety Council was set up in 1966.
Fifth Five Year Plan (1974-79): The fifth plan called for strengthening professional management particularly in the public enterprises and also underlined the need to raise labour productivity. For this, the plan envisaged “better food nutrition and health standards, higher standards of education and training, improvement in discipline and moral and more productive technology and management practices”. The period also saw the declaration of emergency during which certain labour rights were curtailed.
Sixth (1980-85) and Seventh (1985-90) Five Year Plans: The sixth and seventh plans reiterated the earlier programmes, expressed concerns over the shortcomings in realising the important goals of improving the conditions of working class, workers’ participation, productivity improvement, etc. During the period, important legislative amendments were made to enhance the protection to workers, besides the introduction of a 20-point programme, new schemes of workers’ participation in management and attempted radical overhaul of labour legislation.
Eighth Five Year Plan (1992-97): The eighth plan echoed concerns raised in the earlier plans with particular reference to workers’ participation in management, skills training, productivity, equitable wage policy, informal sector, etc. It also, for the first time, expressed concern about the need to rationalize the regulatory framework with a view to ‘providing reasonable flexibility for workforce adjustment for effecting technological up gradation and improvement in efficiency”. At the same time, the plan document emphasised the need to “ensure that the quality of employment in the unorganized sector units improves in terms of earnings, conditions of work and social security”.
The major problem with our five year plan is that the intentions are pious and noble. But, only little guidance or clue are provided as to how these shall be achieved and measured. The goals being abstract, the inspection and database being weak the daunting tasks in each of the successive plans left more to be achieved.
Industrial Relations Policies of Government of India in the post-globalization era
Indian economy had experience a major policy change in early 1990s. The new economic reforms, popularly known as Liberalization, Privatization and globalization (LPG) aimed at making the Indian economy as fast growing economy and globally competitive. A series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient.
With the onset of reforms, to liberalize the Indian economy in July of 1991, a new chapter has draw for Indian and her billion plus population. This period of economic transition has had a tremendous impact on the overall economic development of almost all major sectors of the economy and its effects over the last decade can hardly be overlooked. Besides, it also marks the advent of the real integration of the Indian economy with the global economy which is called globalization.
With the advent of globalization, the policies of production proved impractical and rigid. They posed a serious threat for the industry to face the global competition and survive in the global markets. Apart from the global needs of the organization there was a technological revolution across the world. The business rules were changing with worldwide margin and acquisitions. Disinvestment, privatization, retrenchment and introduction of VRS, contract labour, outsourcing and the need for flexibility in workforce changed the industrial relations outlook.
The various types of policies and factors that emerged in India after globalization are:
1)      The HR policies which were rigid before globalization have become flexible after globalization.
2)      The style of management was generating negative feelings towards the employees which turned into positive due to the advent of globalization.
3)      The type of negotiation was win-lose type before globalization which changed into win-win mode after globalization starts.
4)      The strategic orientation became linked with the goals of the organisation with the advent of globalization which was not before.
5)      Previously, the union management relations were adversarial, now its cooperative.
6)      The workforce was production oriented, which has become service oriented now.
7)      Collective bargaining was strongly criticizes which has now been decentralized.
8)      Mergers and acquisitions were very few and that too within India, which had changed to large scale across the globe with the advent of globalization.
9)      Guaranteed payment system, is changed into variable and incentive payment system due to globalization.
10)   Profit sharing was negligible, but after the LPG policy there was profit sharing in the form of bonus, allowances, etc.
11)   The type of labour which were permanent and regular, is casualized after globalization.
In the globalization era, with the increase in competition there have been fewer strikes, lockouts and man days lost due to strike. In this era of knowledge economy, employees are educated and do not indulge in violent activities as during pre-globalization era. Today, they are more responsible and are aware of their duties as well as their rights.
The effects of globalization on Indian industry have proved to be positive as well as negative. The positive effects of globalization in Indian industry are that it brought in huge amounts of foreign investments into the industry especially, in the BPO, Pharmaceutical, petroleum and manufacturing industries. Foreign companies brought in advanced technology with them and this helped to make the Indian industry more technologically advanced.

The negative impact of globalization on Indian Industry is that it increased competition in the Indian market between the foreign companies and domestic companies. With the foreign goods being between than the Indian goods, the consumer prefers to buy the foreign goods, thereby reducing profit of the Indian Industrial Companies. Also, due to globalization technology has improved and the number of labours required decreased and resulted in job cuts. Therefore, the government must try to make such economic policies with regard to Indian Industry’s globalization that are beneficial and not harmful.


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