Indo German Training Centre IR Assignment

Industrial Relations

By
Prashant Tandon
IGTC Bangalore.

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Indo German Training Centre IR Assignment

Contents

Industrial Relations.....................................................................................................................................1
Contents.....................................................................................................................................................2
International Trends – Role of ILO & WTO in Industrial Relations.............................................................3
Recent Trends.............................................................................................................................................3
Competition on the basis of cheap labour.................................................................................................3
Deregulation...............................................................................................................................................4
New actors and the emerging dynamics ...................................................................................................4
The Role of ILO ..........................................................................................................................................6
The role of WTO ........................................................................................................................................7
Industrial Relations Trends.........................................................................................................................9
USA.............................................................................................................................................................9
Japan........................................................................................................................................................10
China........................................................................................................................................................11
Western Europe.......................................................................................................................................11

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International Trends – Role of ILO & WTO in Industrial Relations

Today most of the Industries are going global & most of the companies are MNC's i.e. Multinational
Companies. Therefore the companies deal in various countries and with various different sets of
people culture & beliefs.

During the global dealing the companies come across various road blocks in trade like unions, regional
barriers to trade in certain countries, different legal system & other practices which may bring the
businesses to a halt & all we would find is conflicts emerging everywhere.

We could see the examples of these in our own country where recent incidents happened in
Maharashtra & Karnataka, where Shiv Sena & other regional parities don't want people from other
states to come & work there. There is a feeling that the people from other states ruin the
opportunities of the local people. Same are the beliefs throughout the world, were outsiders treated
as a problem area & considered as aliens that have arrived to ruin them

Therefore in above situations the WTO & ILO i.e. World Trade Organization & International Labour
Organization play a very important role in maintaining the best trade practices in the world so that no
countries are exploited, the ILO plays an important role in seeing that the work force in not exploited
& have ease of working under different cultures & laws. Also they help in achieving uniformity in the
work & trade environment in the world.

Recent Trends

Competition on the basis of cheap labour

Globalization and increased competition has lead to less strikes, lockouts and less man days
lost due to strikes. Also now in the era of knowledge industry employees are educated and
thus don¡¦t believe in violent activities. They are having responsibilities in cut throat
competition and also are aware of their rights well leading to decline in strikes. Employers also
avoid lockouts because decline in production for even hours results in heavy losses so forget
about days or weeks.

Disinvestment: - it affects IR in following ways

• It changes ownership, which may bring out changes not only in work org and employment but
also in trade union (TU) dynamics.
• It changes the work organization by necessitating retaining and redeployment.
• It affects the right of workers and Trade unions, including job/union security, income security,
and social security.

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• Trade unions, mgt and government are responding to these challenges through various types
of new, innovative, or model arrangements to deal with different aspects of disinvestment like
Making workers the owners through issue of shares or controlling interests (latter is still not in
India)

• Negotiating higher compensation for voluntary separations Safeguarding existing

benefits Setting up further employment generating programs, and
• Proposals for setting up new safety nets that not only include unemployment insurance
but also skills provisions for redundant workers.

Deregulation

• It is tried to ensure that public sector/ government employees receive similar

protection as is provided in public/government employment. The worst affected are
the pension provisions. this means, usually a reduction in pension benefits and an
uncertainty concerning future provision of pension benefit due to

• The absence of government guarantees

• Falling interest rates
• Investment of pension funds in stock markets

Decentralization of IR is seen in terms of the shift in consideration of IR issues from

macro to micro and from industry to enterprise level. When the coordination is at the
national or sectoral level then work in the whole industry can be paralyzed because of
conflict in IR. But when the dispute is at the bank level, in the absence of centralized
coordination by Trade unions only work in that bank is paralyzed and the other banks
function normally. This weakens the bargaining power of unions.

New actors and the emerging dynamics

Earlier IR was mainly concerned with Trade unions, mgt and government but now consumers
and the community are also a part of it. When the right s of consumers and community are
affected, the rights of workers and unions and managers / employers take a back seat. Hence
there is ban on bandh and restrictions even on protests and dharnas.
Increasingly Trade unions are getting isolated and see a future for them only by aligning
themselves with the interests of the wider society.

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Pro-labour-pro-investor policies
This leads to decline in strength and power of Trade unions if not in numbers. Unions have to make
alliances with the society, consumers and community and various civil society institutions otherwise
they will find themselves dwindling.

Declining TU density
• In government and public sectors workforce is declining because of non-filling of vacancies and
introduction of voluntary / early separation schemes. New employment opportunities are
shrinking in these sectors.
• In the private sectors particularly in service and software sector, the new, young, and female
workers are generally less eager to join unions.
• Workers militancy replaced by employer militancy
• Due to industrial conflicts
◦ In 1980-81 man days lost = 402.1 million.
◦ In 1990-91 man days lost = 210 million.

Not because of improved IR but because of the fear of job security, concern about the futility of
strikes, and concern to survive their organization for their income survival.

Trade unions have become defensive evident from the fact that there is significant shift from strikes to
law suits. Instead of pressing for higher wages and improved benefits, Trade unions are pressing for
maintenance of existing benefits and protection and claims over non-payment of agreed wages and
benefits.

Collective Bargaining
Level of collective bargaining is shrinking day by day.

Some more information:-

In India, while labour is in the Concurrent List, state labour regulations are an important determinant
of industrial performance. The Survey notes evidences that states that had enacted more pro-worker
regulations, had lost out on industrial production in general.

However, on the upside, the Survey said there was a secular decline in the number of strikes and
lockouts during 2000-04. The total number of strikes and lockouts went down 13.6% from 552 in 2003
to 477 in 2004. The decline was sharper in the number strikes than in lockouts, it noted.
While most of the strikes and lockouts were in private sector establishments, overall industrial
relations had improved, especially between 2003 and 2004, when there was a decline in the number
of mandays lost by 6.39 million.

Among states, the maximum number of strikes and lockouts were in Left-ruled West Bengal, followed
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by Tamil Nadu and Gujarat. The sectors which saw instances of industrial disturbance were primarily
textiles, engineering, chemical and food product industries.

Stressing on the importance of labour reforms to enhance productivity, competitiveness and

employment generation, the Survey noted that a beginning had already been made in that direction.
For instance, in the current year, there was a proposal to enhance the wage ceiling from Rs 1,600 per
month to Rs 6,000 per month through The Payment of Wages (Amendment) Act 2005. Also, the
proposal to empower the central government to further enhance the ceiling in future by way of
notification is already in effect from November 9, 2005.

As regards women working on night shifts, The Factories (Amendment) Bill 2005, was under
consideration to provide them flexibility and safety.
Also, to simplify the procedure for managements to maintain registers and filing returns, an
amendment of Labour Laws (Exemption from Furnishing returns and maintaining Registers by Certain
Establishments) Act 1988, was under consideration.

The Role of ILO

ILO Is

• A United Nations affiliate

• Consists of government, industry, and union representatives
• Works to promote fair labour standards in health, safety, and working conditions, and freedom
of association for workers

The ILP has four strategic objectives

• Develop, promote & realize international labour standards

• Create greater opportunities to secure decent employment
• Enhance coverage & effectiveness of social protection
• Strengthen tripartism & social dialogue

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The ILO Defines core labour standards:

• Freedom of association and collective bargaining

• The elimination of all forms of forced or compulsory labour
• The effective abolition of child labour
• The elimination of discrimination in respect of employment and occupation
• Declaration on Fundamental Principles & Rights at Work
• Key instrument on labour aspects of CSR
• Non-binding character : Not Compulsory for anyone to follow.
• Recommendations to enterprises, governments, employers and workers
• Applies to multinational and domestic companies

Thus we can see above the process by which the ILO tries to improve the industrial relations between
countries & within countries & various organizations.

The role of WTO

• A multilateral trade organisation aimed at international trade liberalisation.

• Came into being in 1995, after a 48-year development that started with trade negotiations at
the Geneva Conference in 1947
• Is a relative of the original International Trade Organisation that was proposed there.
• Successor organisation to GATT to administer international trade and investment accords.
• In 2002, the Doha Round ended the first stage of implementation. The aim is to further hasten
implementation of liberalization to help the impoverished and developing nations.
The WTO seeks to establish trade policy rules that help expand trade and improve world living
standards. It does this through
• Administering Trade Agreements.
• Serving As The Forum For Trade Negotiations.
• Settling Trade Disputes.
• Reviewing National Trade Policies.
• Assisting Developing Nations On Trade Policy Issues.

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• Cooperating With Other International Organisations

Following are the major functions of WTO

• Reduce import duties.

• Eliminate trade discrimination through most favoured nation (treating everyone equally) and
national treatments (where all products are considered “domestic” once they cross national
borders).
• Combat protection and trade barriers
• Dumping – the sale of imported goods either at prices below what a company charges in home
market or below cost
• Provide forums for dealing with trade issues.
• Provide dispute resolution services for members

• The WTO is the only international organization dealing with the global rules of trade between
nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as
possible. At the heart of the system - known as the multilateral trading system - are the WTO's
agreements, negotiated and signed by a large majority of the world's trading nations, and
ratified in their parliaments. These agreements are the legal ground-rules for international
commerce ("The WTO," 2002).

• Trade friction is channelled into the WTO's dispute settlement process where the focus is on
interpreting agreements and commitments, and how to ensure that countries' trade policies
conform to them. That way, the risk of disputes spilling over into political or military conflict is
reduced. Dispute settlement is the central pillar of the multilateral trading system, and the
WTO's unique contribution to the stability of the global economy. Without a means of settling
disputes, the rules-based system would be less effective because the rules could not be
enforced.

• The WTO's procedure underscores the rule of law, and it makes the trading system more
secure and predictable. The system is based on clearly-defined rules, with timetables for
completing a case. First rulings are 24 made by a panel and endorsed (or rejected) by the
WTO's full membership. Appeals based on points of law are possible ("The WTO," 2002).

• However, the point is not to pass judgement. The priority is to settle disputes, through
consultations if possible. By May 2003, only about one third of the nearly 300 cases had
reached the full panel process. Most of the rest have either been notified as settled "out of
court" or remain in a prolonged consultation phase — some since 1995 ("The WTO," 2002).

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Industrial Relations Trends

USA

• Collective Bargaining
The process whereby formal labor agreements are reached by union and management
representatives; it involves the negotiation of wages, hours, and conditions of employment and
the administration of the labor contract.
• Union
An organization that represents the workers and in collective bargaining has the legal authority
to negotiate with the employer and administer the labor contract.

• Efforts are made to solve problems at the lowest level of the hierarchy as quickly as possible
• First step usually involves a meeting between the union representative (shop steward) at the
operating level and the employee’s supervisor – they attempt to agree on how to solve the
grievance

• Unresolved grievances may involve union officials and higher-level management representatives –
these conciliatory approaches usually solve the grievance

• Sometimes the matter ends up in the hands of a mediator or an arbitrator

• Three of the most common arbitration approaches for resolving wage-related issues include:
• 50:50 split Splitting the difference between the demands of the two parties
• Using an either-or approach: one position is fully supported and the other is rejected
• Determining a fair wage based on market conditions

• They directly determine labor costs, productivity, and eventually, even profits
• Labor costs in the United States are lower in recent years than in most other major industrial
countries.
• Thanks to union–management cooperation, U.S. companies have been able to introduce high-
tech, efficient machinery.
• Much of this outcome is a result of effective labor relations strategies.

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• Most U.S. labor contracts have a specific provision that outlaws strikes; thus, sudden or
unauthorized strikes (commonly called “wildcat strikes”) are uncommon.
• The grievance procedure is used to resolve the disagreements peacefully
• Once the contract period is over and if a new one is not successfully negotiated:
• Workers may strike or continue to work without a contract while threatening to walk out
• Management also may lock out the workers—very rare
• Collective bargaining is the most common form of industrial democracy – guidelines are spelled
out by law
• NLRB certified unions become the exclusive bargaining agent for employees authorized to
represent workers in negotiation and administration of labor–management contracts
• Employee groups discuss ways to improve quality, efficiency, and overall work environment
• Employee groups that design and introduce work reforms and new technology
• Employee groups perform supervisory duties and manage themselves
• Consist of individuals who learn all the tasks of all the group members
• Team members rotate jobs

Japan

• Social custom dictates non confrontational union–management behavior

• Provisions in Japanese labor agreements are usually general and vague, although they are legally
enforceable
• Agreement disputes are settled in an amicable manner though sometimes resolved by third-party
mediators or arbitrators
• Labor commissions have been established by law
• Japanese unions remain relatively weak.
• Strikes and lockouts in Japan are very rare
• Japanese workers sometime strike when a union is negotiating with management during industry
wide negotiations to show support for their union
• Cultural value of Wa implies that individuals should subordinate their interests and identities to
those of the group
• Accounts for much of the harmony that exists between management and labor in Japan.
• Industrial democracy in Japan is not closely tied to political philosophy

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• Japanese firms are oriented more to the operating philosophy of enhancing worker performance
• Management is receptive to workers’ ideas that will produce bottom-line results
• Due to the basic nature of Japanese union–management relations there is very little industrial
democracy in the European sense
• Enterprise Unions
◦ Unions that represent both hourly and salaried employees of a particular company.
• Employees join the union because they are members of the firm and union membership is
expected
• They do not expect the union to negotiate and win big salary increases for them
• Many Japanese unions are relatively weak because they are company dominated

China

• The Chinese economy has shifted from a command economy to a more market-led one
• An increasing emphasis is being placed on the role of the collective contract system
• Integration of trade unions into workplace management continues to prevent collective
consultation from providing an adequate framework for the full freedom and regulation of labor
relations
• Labor relations in China has become a point of contention in international trade and human rights
discussions
• Chinese enterprises traditionally had two policy-making committees
• Communist Party leaders and members
• Managers and worker representatives
• The political climate determined which committee had more power
• After reforms in the 1980s, the workers (not the party members) represented industrial
democracy in communist countries
• The Chinese government has agreed to an ambitious program of cooperation with the ILO which
will provide advice on such things as job creation, workplace safety, collective bargaining, and the
settlement of labor disputes.

Western Europe

• European firms typically negotiate agreements with unions at the national level
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• Many European unions have more political power than U.S. unions
• Salaried employees in Europe (including those at managerial levels) often have unions of their
own
• European unions have existed longer than those in the United States and occupy a more accepted
position in society
• The industrial relations systems in the w.europe have emerged as a mix of growing decentralised
employer unilateralism and enduring state regulation (Bluhm, 2006); none of these aspects
offering prospects for employees’ voice.
• trade unionism, collective bargaining and institutionalisation of the employment relationship,
• Brief Historical Background of Social Protection (including Industrial Relations) in the EU

• End of 19th Century Social Rights gradually recognised after long struggle for effective political
democracy.
• 1960-70s - Trade Unionism at its height.
• 1980s - Thatcherism became popular in Europe nations and Union power and Collective
Bargaining starts to wane.
• 1990s - Economic Partnerships between Capital and Labour begins to take shape.

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