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Unions, Adjudication and Wages Subbiah Kannappan

Indian Trade Unions acting either by themselves or because of favourable Government policies, have had a significant impact on raising the level of money wages in modern industry.

This is the main conclusion reached by Father A J Fonseca' a leading Indian student and observer of the labour scene, who brings into his study his personal insights, and writes with great sympathy for the Indian labour movement.

Fr Fonseca does not argue that the unions have raised real wages, but he does take the view that the unions may be a positive force in this respect. This is due to their possible impact on industrial producti­vity as well as their growing ability to control the supply of labour or stipulate wage rates in collective contracts.

Is there evidence to support his conclusions ? The typical union is small, and lacks stable leadership. The labour movement as a whole is ridden by political factions.

It most certainly does not follow that a carefully calculated attitude ho wage, employment and pro­ductivity relationships will be dominant.

Fr Fonseca argues that the degree of unionisation is a poor indicator of union strength, as it fails to convey "the more subtle elements that go to explain the personality of the union leader and the power­ful force that he can wield".

My own suspicion is that the analysis of the union or Government impact on wage determination has tended to assume a significant upward thrust on industrial wages, and has perhaps argued backward from an appreciation of the significant wage premium, that industrial wage-earners do in fact enjoy as compared to other ranks of wage-earners in urban services or trades and rural farm and non-farm occupation.

The unions, in my view, are a manifestation of a relatively privileged industrial elite rather than an instrument to secure this favoured position.

T H I S ' i s a doctoral dissertation presented at the Kathol ieke Eco­

n o m i s e d Hogcschool, T i l b u r g . The author is a leading I n d i a n student and observer of the labour scene, and br ings to the study his valua­ble personal insights. H i s m a i n con' elusion is that the I n d i a n unions, ac t ing either by themselves or be­cause of favourable Government policies, have had a s ignif icant i m ­pact on ra is ing the level of money wages in modern indus t ry . I t i s not argued that the unions have raised real wages. B u t he appears very much to lean towards the view that the unions may be a posit ive force in this respect. Th i s is ascribed to their possible impac t on indus t r i a l p r o d u c t i v i t y as wel l as the i r grow­i n g ab i l i t y to control the supply of labour or s t ipulate wage rates in collective contracts.

The study deals w i t h the various wage doctrines, specifically w i t h a v iew to assessing the i r treatment of unions ; the I n d i a n trade un ion movement ; the role of the Govern­ment and compulsory ad judica t ion

"Wage Determination and Organized Labour in India" by A J Fonseca, S J Grafiech Bedrijf Avanti-Delft, 1961

in wage de te rmina t ion ; the methods of wage statement; the influence of trade unions on the wage struc­t u r e ; and f ina l ly the impac t o f trade unions on wage levels. A p a r t f rom a general discussion of the author 's approach, for reasons of space th i s reviewer w i l l focus ma in ly on the issues dealing w i t h the un ion impac t on wages.

Optimism Misplaced Father Fonseca writes w i t h great

sympathy fo r the Ind ian labour movement, bu t his op t im i sm is mis­placed and is in fact contradicted by the i n f o r m a t i o n provided by h i m . In the process, he fails to examine some of the economic impl icat ions of his statements. Thus (p 31) he asserts that the trade unions in I n d i a are "becoming strong, uni ted , res­ponsible groups". Later, he adds that hi " the economic f ie ld the trade un ion is recognized to be a control ler of the supply of labour, a posi-t ive force for the expansion of employment oppor tuni t ies and a powerfu l lever in rais ing the stand ard of l i v i n g of the wroker . . . . " and tha t " i t is along these desirable lines that the trade un ion movement in Ind ia is expected to develop' ' .

But is there evidence to suppor t his conclusions regard ing the g r o w t h and d i rec t ion o f the I n d i a ' trade un ion movement? The follow-i n g chapter is a bleak one in this respect. It points out that on ly a l i t t le over one per cent of the " labour force"" is in fact organized in unions, and only about 30 to 40 per cent i f one accepts the usual, more restrict­ed, def ini t ion of the potent ia l ly un io -nizable labour (p 3 3 ) . The typ ica l Union is small, and lacks stable lead­ership. The labour movement as a whole is ridden by po l i t i ca l factions. "Ra t iona l " un ion behaviour, in the context of this acute r i v a l unionism need not be the same as the goal of a " r a t i o n a l " m i l i t a n t leader max i ­miz ing any single or complex of ob­jectives per t inent to the union or its members.1 It most cer ta inly does not fol low that a careful ly calculated

1 These points are discussed in greater detail in Charles A Myers, Labour Problems in the Industrialization of India, Camhridgc: Harvard University Press. 1958, chapters 4 and 5, and in my The Indian Trade Union Move­ment: An Account and an Analysis, especially, chapters 10 and 12 (unpub­lished doctoral dissertation, Fletcher School of Law and Diplomacy, Tufts University, 1956)

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atti tude to wage, employment and p roduc t iv i ty relationships w i l l be dominant .

I t is also wor th examining whether the restrictions on the labour mar­ket are necessarily desirable or con­ducive to the expansion of employ­ment opportuni t ies . Present day con­di t ions in urban, industr ia l Ind ia are not typ ica l ly those of the isolat­ed monopolist ic labour market. I t is not possible to say that shifts in labour costs are unimportant , des-. pi te the average pattern of relative­ly low labour costs per uni t of out­put . Given some va r i ab i l i t y around the mean value, across the board money wage increases w i l l not af­fect different firms equally. Even as. suming l imi t ed var iab i l i ty , i f the different firms covered by the award vary in capital-labour intensity, across the board money wage i n ­creases would result in marked varia­tions in their impac t on the labour cost per un i t of output. F ina l ly i f there are substantial differences in the wage rates as between industries in which wage increases are award­ed, and the other economic sectors, typica l ly the service and ru ra l sec­tors, despite the low labour cost to total cost, it is not possible to i g ­nore the other determinants of the elasticity of derived demand. For certain industries, it is impossible to ignore the competit ive pressures they face or the tie-up between low p roduc t iv i ty and low wages. At least the points are arguable, and in the absence of more detailed evid­ence and assessment, one cannot just assume the answer.

W h a t is more surpr is ing is the empir ica l proposit ion to which Fr Fonseca subscribes, that unions do in fact have an effective control over the supply of labour or are moving in that d i rec t ion. W h i l e many sur­face manifestations of un ion strength do suggest a greater degree of con­t ro l for I n d i a n unions than one might suppose if aggregate statistics of unemployment alone are consider­ed, it is nevertheless difficult to ac­cept Fr Fonseca's statement. Few I n d i a n unions are of the craft type, or have any th ing approaching even l imi ted direct cont ro l over the mean ' of entry into the labour mar­ket. The ext raordinary violence and chaos of worker behaviour repre­sen t i f anyth ing , weakness o f union discipline and organization, of wh ich more di rect evidence is p ro ­

vided by the acute and unstable union r ival r ies .

Herein lies; the paradox if one reads Fr Fonseca care fu l ly : on the one hand the unions are weak in organizational strength (even in such an established industry l ike the Bombay textile indus t ry legisla­t ion r equ i r ing 25 per cent member­ship to obtain the status of an "ap­p r o v e d " union was watered down in 1946 to 15 per c e n t ) ; on the other hand, the evidence leads h i m to conclude that unions d i d indeed have a positive wage impact . There are serious questions in my mind that the statistical analysis of the data supports the conclusion indicat­ed by Fr Fonseca. By his own read­ing, the part ial corre la t ion coeffici­ent, relat ing the increase in money wages, to the degree of unionizat ion, holding cost of l i v i n g and produc­t i v i t y constant, amounts to only 0.23. However, Fr Fonseca argues that the degree of unionizat ion is a poor indicator of union strength, as it fai ls to convey " the more subtle ele­ments that go to explain the perso­nali ty of the union leader and the powerful force that he can wie ld ' ' .

The logic of Fr Fonseca's argu­ments comprises the fo l lowing pro­positions. A major feature of post­war wage determinat ion has been the acceptance by the I n d i a n Go­vernment of the p r inc ip le of neut­ralization of increases in the cost-o f - l i v i n g and of other t r ibuna l or­dered wage increases. It is un l ike ly that this p r inc ip le or the other gains would have been secured wi thout the effective campaigning by unions. In support, he could refer to the post-war spurt in un ion member­ship when real wages rose compared to the w a r t i m e decline in real wages, the latter due presumably to the relatively static pic ture of union membership and the inclement a t t i ­tude of the Government. But I sub­mi t that the data relied on by Fr Fonseca are at best inconclusive, and his conclusions as to the posi­tive role of unions are misleading.

The Post-War Years Let us first examine the narrow­

er sub-period covering the post-war years. A p a r t f r o m an i n i t i a l spurt in trade un ion membership after the war , the subsequent years actu­a l ly revealed a marked decline in the degree of unioniza t ion . Thus the index o f unionizat ion j u m p e d f rom

114 in 1945 (1939 : 100) to 186 in 1946, 243 i n 1947, and 264 i n 1948. Afterwards , the index dropped dras-t ical ly , f luctuat ing mostly around 200, and standing at 214 fo r 1956, the last year covered by Fr Fonse­ca. Money wages, however, increas­ed throughout this per iod , continu­i n g the unbroken record of increa-. ses d u r i n g the war . The recorded i n ­dex of money earning thus c l imbed f rom 253 in 1947 and 304 in 1948 to 412 in 1956. I f one accepts Fr Fonseca's judgement as to the subtle sources of un ion power, i t may be argued that the un ion leaders suc­ceeded in selling to the wage-fixing authorities the p r inc ip l e of neutral­ization of cost-of-living increases, and that the continued acceptance of this pr inc ip le was not contingent upon changes in the degree of union organization. There is also the pos­s ib i l i ty that our t ime series of union organization suffers f rom a lack of comparabi l i ty due to a stricter scru­t iny of union membership claims.

However, to this reviewer, what is s t r i k ing about the post-war per iod is not the un ion influence of Govern­ment wage policies, but rather the reverse. An integral aspect of post­war wage determinat ion has been the inst i tut ional izat ion, d u r i n g a per iod of r ap id pr ice level changes, of a commitment to adjust money wages to changes in its purchasing power. W h i l e i t robbed the union movement of a major cause celebre for the section of the labour force that was covered by a weak union organizat ion (wh ich the t r ibunal and wage-adjustment machinery pa r t i a l ­ly encouraged) and which relied solely on t r ibunal-ordered money wage adjustment, this commitment was never one of ful ly neutral izing the changes in the cost of l i v i n g . Further , the t r i buna l procedures and the nature of monev wage ad­justment to compensate for changes in the cost of l i v i n g were subject to considerable lags.2 It would be more appropria te then to view the post­war period as one of a series of rear-guard actions fought by weak unions in the context of a losing battle — as the entire per iod , w i t h minor breaks at the end of the Firs t 2 A careful discussion of these points

may be found in Philip Kotler, Problems of Industrial Wage Policy in India, Massachusetts Institute of Technology, unpublished doctoral dis­sertation, 1956, pp 78-113.

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Plan per iod , was one of r i s ing p r i ce levels. We shall later discuss the reason' f o r doub t ing the contention that the un ion influence, as eviden­ced in the recurrent struggle fo r bonus payments, and claims fo r basic wage rate revisions, was responsi­ble for real wage increases so that money wages c l imbed faster than the cost of l i v i n g f igures.

Shortcomings of Data Fr Fonseca's analysis of real

wage trends is fur ther subject to two serious shortcomings: they are first ly the shortcomings of the data re l ied upon, and secondly, the nota­ble absence of economic analysis fo­cussing on factors affecting supply and demand in the labour market .

Regarding the f i r s t po in t , i t i s wor th stressing that Fr Fonseca's figures of money wages are derived f rom data reported under the Pay­ments of Wages A c t and the cost of l i v i n g figures are based on data re­ported by the I n d i a n Labour Bu­reau, As these are the only t ime series covering the entire period since 1939, these have been the sources re l i ed on by other invest i ­gators also.3 However, their short­comings should be taken i n to ac­count in any economic exercise.

There are first the adminis t ra t ive weaknesses revealed in the large f rac t ion of f i rms f a i l i n g to submit returns and the considerable year to year variat ions in the p r o p o r t i o n of f i rms comply ing . This may be omi t ­ted on the ground that such varia­tions are of a r andom nature. The internal l imi ta t ions of the data are, however, more severe, and the series der ived f r o m them must be suspect of a systematic bias towards an un­derstatement of the increase in money, and therefore, real wages.4

Specifically, one must note tha t : 1 The A c t is confined to persons

earn ing Rs 200 or less per mon th . ( I t is not clear whether the upper l i m i t refers to the basic wage rate or total earn-

• The exception is the pioneering work undertaken by S A Palekar, Problems of Wage Policy for Economic Deve­lopment (with special reference to India), unpublished manuscript, 1959, to be published in India. Although his use of the data provided by the Gen­ius of Manufacturing Industries is likely to provide improved coverage of earnings in factory industries, since the Census does not cover the war and immediate post-war years, the problem of comparability wi l l still remain.

ings.) A ' the d i s t inc t ion bet­ween these two measures be­

came progressively more impor t ­ant, i t is possible tha t some changes were in t roduced. I f , at a later stage, there was a ten­dency to include those whose total money earnings were over Rs 200, but whose basic wages were less than Rs 200, there w o u l d lite a tendency f o r the real wage figures to be over­stated fo r the later years and understated for the earlier years. Assuming a consistent interpre­ta t ion of the term "earnings" there would s t i l l be a secular tendency to understate the i n ­crease in money, and therefore, real wages.

2 Certain types of payments were excluded w h i c h are significant considering the i n b u i l t protec­t ion afforded against inf la t ion.

3 I t appears that certain goods and services were p rov ided at less than the r u l i n g re ta i l prices, thus overstating the increase in cost of l i v i n g . The deflation by the cost of l i v i n g index, of at least a po r t i on of money earn­ings, thus tends to understate

the gains in real wages. As an i l lus t ra t ion , admit tedly imper­fect because this affects only a f rac t ion of money earnings, the

fo l lowing computations f rom Dr S A Palckar's study may be quoted, where the index of money earnings is deflated by the index of wholesale p roduc t prices.

4 It is possible that certain con­cessions in k i n d were evaluated at cost to employer rather than at r u l i n g retai l prices. On the basis of present in fo rmat ion , i t is no t possible to say how seri-

4 According to The Indian Labour Year Book, 1958 (Delhi 195ft), p. 51: wage in terms of the Act "includes all re­muneration capable of being expressed in terms of money which would be payable in terms of the contract of employment, but does not include the following: (a) The value of any house accommo­

dation, supply of light, water, etc.; (b) Contribution paid by the employ­

er to any pension fund or provi­dent fund;

(c) Travelling allowance or value of any travelling concession;

(d) Any sum paid to defray special expenses; and

(e) Any gratuity payable on dis­charge."

Movement of Real Wages

Now it is clear that the first con­sideration raises a serious doubt ad to the extent of decline in real wages, for as each wage earner cros­sed the threshold indicated by Rs 200, his earnings would automatical­ly be excluded f rom the reported data. Given the "paternal is t ic" nature of employee relationships, and the myr i ad adjustments actually in force in urban and ru ra l labour markets to protect the real returns of workers, it is not possible to con­clude that the others are an u n i m ­portant consideration.1' Cer ta in inst i -

Thus the following conclusion emer­ged from an analysis of rural wages in II P during 1944-50: "It. is clear that the cihangeover from Kind to Cash economy has received a setback during the quinquennium 1944-50 . . . . A possible reason - . . may be the great rise in the prices of agricultural pro' ducts during this period . - .'' Pro­ceeding the author points out that pay' ment in kind helped the employer (cultivator) attract labour "in compe­tition to other cultivators." In S C Chaturvedi Rural and Urban Wages in Vttar Pradesh, Government of Uttar Pradesh. Superintendent, Printing and Stationery, Lucknow, 1956, p 23. Des­pite the vexing problems of comparabi­lity, an interesting 'hift reported by the second all-India Labour Inquiry merits special attention. Payments in kind ac-counted for 40.5 per cent of total in­comes during 1956-57, but only 31.3 per cent during 1950-51, at the time of the first inquiry.

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tu t iona l considerations are relevant here : the r u r a l nexus d i d p rov ide a means fo r u rban workers to p a r ' t i a l l y offset the threat of r i s i ng pr ice levels, fo r instance by ' i m p o r t i n g ' or "smuggling' g r a i n ; even the ins­t i t u t i on of r a t ion ing worked to their advantage i f some of the ra t ioned items, such as c lo th , were a l lo t ted i n quantit ies larger than normal ly consumed.

On the other hand, i t should be conceded that there are grounds to believe that the cost of l i v i n g f igures are themselves deficient. They tend, on the f o l l o w i n g counts, to m i n i ­mize the increases in the cost of l i v i n g : the choice of Augus t 1939 to represent the base year (1939) prices, the choice of 1 9 4 3 4 5 to re­present consumption weights for the f a m i l y budget af ter the inf lat ion had been wel l underway f o r several years, and the compi la t ion of cost of l i v i n g figures on the basis of con­t ro l l ed prices d u r i n g a per iod of severe scarcities. The net effect of these two considerations is difficult to determine, a l though the reviewer believes, fo r reasons indicated above, that the extent of decline in real wages has been overstated by the recorded data.

Dearness Compensation Ante-dates War

If one were s t i l l to accept the conclusion of a substantial decline in real wages d u r i n g the war- t ime and a compensating post-war real gain , it is nevertheless difficult to accept the argument that the p r i ­m a r y responsible agents were the Government and the un ion move­ment. The payment of special al low­ances to compensate fo r the i n ­creases in the cost of l i v i n g , and grant of concessions in k i n d , rather than the procedure of pay ing equi­valent money wages has a past in the h i s to ry of I n d i a n wage determinat ion tha t ante-dates the post-war com­b ina t ion of Government and union thrust toward the same end,. Indeed, i t reaches back in to I n d i a n t r ad i t ion , and is even today observable in I n d i a n villages, where nei ther the Government nor the un ion move­ment as we know it has a role in the wage determinat ion process.

Fur ther , there are other considera­t ions w h i c h p rov ide a t least an i m ­por tan t independent explana t ion of the recorded trends. The war- t ime

expansions of I n d i a n industries took place in the context of p r ice con­t ro ls , extensive depreciat ion of p lant and equipment, and the recrui tment or upgrad ing of the less skil led and marginal workers . Our i n f o r m a t i o n is scanty, but clearly the add i t ion of a large number of workers w i t h "temporary'" status, and the relaxa­t ion of legislative restrictions on the employment of young persons and women are relevant. The index of labour p r o d u c t i v i t y reflects these features registering a continuous f a l l which was arrested only after the war and the immediate post-war years of d i s rupt ion . Some of the factors tending to mainta in or de­press average real wages were re­versed after the war . The abortive experiment w i t h decontrol st imulat­ed pr ice increases, especially of food grains, and encouraged the demand fo r compensating money payments. The Government's decision on re­leasing excess prof i t tax accumula­tions, p rovided a stimulus fo r wage, pa r t i cu l a r ly bonus: disputes. Indeed this l ink par t ly inspired the Indus­t r i a l Truce Resolution of 1948, w i th its emphasis on res t ra in ing d i v i d ­end payments as w e l l as money wage increases. P lant modernization and replacement made some head­way, along w i t h an attempt to reduce the swollen labour complement. The latter indeed provided a major cause of the post-war indus t r i a l disputes, and in some industries, l ike the De­fence industries, s ignal led the b i r t h of contemporary unionism. The downward movement of the index of labour p roduc t iv i t y was arrested by about 1947, and after some waver­i n g , c l imbed upwards steadily to re­cord a peak 123 in 1956.

Bias of Recorded Data

W h a t of the post-war per iod? Does not the bias of the recorded data understate the real gains to i n ­dust r ia l workers, and therefore of the combined influence of the Go­vernment and the trade unions? The answer to the f i rs t par t of the ques­t i o n w o u l d be in the affirmative. There is, of course, the poss ibi l i ty that the post-war adjustments, i n ­c luding de-ra t ioning, tended to off­set the d o w n w a r d bias in our money wage series: one such change m i g h t be the conversion of many of the concessions into s t ra ight money earnings. However, my purpose is not to raise a l l k inds of m i n o r ob­

jections in the face of the p a i n f u l l imi ta t ions of the available statistics and other in format ion . Such an ap­proach can be fo rb idd ing and dis­couraging to a l l but the most super­ficial analysis. However, the l i m i t a ­tions do stress sharply the need for caut ion in d r a w i n g conclusions and the researcher's special responsi­b i l i t y of p r o v i d i n g independent ana­ly t ica l support for the propositions advanced. Th i s Fr Konseca has fa i l ­ed to do, in so far a' his main focus, in seeking to exp la in the upward movement of money and real wages, is on the combined action of unions and the Government. Specifically he fails to establish that the funct ioning of the ad judica t ing machinery repre­sents a ma jo r gain fo r the union ob­ject ive of increased wages. I shal l proceed to l ist my reasons fo r doubt­ing these arguments, based main ly on the post-war record.

Union Efforts on Wage Front

In the field of wages, the efforts of the unions have been centred on three m a i n components, the basic wage, the annual profi t -sharing bonus (whatever the legal niceties of the debate as to whether it is an ex-gratia payment , or a deferred wage and so o n ) , and the dearness allowance. I have already indicated the reasons for doub t ing the claim that the dearness allowance was an instrument of securing real wage gains or even its maintenance. When we look at the record of revisions of the other two components, there exist s trong reasons to suspect thai the unions have, if anyth ing , per­formed rather poor ly on the wage front . The point of departure of I nd i an wage de terminat ion is the basic wage: it classifies the worker , it is the rate for the j ob , and it is the basis for the calculat ion of sup­plementary benefits. U n i o n represen­tatives have na tu ra l ly demanded that these benefits be based on total earn­ings, inclusive of dearness a l low' ance, and have thus clamoured, wi th p a r t i a l success, fo r the merger of basic wages w i t h the dearness allow­ance. Regarding basic wages, it is generally agreed that one of the widely accepted pr inciples of t r i b u ­nal decisions was the restoration of the pre-war (1939) m i n i m u m real wage. Th i s was calculated on the basis of subsistence needs at 1939 prices to establish the basic wage,

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and the bu lk of t r i b u n a l awards es­tab l i sh ing this p r inc ip le was made d u r i n g 1946-48. The clearness a l low­ance, at cur ren t prices, was supposed to make up f o r the balance needed to subsist. A p a r t f rom the i n i t i a l inadequacy of the clearness a l low' ance, evidence suggests that subse­quent dearness - allowance adjust­ments allowed real wages to decline. Acco rd ing to the recorded data re­l i ed on by Fr Fonseca, even after the round of basic wage revisions and deamess allowance awards of 1946-48, the real wages were well below the pre-war level, and subse­quent t r ibuna l ac t iv i ty to revise basic wages was? negligible. (See Ko t ­ler, Problem' of Industrial Wage Policy in India, pp 66 and ff. 337.)

W h y d i d the upward course of real wage increases continue even after this pe r iod , even after the pre­war level was secured in 1951-52, i f the t r ibunals were not responsible for this act ion? Actua l ly , apart f rom the considerations already men­t ioned, there is reason to believe that the I n d i a n Labour Bureau's i n ­dex of real earnings understates the post-war increase due to the reliance on fixed base-year employment weights, whereas an alternative i n ­dex, based on current employment weights, yields a higher index of real wages because of the increased impor tance of the new, better pay­ing industries.

Bo th Palekar and K o t l e r have prepared such al ternative indices, as indicated below :

Index of Real Wages A B C

LABOUR BUREAU KOTLER PALEKAR

1950 100 1951 102 1952 113 1953 111 1954 114

100 100 104 107 116 114 113 115 121 118

A and B from Kotler, p 335; C from Palekar, p 306. The Labour Bureau index is the same as Fr Fonseca's, except that it has been converted to a 1950 base.

Negotiated Wage Increases T h i s leaves us only the size of the

annual bonus payments w h i c h have been the focus of vigorous union ac t iv i ty designed to impress the t r i ­bunals, The unions undoubtedly have a major stake in the size of the bonus payments, because of their weak financial structure and have keenlv fought for them. However, the bonus payments are a relat ively smal l percentage of total earnings.

Further , they are usually expressed as a mul t ip le of basic earnings, and have rarely exceeded or fal len 'be­low the l im i t s of 2 to 4 months ' basic wages.'1 For the most of the post-war years, the explanation fo r the real wage increases, to the ex­tent that these stand the test of the statistical verif icat ion, must be found then in the numerous pr ivate wage decisions thai take place all the t ime. Superficial inquir ies suggest thai there is a divergence between t r ibuna l fixed rates and the actual­ly pa id rates, and that this is sharp in the new and rapidly g rowing firms,

[ T h i s may well be a part ial ex­planation of the puzzl ing contrast in the relative Importance of the different wage components as order­ed by t r ibunals , and as revealed by aggregate statistics cul led from the Payment of Wages A r t . Thus for nine leading industr ia l State? fex­cluding West Bengal) , i t was found that the relat ively r i g i d basic wage constituted 56.16 per cent of gross wages. Breakdowns were as fol lows: Andhra : 78.54; Assam 65.24; Bihar 62.27; Bombay 40 .87; Madras 56.00; Orissa 72.67: Punjab 85 .26: U t t a r Pradesh 6 3 : 3 8 ; Delhi 60.30. On the other hand, the clearness allowance, considered by students to be the major method of securing changes in money earnings to com­pensate for the rise in the cost of l i v i n g , amounted to only 36.26 per­cent, and ranged between 11.46 per ' cent for the Pun jab and 42.91 per­cent for Bomhav. Source : Indian Ulxmr Gazette, M a r c h 1958. p 849. as reproduced in Palekar. Problems of Wage Policy for Economic Deve-lopment, p 1 4 6 ] ,

Further , the tr ibunals themselves, as a matter of adminis t ra t ive con­venience, dealt only w i t h broad i n ' dust r i a l or industr ial-cum-regional categories, and in so far as they were concerned w i t h the problem of sk i l l differentials, addressed them­selves generally to such broad cate­gories as ski l led, "semi-skilled and unskil led labour. W i t h exceptions, and these deal w i t h the major com­missions or committees dealing w i t h the public services, r a i lway or postal employees and a few other instances,

6 Thus, writing as recently as 1960. Fr Fonseca points out that for the cotton textile industry "3 month's basic wage seems to be the general rule in practically every centre since 1952." (p 148.)

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the tr ibunals have done no th ing more than to indicate the m i n i m u m f o r the category covered, be i t indus­tries or occupational groups. The marg ina l f i rm , and the least pa id in each broad category, have undoubted, ly been depressant influences in such a procedure. U p w a r d flexibility was provided to some extent by the bonus, but bonus awards have gene­ra l ly been conservative, as already indicated.

True Role of Unions

None of this is to deny the role of the unions as the p r inc ipa l vehi­cles to mobil ize protest and to give i t d i rec t ion . However, the point would be more impressive i f i t can be argued that Ind ian unions d i d indeed behave l ike unions w i t h a specific membership and wage i n ­terest to advance, and if i t can be further demonstrated that compul ­sory adjudicat ion worked in response to the extent and strength of specific union pressures. On both aspects one must have considerable doubts. I n d i a n unions are far f rom being discipl ined, organizat ional units, exer t ing pressure on behalf of a cohesive group of members. I n d i a n leaders may attempt not on ly to maximize, as their Western counter­parts do, a wage b i l l fo r a given number of employed, and the orga­nizational ends of strengthening the union, but are also keenly interested in maximiz ing their i nd iv idua l stand­i n g as po l i t i ca l loaders, or as some would have i t . in max imiz ing their charismatic standing.7 Some union leaders of course have an even wider perspective, a social and economic perspective, in which the union is only a small par t of their overal l responsibi l i ty : witness fo r instance some texti le labour leaders w h o argued for a restr ict ion of the loom output of Indian mi l l s ' at a t ime

7 Despite what appears to be a laudatory reference to ihe ''charisma" brought to the labour movement by union leaders, there are strong grounds to believe that these features work against the objective of strengthening the unions. For a con­trary view, see the remarks of Richard D Lambert, "Labour in India", Econo­mic Development and Cultural Change January 1960, especially p 211. The following story may be illustrative of the positions involved. In conversations with an astute politician and Govern­ment leader, I referred to a veteran trade union lender by his usual title as "the Father of the Indian Trade Union Movement.'' The leader paused and com­mented : "Yes, Father without childen!"

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when demand f o r tex t i le ou tpu t was expected to g row.

Interpreting Union Behaviour

I f there i s necessity for caut ion in in t e rp re t ing I n d i a n un ion behaviour, such wariness is even more necessary in appra is ing compulsory adjudica­t i o n as responding p r i m a r i l y to un ion strength. Obviously , adminis­trators are human and respond in panic or distress to threats of indus­t r i a l unrest' Pending a detailed study, one can on ly guess at the ex tent to wh ich they are influenced by the strength of the un ion . Bu t who, relies on the adjudicator ? The strong or weak unions, or the strong or weak managements ? Is there any sol id basis to argue that unions have done better by r e ly ing on the. adjudicators rather than their o w n strength in collective ba rga in ing or the unorganized labour market ? I f a pa r t i cu la r union in an ent i re indus t ry or in one plant in an indus­t ry - cum-Iocal i ty is very strong, the employers may negotiate w i t h the u n i o n ; or they may well f ind i t con­venient to let the dispute go in for adjudicat ion, k n o w i n g f u l l we l l that the award must be inclusive of the weaker placed f irms in the indus t ry On the other hand, i f the union is weak, the employer may decide to avoid the t r i b u n a l , w h i l e the union may feel the other way. So far as the Government au thor i ty is concern, ed, w h i l e the threat of indust r ia unrest m a y p r o m p t the establish­ment of a t r i b u n a l , it is clear the a var ie ty of considerations, other than the s trength of the un ion or un ion groups beh ind the agi ta t ion , also p lay an i m p o r t a n t par t .

As an adminis t ra t ive matter, how­ever, there has been a re la t ive ly strong bias on the part of the ad­minis t ra tors to broaden the area fo r wh ich a decision has to be taken, and the awards themselves have been for b road categories of occu­pations or industries, over the range o f wh ich the degree o f unioniza t ion displays considerable va r i ab i l i t y . T r i -buna! ordered wage increases have perforce been conservative' both be­cause of the range of the i r decisions, and because of the conservative out­look of government wage policy. Far from unions be ing an effective force i the func t ion ing of the compulsory

adjudica t ing machinery , i t wou ld not be far fetched to argue tha t the machinery has w o r k e d against the strengthening of the unions. Cer­t a in ly sectional unions or groups of labour which enjoy a s t rong bar­ga in ing posit ion have less to gain th rough the generalized process of ad judica t ion awards than through their own independent pressure.

Effect of Compulsory Adjudication

Does this mean that the net effect of the compulsory ad jud ica t ing machinery has been negl igible ? N o t necessarily, fo r i t may well be that the machinery has provided a cost­less means of revis ing money wage payments to correspond to changes in cer tain major respects l ike in­creased or decreased profits, changes in the cost of l i v i n g and so on. The major advantage would then be the extent to w h i c h i t has in fact been an impor tan t substitute for the pro­cess of t r i a l and error , and of the gambles of strikes and lockouts which i t sought to a v o i d . ' The machinery has perhaps also been valued by those who seek its re­course as a t h i rd -pa r ty machinery f o r the non-economic basis of con flict. 8 On the other hand, it is only too easy

In overestimate the loss due to strikes. Thus it has been observed: ". . . man-dnvs of inartivity do not provide, a re­liable basis for measuring the magni-tude of economic loss because of strikes . . . Production is shifted from one point of time to another or from one establishment to another or from one area In another. That is, employ­ers may build no inventories in anti­cipation of the strike or step an pro­duction to fill delayed orders after it has terminated . . .'' The greater the slack in the economy it would he possible ''to absorb the effect of most strikes without enduring loss of any great consequence". Arthur Korn-hauser, Robert Dubin, and Arthur M Ross. "Industrial Conflict". llfcOaw H i l l 1954. p 7. It may be added that in the famous Tata Steel strike of 1958, in spite of nearly two weeks of disruption, steel production loss was estimated at only 45.000 tons. Hin­dustan Times. September 20. 1958. Substantially the same points are made by Van Dusen Kennedy in his obser­vations on Indian industrial relations. Specifically. he points out that between 195? to 1957, man-davs lost through strikes have ranged from four to six tenths of one per cent of total man-days worked. He also stresses that many Indian industries operate below full capacity, "Labour and Indian Development", United Asia, Bombay. 1960.

However, none of th is is to argue that compulsory ad jud ica t ion has worked in a way to recognize variat ions in un ion strength either spat ia l ly or temporal ly . Fur ther , to the extent that un ion strength i t se l f is a reflection of other economic variables such as the size of the firm, the nature of the indus t ry , the sk i l l ­ed p r o p o r t i o n of the labour force, and a m y r i a d related element, i t is l ike ly that the compulsory adjudica­t i n g machinery has functioned in disregard of economic variables that wou ld have a power fu l influence on the structure of wages. A l t h o u g h on general grounds I have argued that Government-organized wage fixation has worked conservatively, i t is quite possible that it has had a d i s to r t ing effect on the factor markets, dam­pening wage increases that w o u l d otherwise have taken place, or s t ipu­l a t ing wage increases that would not otherwise have taken place.

Unions and Labour Productivity

There are two fur ther considera­tions, specifically mentioned by Fr Fonseca, w h i c h are relevant in ap­pra i s ing the ab i l i ty of the union-Govrrnnient action to raise real wages. These deal w i t h the cont r i ­but ion of unions to p r o d u c t i v i t y i n ­creases, and the un ion ab i l i t y to raise real wages fo r the i r member­ship by general wage demands in comprehensive contract negotiations. Th i s latter is comparable to the "a l l -or-nothing" proposit ions f a m i ­l i a r to students of labour economies, and it is undoubtedly t rue that the sigining of bi lateral ly negotiated' col-lective agreement' has made some headway in Ind i a . By and large. however, this tendency is s t i l l in its infancy, confined to a few of the more prosperous, better managed firms. Even here some of the p ro­blems of industry-wide, ad judica t ion crop up. as was clearly demonstrated in the events f o l l o w i n g the Tata Steel Agreements of 1956.9 Fur ther . 9 Some of the problems involved in im­

plementing the Tata Agreement'' of 195ft" an' reviewed in "Fight for Lobour Leadership in .Jamshedpur" States­man' June 7. 1958: Morris D Morris. "Order and Disorder in the Labour Force : The Jamshedpur Crisis of 1958", The Economic Weekly November 1. 1958. and m y ' ' T h e Tata Steel Strike: Some Dilemmas of Industrial Relation' in a Developing Economy" The Journal of Political Economy October 1959, pp 489-507,

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a good many of the so-called collec­t ive agreements are n o t t r u l y collec­t ive agreements, a n d have few of the at t r ibutes of the annual round of wage revisions characteristic of major bargain ing in the Un i t ed States. A five year agreement on bonus payments is undoubtedly com­fo r t i ng to the worker and the unions, but does no t qui te meet the objec­tive, or exp la in the recorded t rend ' of a secular increase in real wages.

F ina l ly , despite the increased use of collective contracts, i t i s s t i l l too early to forecast the emergence of nation-wide or industry-wide bar­ga in ing w i t h the object ive of en­forc ing certain a r b i t r a r i l y chosen wage levels. There are few I n d i a n unions of the powerfu l craft or national indus t r ia l var ie ty , and even where federations of i n d i v i d u a l unions exist, there are two or more r i va l federations w i thou t demarcated ju r i sd ic t iona l f ront iers . Aggressive union action is fur ther thwarted by considerable divergences in the labour policies of the different State Govern­ments and other regional differences. I t is true that in some industries l ike rai lways, post and telegraphs, defence, bank ing , insurance, o i l , and ports and docks, the Cent ra l Govern­ment plays a more active role, and that th is has encouraged the forma­t i o n of national indus t r i a l unions. They are, however, weak and face the formidable reluctance of the Central Government to undertake piece-meal changes w h i c h have a tendency to mushroom into more general c laims. The classic example of slow moving Government mach­ine ry is the series of bank t r ibunals , c u l m i n a t i n g in the resignation in 1954 of the Cabinet Min i s t e r for Labour and a Par l iamentary act freezing certain wage terms fo r several years.

Basic Weakness of Adjudication

I t w o u l d be fu t i le t o quar re l w i t h the conservatism of the compulsory ad jud ica t ion process, w i t h o u t recog­n i z ing its more basic weakness in the f ield of wage determinat ion. The ten­dency to decree m i n i m a is after a l l on ly the inevi table consequence of deficiency of adminis t ra t ive resource compared to the complexi ty of the problems faced. M o r e impor t an t , t r i ­bunal decisions are awards rather than negotiated settlements (a l though there is some evidence tha t i n f o r m a l

" b a r g a i n i n g " takes place before the t r ibuna l s ) . There i s l i t t l e of the horsetrading, or quid pro quos, and l i t t l e direct encouragement to j o i n t union-management or management' worker effort to tackle the thousands of product ion and d i sc ip l inary p r o ­blems that arise w i t h i n the p lan t on a da i ly basis. The t radi t ions and back­ground of both labour and manage­ment have no t been too favour­able towards the evolut ion of such j o i n t endeavours, and i t is not neces­sary to look for the v i l l a i n in the compulsory adjudica t ion process. Yet, to the extent that the procedure as it presently works encourages the fo rma t ion of unions whose strength is not contingent upon membership support , and encourages the false belief that referrals of disputed wage (and to a smaller extent em­ployment ) claims to statutory autho­ri t ies solves the p rob lem of i ndus t r i a l morale and unrest, the t r i buna l mach­inery must also share to some extent the blame for the relat ively l i m i t e d advance in p roduc t iv i ty . 1 0 Fo r any one concerned w i t h the problems of p lan t level p roduc t iv i ty , i t is impos­sible not to be impressed w i t h the experience of the I L O Produc t iv i ty Teams, and the Belur W o r k s in Cal­cutta, that there is in fact substan­t i a l r oom for improved p roduc t iv i t y w i thou t increasing capital inputs . However, an essential cond i t ion of such enterprise is the i n i t i a t i ve of the management and at least passive support f rom the un ion . Belur again provides an excellent example of what lies in store for the un ion in the f o r m of real wage gains. (The Be lu r experience i s reported b y a Government sponsored study : " T h e Belur Report : A Case Study of Labour-Management Relations of the I n d i a n A l u m i n u m works. Belur, West Bengal" , Government of Ind ia , 1958, See especially pp 88-89) .

10 Basically, such an approach reflect' an undue pre-occupation with the most overt manifestation of industrial dis­pute, namely the strike, to the exclu­sion of several other disturbing features which significantly affect morale and productivity. Some of these point' have been more fully discussed in my arti­cles on 'The Tata Steel Strike" (ibid) and "Management and Discipline in a Welfare State", The Economic Weekly, December 20, 1958. For an illuminating discussion of the primitive state of plant level relations, see Van Dusen Kennedy, "In'plant Role of Unions in Labor Relations in India'', Monthly labor Review (US) , March 1956.

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No Expendable Luxuries Some of th is must p rov ide room

f o r sobering reflection for those who have viewed unions as expendable luxur ies in the early stages of eco­nomic g r o w t h , and fo r those who have viewed the nat ional f ramework of t r ibunals and compulsory arbi t ra­t i on as an effective instrument of indus t r ia l wage po l icy . They may be r igh t , 'for a l l I know, for I have no way of q u a n t i f y i n g the alleged losses due to this procedure as aga­inst the alleged gains due to the re­duc t ion of workdays lost.1 1 N o r is this the occasion to debate these issues, and my reasons fo r v i ewing w i t h serious concern the deplorable state o f discipl ine and morale in I n ­d ian indus t ry have been dealt w i t h in more detailed terms in other articles. Fr Fonseca, however, views the p rob lem in a different l ight . He does not appear to be unduly wor r i ed about unions and t r ibunals encouraging wage increa­ses. He thinks they do, and to h i m this appears to h i n t at the possibi­l i t y of a heal thy labour movement emerging under the protection of a benevolent Government.1 2

In real i ty unions are neither ne­cessarily ev i l , nor necessarily bene­f ic ia l , and m u c h w i l l depend on the extent to w h i c h they are in te l l igent ly incorporated i n to the efforts to main­ta in and i m p r o v e plant d isc ip l ine and p roduc t iv i ty . Yet i t is a matter of the deepest regret that Fr Fonseca, who is probably as aware of this pro­blem as any other expert in the field, has not dealt w i t h i t in e x p l i c i t terms. It is not enough to say that unions have a potent ia l i ty of in f lu ­encing p r o d u c t i v i t y . Do they ? Is there encouragement to do so under the present system ? W h a t are the conditions w h i c h migh t encourage them to exercise a more posi t ive i n ­fluence in this regard ?

11 It is interesting to note that Van Dusen Kennedy in the United Asia article referred to above draws atten­tion to the encouragement to unstable union behaviour and needless strikes under the present Indian framework,

12 In fairness, I must add that Fr Fon­seca is not ignorant of the real diffi­culties, hut perhaps overly charitable. That he shares the forebodings ex-pressed is revealed in the following remarks: "The intricacies of labour law and the continual dependence on l i t i ­gation. . . compel the union members to subscribe more easily to the politics proposed by the union executive. . " ( p 5 2 ) .

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More General Issues

There are more general issues raised by this s tudy w h i c h may be br ie f ly commented upon . For those whose p r i m a r y interest is the aggre­gate level of savings, i t i s no t the s t rong unions w h i c h can effectively neutralize changes in the cost of l i v i n g index, nor an irresponsible t r i b u n a l po l i cy aimed a t g r an t ing real wage increases, wh ich are the source ' of concern. In a real sense, these are, after a l l m i n o r actors in the d rama fo r w h i c h the stage is set by p l a n n i n g po l icy and the level and d i s t r i bu t ion of aggregate e x ' penditures. These have clearly had an in f la t ionary impact , g i v i n g rise to worker protests and the necessity fo r t r ibuna l induced adjustments Nor , despite the lags indicated by th is procedure, does the record i n d i ­cate that i t i s effective in ho ld ing real wages d o w n . Where i n d i v i d u a l employers are free to negotiate wage increases depending on considera­tions of relat ive supply and demand, wage pol icy as implemented t h rough the t r ibunals is at best a poor sub s t i tu te fo r a more comprehensive and manda to ry wage cont ro l . This po in t has been made in considerably greater deta i l by S A Palekar in his "Problems of Wage Pol icy fo r Eco­nomic Development" . However, this w o u l d open a "Pandora's b o x " and is fur ther not the only conclusion to be gained f rom the I n d i a n experience.

Fur the r provocative issues an posed f o r those concerned w i t h the search for an effective wage po l icy for economic g rowth . W h a t exp la in the substantial difference in the war t ime experience as contrasted w i t h the more recent experience of as upward t rend in employment ? Re­corded statistics, w i t h a l l thei r l i m i ­tations, argue a dec l in ing or relat ive­ly stable real wage level d u r i n g the war (depending on whose explana­t i o n you choose), despite the pheno menal d r a f t of nearly three mi l l i ons for the I n d i a n A r m y . No such dra f on available manpower i s i m p l i c i in recent developments, yet rea wages have cont inued to increase. Is it a reflection of the g rowth of new firms, of the demand fo r new skills and o f compet i t ive b i d d i n g away of l abour reflective of shifts in the derived demand for l abour ? Or has there been a sh i f t in supply condi-l ions, in the f a r m and non- industr ia labour markets ? Or , is i t , as F

Fonseca wou ld have as believe, the benevolent influence of a pro- labour government in independent Ind ia ?

Industrial Workers—A Privileged Class

My own suspicion i s that the analysis of the un ion or Oovernment impac t on wage determinat ion has tenaed too readily to assume a sig­nificant upward thrust on indus t r ia l wages, and has perhaps argued backward f r o m an appreciat ion ox the s ignif icant wage p r e m i u m that indus t r i a l wage ea rne r s do in fact enjoy as compared to other ranks in wage earners in urban services or traces and r u r a l f a r m and non-farm occupations, The unions, in my view, are a manifestation of a re la t ively p r iv i l eged indus t r i a l elite rattier than an instrument to secure this fivoured pos i t ion . An examinat ion of th is phenomenon of which a valuable beginning, nu t o n l y a start, has been made by students of the subject like DIPAK Mazumdar , w i l l involve a more detailed analysis not only of the urban-rura l nexus' and of the urban labour markets, bu t also of the strength of the pr iva te calculus to invest in the ski l ls and m o b i l i t y of the labour force1 3 . Special con siderations of p r o d u c t i v i t y under l y i n g employer demand arc also involved, (bee especially, Harvey Leibenstein, "The Theory of Under employment in Backward Econo-mies", Journal of Political Economy, A p r i l 1957.) The union (or f o r that matter, the Government) impact on wage levels in i ndus t ry w i l l thus be a segment of the ent i re range of wage decisions affecting the labour market .

I f more refined data can be made available fo r purposes of statistical analysis, i t is doubt fu l that we are l ike ly to come ou t w i t h conclusion, in any way s t a r t l i ng ly different f rom

13 The reference is to Dipak L Mazum­dar, "Underemployment in Agriculture and the Industrial Wage Rate", Eco­nomical November 1959, pp. 328-40. This issue has also been explored by me in a preliminary, unpublished manuscript entitled: "Industry-Agri-culture Wage Differentials in India: An Exploratory Memorandum", 1961.

s imi lar studies in the Uni ted States. A few, perhaps those in the better organized industries in Bombay o r Calcutta and those in the protected or the r a p i d g rowth industries, may indicate evidence of a wage advant­age fo r the i r members. As the ex­ample suggests, i t w i l l be a p rob lem separat ing the impac t of the union f r o m other factors per t inent to the i ndus t ry or f i rm which favour wage increases. Such studies should be welcome, p a r t i c u l a r l y i f they also s t imulate m o r e detailed analyt ical studies seeking to e x p l a i n the h igh cost o f labour in indus t ry . 1 1 A l t e r a l l i t i s impor tan t for I n d i a to know i f i t does have the advantage of reliance on an u n l i m i t e d sea of la­bour i n her i ndus t r i a l i za t ion d r ive , and what are the obstacles to i ts realization.1 5

To sum up. The foregoing re­view has been necessarily c r i t i ca l . This is not to deny the many insight­f u l comments that are scattered throughout the monograph or Fr Fonseca's first-hand knowledge of many aspects of I n d i a n indus t r ia l l i f e . Bu t these are marred by his predelection for , and ma jo r effort towards, establishing the powerful role of Ind ian unions. By any stand­a r d this is a difficult task, and more so when the statistics are as clumsy a s they now are and his penchant fo r a sympathetic appraisal of un ion abi l i t ies pi ts h i m against the real i­ties of the Ind ian environment.

14 Witness the lament of LMD Little, 'The Strategy of Indian Development", National Institute Economic Review (United Kingdom), 1960. p George Rosen makes a similar com­

plaint. " Industrial Change in India ", Asia, 1958, pp 117 et passim.

15 The classic presentation is by W A Lewis, "Economic Development with Un­limited Supplies of Labour," in the Manchester School of Economic and Social Studies, May 1954 and "Unlimited Labour : Further Note'", ibid., Janu­ary 1958. For discussions of relevance to the Indian context, see Pharma Kumar, "The Transfer of Surplus Labour from the Rural Sector", The Indian Economic Journal. April 1957, pp 355' 65 and S H Deshpande, "Labour Sur­pluses and Saving Potential in the Un­der-developed Countries", ibid. Janu­ary 1959, pp 376-89.

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