The Indian Economy Blog

October 28, 2005

Labour Aristocrats

Filed under: Labour market — Yazad Jal @ 6:32 am

Today’s lead editorial in the Times of India is spot on regarding the “labour movement” in India.

India’s unionised labour is a tiny, entrenched labour aristocracy which when not forcing lock-outs and shutdowns, hikes pay and perks for their own members and makes it extremely tough for poorer, lower-wage workers to enter the job market.

This raises costs and makes industry less competitive and jobs tougher to come by. Unions also militate against the interests of employees or job-seekers who are not members. India’s total workforce is about 500 million today. Of that, a minuscule 5%, or 27 million, work in the organised sector. About 70% of this number, about 19 million, work for the central and state governments and can safely be assumed to be unionised.

Add a couple more million to that and you get a figure of between 20 and 22 million people who belong to the labour aristocracy. This 4% of workers militate against the interests of the other 96%.

Very true. And a classic unintended consequence of leftist pro-union policies is that the currently employed benefit at the cost of the unemployed.

I do not advocate the banning of unions however. Let’s have the freedom of association. Which means that if employees want to use collective bargaining they should be able to. This freedom also applies to employers who may choose to specify, in their contracts with employees, that strikes may lead to dismissal.

6 Comments »

  1. What’s required is the usa style ‘Employment at will’ contract, where an employer is free to fire an employee any time and without having to explain. Employees already have the freedom to quit the employre whenever they want. Why not extend this freedom to employers too?

    Comment by sv — October 28, 2005 @ 4:35 pm

  2. The worst part of the “labor aristocracy” is in the public sector. Unions in the private sector have some sense of sobriety since they now know that their companies can go bust. The public sector unions are blissfully unconnected with market realities, for their pay and their job depend on politics and not on productivity or profitability. Privatization of PSUs is the only antidote.

    Comment by Blue Sky — October 28, 2005 @ 4:55 pm

  3. What this article does not tell and not many realize is that laws all over the world (in India and the United States for example) afford special privileges to the unions ostensibly to protect “worker’s rights”. For example in the United States, trade unions are not subject to anti-trust laws which are applicable to corporations like Microsoft for example. This is one among the many laws that violates the basic and primitive legal doctrine of “Equality under the Law”. Trade unions ought to be legal since individuals have a fundamental right to associate but should be subject to the same laws corporations and other legal entities are.

    Comment by Vivek Ghodekar — October 28, 2005 @ 11:42 pm

  4. [...] to attract foreign investment — the net losers will be the people of the state. But who said Communists care for the people?

    [...]

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  5. [...] occuring. That is because in contemporary India strikes are orchestrated and organised by the labour mafia that controls the trade unions. Airport workers not only see the benef [...]

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  6. Good job.

    Comment by Hillary — August 7, 2006 @ 3:12 am

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