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| Sunday, 24 April 2005 |
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Business |  |
| News Business Features Editorial
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Trade union
power and economic growth
by Lloyd F Yapa Sri Lankan trade unions are again in the news - for the wrong reasons. Before examining, what is wrong or right with trade unions, an examination of a definition and their functions is in order. One of the definitions could be that they are "organisations of employees or workers within a trade or profession". The function or objective of such trade unions is primarily to represent the interests of their members for improving their pay and conditions of work, in the face of the tendency on the part of some employers to exploit their employees. Sometimes trade unions would also provide a number of other services for improving the living standards of workers. Politically affiliated In Sri Lanka, most of the unions are industrial unions, where workers of a given plant or firm or a given industry are organised into a union, (whatever their skills), as distinct from craft unions, which are associations of workers with similar skills. A further characteristic, a conspicuous one at that, is they are appendages mostly of the major political parties. One of the hilarious post election happenings in the country is the overnight change in colour of the shirts (and caps) worn by the proletariat, depending on the political hue of the winning party. This, though could be innocent fun. More sinister things could happen, given the way trade unions are organised in the country, as it did in the UK, when the country was called 'the sick man of Europe', until the 'iron lady,' Mrs.Thatcher came on the scene. It was pointed out in this column recently that employees have their rights and they should be treated as assets to be developed for the sustainability of business itself. It cannot be realised without the enthusiastic support, not just the labour and skills, of the workers. However, when the workers forget their duties by their employers and by society and push up wages, using their union power boosted by their political masters, beyond the market (wage) rate, at which demand for workers meet available supply, unemployment is created. This may happen, when employers stop recruiting, when the higher wage makes their businesses uncompetitive and unprofitable. If the regulations also happen to be rigid so as not to permit a flexible formula for such businesses to seek a legal solution to the problem, employers may resort to other means, which would make unemployment worse than it is. They may resort to capital intensive technology or employ workers on a contractual basis to reduce their costs. They may also surreptitiously resort to recruitment on a casual basis, the worst form of which is withholding letters of appointment and failing to specify details of pay, non payment of EPF and ETF benefits. When corruption is rampant, such violations of human rights may go on and on 'undetected', right under the noses of those concerned. What is more, employers may also be disinclined to carry out their own duties such as listening to employee grievances and undertaking the rather costly task of training the workers to improve their skills. Repercussions This type of stand off between business and workers on one hand and the authorities and business on the other can bring the economy literally to its knees. Why is this? Investment, especially the foreign direct variety, without which, it would be impossible for the country to achieve faster growth than the 4-5% managed so far, as it (FDI) is the medium for transfer of the very scarce capital, technologies, knowledge of markets and higher level management skills required for the purpose. Why faster growth? To give employment to the backlog of unemployed numbering nearly a million people and the 150,000 or so young people entering the labour market every year as well as the underemployed. In other words massive investments amounting to as much as 40% of GDP, (as against the present 25% or so of GDP) needed to alleviate poverty in this country will not be forthcoming, if this type of standoff continues. The other repercussions of such adversarial industrial relations include escalation of prices due to the higher level of wages and work stoppages. Rising prices will erode the purchasing power of the incomes of the entire community, mostly the poor, not only of the few workers, who are responsible for pushing up wages. Rising costs would also affect the competitiveness of exports (unless the currency depreciates, which in turn would worsen inflation). Accord What then is the solution? The answer is consensus among the three groups of stakeholders. Tripartite accords among government- labour- business signed by countries such as Australia and Sweden, which have had industrial relations problems of a milder nature can be taken as examples. The objectives of such accords is to persuade labour to maintain industrial peace with consensus on key developmental issues in return for certain concessions such as, fiscal prudence to protect the purchasing power of nominal wages, better retirement benefits, career development opportunities and the like. |
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