Saving on costs

Maruti Suzuki, in search of higher profit, will move to Gujarat, where the govt does not implement the labour laws.

Maruti Suzuki is speeding up its manufacturing facility in Gujarat. It is only natural that a company will try to locate in such a place where 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 there does not tolerate industrial unrest much. It becomes easy for companies to pay less and extract more work with government backing.

Pressures from trade unions 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 a 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.

Globalisation has made the problem yet more difficult. Say, if the Government of India provided protection to the trade union at Maruti to secure the welfare of the workers and the casual labour system was abolished as provided in law of the country. The cost of production of Maruti would have increased. In such a 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 by companies the world over.

Newer factories

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. The objective of the company is to produce cars at the least cost. Low cost labour helps here. Many multinational corporations are now shifting their high-end manufacturing facilities back to the US from China.

They have found that the increased costs due to bad governance are more than the savings from cheap labour.

We will have to revisit the impact of globalisation on the common man. Globalisation 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 globalisation 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 globalisation 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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