Trade-Unions-and-Industrial-Relations-in-India-English-Version-munotes

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MODULE I : ECONOMICS OF TRADE
UNIONS
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ECONOMICS OF TRADE UNIONS – I
Unit Structure
1.0 Objectives
1.1 Introduction
1.2 Meaning of Trade Unions
1.3 Concepts of Trade Unions
1.4 Evolution of Trade Unions
1.5 Role of Trade Unions
1.6 Approaches to the Origin of Trade Unions
1.7 Summary
1.8 Questions
1.0 OBJECTIVES  To know the meaning and concepts of trade unions
 To study of evolution of trade unions
 To study of role of trade unions
 To study of approaches to the origin of trade unions
1.1 INTRODUCTION Economists who study unions analyze them as cartel s that raise wages
above competitive levels by restricting the supply of labor to various firms
and industries. Many unions have been successful in obtaining higher
wages and better working conditions for their members. However, in the
process, they have r educed the number of jobs available in unionized
companies. The loss of economic welfare occurs because of the basic law
of demand i.e. if unions successfully raise the price of labor, employers
will purchase less of it. Thus, unions are a major anticompet itive force in
labor markets. Their gains come at the expense of consumers, nonunion
workers, the jobless, taxpayers and owners of companies.
According to Harvard economists Richard Freeman and James Medoff,
―Most, if not all, unions have monopoly power, w hich they can use to
raise wages above competitive levels‖ (1984, p. 6). Unions‘ power to fix
high prices for their members‘ labor rests on legal privileges and
immunities that they get from government, both by statute and by non -
enforcement of other laws. The purpose of these legal privileges is to munotes.in

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2 ECONOMICS OF TRADE UNIONS – I restrict others from working for lower wages. Unions world over enjoy
many legal privileges. Unions are immune from taxation and from MRTP
laws. Companies are legally compelled to bargain with unions. Once the
government ratifies a union‘s position as representing a group of workers,
it represents them exclusively, whether or not particular employees want
collective representation. In 2002, unions represented about 1.7 million
waged and salaried employees who wer e not union members in the United
States. Unions often use funds collected from the workers for political
purposes such as political campaigns and voter registration which are not
related to collective bargaining or to employee grievances. Unions are
relatively immune from payment of tort damages for injuries inflicted in
labor disputes, from court injunctions, and from many state laws.
Labor unions cannot prosper in a competitive environment. Like other
successful cartels, they depend on government patrona ge and protection.
Worker cartels grew during the two world wars and the Great Depression
of the 1930s. In India, labor laws protecting the rights of workers and laws
relating to trade union formation and recognition along with laws relating
to industrial relations protect and help prosper trade unionism in the
country. For instance, the Trade Union Act of 1926 gives the workers the
right to form unions. The Industrial Disputes Act 1947 recognizes the
trade union as a bargaining agent and the employers have the legal
obligation to sit across with the Unions and execute collective wage
agreements.
In the United States, most unions in the private sector are in crafts and
industries that have few companies or that are concentrated in one region
of the country. Both factors: few employers and regionally concentrated
employers, make organizing easier. Conversely, the large number of
employers and the regional dispersion of employers limit unionization in
trade, services, and agriculture. In 2002 unionization rate was 37.5 percent
in the government sector whereas it was only 8.5 percent in the private
sector. It shows that unions do best in heavily regulated, monopolistic
environments. Even within the private sector, the highest unionization
rates (23.8 percent) wer e in transportation (airlines, railroads, trucking,
urban transit, etc.) and public utilities (21.8 percent), two heavily regulated
industries. In India, unionization or union membership was highest in the
transport, storage and communication industry with 40 per cent
membership, followed by trade, hotels and restaurants with 36 per cent
membership in the year 1997. The primary sector consisting of agriculture,
forestry and fishing had only 21 per cent union membership in 1997.
1.2 MEANING OF TRADE UNIONS Trade union, also called labour union, association of workers in a
particular trade, industry, or company created for the purpose of securing
improvements in pay, benefits, working conditions, or social and political
status through collective bargaining.
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3 Trade Unions and Industrial Relations in India A few important definitions of a trade union are as follow:
According to Lester, ―A trade union is an association of employees
designed primarily to maintain or improve the condition of employment of
its members‖.
According to Edwin B. Flippo, ―A labour union or trade union is an
organisation of workers formed to promote, protect and improve through
collective action, the social, economic and political interest of its
members‖.
According to V.V. Giri, ―Trade union is such an organisation which is
created volun tarily on the basis of collective strength to secure the
interests of workers‖.
Sydney and Beatrice Webb defined a trade union as – ―a continuous
association of wage earners for the purpose of maintaining or improving
the conditions of their working lives‖.
According to G.D.H. Cole, a trade union means ―an association of workers
in one or more professions -as association carried on mainly for the
purpose of protecting and advancing the members‘ economic interests in
connection with their daily work.‖
Dale Yoder defined a trade union as – ―a continuing long-term association
of employees, formed and maintained for the specific purpose of
advancing and protecting the interest of the members in their working
relationship‖.
According to S.D.Punekar, ―a union is a continuous association of persons
in the industry – whether employer or independent workers – formed
primarily for the purpose of the pursuit of the interests of its members of
the trade they represent‖.
To summarise, it can be said that a trade union is a n organisation of
employees formed on a continuous basis for the purpose of securing
diverse range of benefits.
An analysis of the above definition reveals that a trade union must be:
1. A combination of workers or employers,
2. Such a combination could be permanent or temporary,
3. Could include federation of two or more unions, and
4. To regulate relations among workmen, between workmen and
employers, or among employers themselves.
1.3 CONCEPTS OF TRADE UNIONS A union is ―what it does‖ or unionism is ―what it is‖. Trade unions have
emerged due to ‗group psychology‘ -a trade union constituting a common
interpretation and set of beliefs concerned with problems confronting the munotes.in

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4 ECONOMICS OF TRADE UNIONS – I workers and a generalised programme of amelioration. Trade union is an
organising centre. It provides the locus for collecting the forces of the
working classes.
Trade unions are the focal points for the functional organisation of the
working class towards a change in the structure of society. Trade unions
are developed out of the spontan eous attempts on the part of workers to do
away with the competition, to strengthen their bargaining position and to
raise their working conditions.
A trade union is an association of employees for the primary purpose of
effecting their employers‘ decision s about their better working conditions
of employment. The basic objective of a trade union is, therefore, to
represent the interest of its members. It seeks to get benefits for
them. Trade unions can also be regarded as an institution for overcoming
manag erial dictatorship to strengthen individual worker and to provide
him an opportunity for regulating and improving the conditions under
which he has to work.
Trade unions play an important role in preventing the exploitation of
employees in the hands of management. Over the years, the relationship
between management and workers has changed from master and servant to
employer and employee. The hire and fire policy of the management can
be dispensed with the intervention of trade unions, who fight for the rights
of workers.
Without the formation of trade unions, employees can get the rights at
their individual level, because their bargaining position tends to be weak
and they stand at the lower ebb in the organisation. With the unionism,
they can collectively press for their genuine demands, and improve their
position in the society.
1.4 EVOLUTION OF TRADE UNIONS The British started colonizing the Indian sub -continent in the 1600s and
started to set up factories and mills in India just like the Industrial
Revolution in Britain. The main reason why the British found it apt to start
industrialization in India was that India had an abundance of cheap and
poor labour along with natural resources and land for setting up the
industries.
The cotton mill was established in 1851 in Bombay and first jute mill was
established in 1855 in Bengal.
Just like in Britain, the conditions of labour in India was worse. The
exploitative and pitiable working terms such as working hours, wages and
expelling policies made the labours join h ands and unite and protest. One
of the first unrest among labourers can be dated back to the year 1877
when due to sudden reduction in wages the labourers of Empress Mill,
Nagpur organized a strike. munotes.in

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5 Trade Unions and Industrial Relations in India Since such unionism was a new phenomenon there existed n o law to
legalize and regulate these new labour unions. With growing discontent
and unrest among the labour class and constant tiff with the employer
class, few steps were taken to inquire and resolve the situation.
Factories Commission, 1875 : Factories C ommission, 1875 was the first
commission set up which properly inquired into the conditions of the
factories and came to the conclusion that some kind of legal limit was
necessary and the Factories Act, 1881 was passed.
Factories Commission, 1885 : The Sec ond Commission was set up in
1885 and on the basis of the inquiry and second Factories Act in 1891 was
passed.
Royal Commission on Labor, 1892 : The Commission led to imposing of
limitations on working hours in factories.
Factories Commissions and Factori es legislations caused no improvement
in the working conditions of the labour class in India. In 1885 all workers
of India had also signed a memorandum with their employers to provide
them with basic minimum working conditions. However, the situation did
not improve.
The initial approach by labourers was humanistic in nature under the
background of the setting up of Indian National Congress and non -
violence movement initiated by Mahatma Gandhi.
Post World War I period:
When World War I broke out there was the sudden diversion of all
resources to cater to war needs and the employers were dependent on the
labourers. It then the labourers realized that the employers need them as
much as they need their employers. This gave them a ―bargaining
position‖.
Trade unions started to get formed in India but the process was slow due
to the leadership of socialist reformers. Yet many Trade unions started to
get formulated. The first major trade union formed was the Madras Labour
Union in 1918 under the presidentship of Mr B.P. Wadia. This was
followed by the formation of the All India Trade Union Congress in 1920.
With the formation of Trade Unions, the labourers started to organize
strikes and protests to assert their demands such as lowering of working
hours, minimum basic wages,
The Buckingham Mill Case :
The formation of Trade Unions and the organization of strikes and protests
by the labourers were not welcomed by the employers. To put an end to
the activities of the newly formed trade unions and further to bar
form ation of Trade Unions the employers sought legal recourse. munotes.in

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6 ECONOMICS OF TRADE UNIONS – I One of the most important cases filed was against Mr B.P. Wadia who was
the President of the Madras Labour Union that he conspired with workers
and went on strike and was restraining trade. The Em ployers prayed for an
injunction to stay the protests and activities done by the Trade Union.
Contentions raised by the Employers:
1. The strike is illegal because it amounts to a restraint of trade under
Section 27 of the Indian Contract Act.
2. The strike con stituted criminal conspiracy under section 120A of the
Indian Penal Code 1860.
3. The strike also constituted civil conspiracy under civil law.
The Hon‘ble Madras High Court granted the injunction to stay the strike
on three grounds:
1. There was a valid cause of action in favour of employers.
2. There was a breach of law by the labourers.
3. There were losses suffered by the employers due to the actions of the
trade union.
It is to be noted here that until this time there was no legislation which
gave legal force /backing to trade unions. The Order of the Madras High
Court was further blown to the truth that there was no law that legalized
trade unionism in India.
The growing need to have pro -labour legislation led to the passing of the
Indian Trade Union Act 1926 . The word ―India‖ was later dropped and the
legislation named Trade Union Act, 1926 came into force.
The Preamble of the ―An Act to provide for the registration of Trade
Unions and in certain respects to define the law relating to registered
Trade Unions‖ .
Post World War I the cost of living increased and there was growing
agitation against colonial rule. With the passing of the Trade Union Act
emergence of ―military trade unionism‖ was witnessed with a lot of strikes
and protests by the Trade Unions. Indi a also joined the International
Labour Organization as a founding member.
Period Post 1947 :
One major lacuna with the 1926 Act was that though it provided for
voluntary registration of Trade Unions it did not provide for compulsory
recognition of the Trad e Unions by the employers and because it was not
compulsory for the employers to recognize the Trade Unions, obviously
did not recognize them. This again put a halt to the development of Trade
unions. munotes.in

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7 Trade Unions and Industrial Relations in India For example, whenever the members of Trade Unions or t heir lawyers
went to negotiate with the employers, the employers simply refused to talk
to them on the ground that they do not recognize such Trade union, though
it is registered!
The Act was amended in 1947 which provided for compulsory recognition
by the employers of the representative Unions. However, the amended act
has not been brought to force yet.
Trade Unionism in India from 1950 to 1970 :
Independence of India was beneficial to Trade Unions in India in a huge
way as the forefathers adopted the princ iples of equality for all, justice and
freedom including the freedom of expression. The Constitution of India
also recognized Freedom of Association as a Fundamental Right.
Planning was also adopted by India by the way of Five - year plans. The
focus of the first two five -year plans was on industry and agriculture
which led to setting up of large public sector industries. With the setting
up of industries, the need for labour grew and trade unionism became
active.
However, the trade unions saw their own trou bles. Due to a lack in
organization and proper leadership there was inter -union tensions and
conflicts which was coupled with political interventions. The State took a
paternalistic approach whereby it stated dictating the unions. Hence,
during this period strikes and protests were low as compared to the coming
years.
Trade Unionism in India from 1970 to 1990 :
From the mid of 1960, the economic situation of India had started to
deteriorate mainly because of famines and wars witnessed by India in its
preced ing years. The rate of inflation rose and prices of food and grains
soared. Industries were also affected by the structural changes in the
economy. There were more protests, strikes and lockouts organized by the
trade unions during this period.
Nationwide Emergency imposed during PM Indira Gandhi‘s regime from
1975 to 1977 suspended all the Fundamental Rights including the right to
form associations and right to strike.
Post-Emergency the government had attempted to bring into force an
industrial relations bill which aimed at banning strikes and lockouts in
essential industries and services. However, the bill was met with strong
opposition from different participants, specifically the trade unions. As a
result, the bill was not passed.
The trade unions had achieved a domineering stance by this time. They
had aced in their bargaining powers and had become more organized and
were able to meet their requirements by negotiations and strikes.
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8 ECONOMICS OF TRADE UNIONS – I Trade Unionism in India from 1990 to 1999 :
In 1991 the Government deci ded to open the economy by introducing the
―New Economic Policy‖ (NEP). With pressures of liberalization,
privatization and globalization cracks and splits were also seen in Trade
Unions in India because the Government‘s labour -friendly approach
changed to be more investor -friendly. Due to globalization, there was
massive cutting in the workforce and trade unions were trying hard to save
labourers jobs. With the advent of liberalization in 1991, the industrial
relations policy began to change. Now, the poli cy was tilted towards
employers. Employers opted for workforce reduction, introduced policies
of voluntary retirement schemes and flexibility in the workplace also
increased. The age -old policy of protectionism proved inadequate for the
Indian industry to remain competitive as the lack of flexibility posed a
serious threat to manufacturers because they had to compete in the
international market. Thus, globalization brought major changes in
industrial relations policy in India. The main characteristics of tr ade
unionism after globalization became the small size of membership, lack of
adequate finance, non -fulfilment of welfare schemes, control of political
parties and other outside interference in the activities of trade unions.
Trade Unionism in the 21st Century:
With difficulties faced by NEP, the trade unions had to face a barrage of
problems but the silver lining is the growth in the number of trade unions,
better organization and functioning. As per data of Labour Bureau, there
are around 11,556 registere d labour unions in India with average
membership at 1283 members per union.
In 2001 the Act was amended. Major additions and amendments to the act
are the following,
Amendment to Section 4: The proviso to Section 4, added after the 2001
amendment, now pre scribes minimum number workers who should be part
of the Trade Union at the time of making the application for registration.
The proviso reads as,
―Provided that no Trade Union of workmen shall be registered unless at
least ten per cent of one hundred of the workmen, whichever is less,
engaged or employed in the establishment or industry with which it is
connected are the members of such Trade Union on the date of making of
an application for registration:
Provided further that no Trade Union of workmen sh all be registered
unless it has on the date of making application not less than seven persons
as its members, who are workmen engaged or employed in the
establishment or industry with which it is connected.‖
Insertion of Section 9A: Minimum membership requ irement was
established by inserting Section 9A to the Act. The new Section 9A reads
as, ―9A. The minimum requirement about membership of a Trade Union. -
A registered Trade Union of workmen shall at all times continue to have munotes.in

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9 Trade Unions and Industrial Relations in India not less than ten per cent or o ne hundred of the workmen, whichever is
less, subject to a minimum of seven, engaged or employed in an
establishment or industry with which it is connected, as its members.‖
Proposed amendments
The Ministry of Labour and Employment has been deliberating o n
inserting a provision for recognition of trade unions at the central and state
level. Contemplation to incorporate such an amend has come in the wake
of numerous representations by trade unions. Hence, on 20th July 2018,
the Ministry has published a noti fication in the official gazette proposing
the amendment and has invited comments from the stakeholders and
participants on the draft amendment.
If passed, a new Section 28A and Sub -section (2A) to Section 29 (2) will
be inserted which will provide for co mpulsory recognition of Trade unions
at both federal levels.
Conclusion :
Trade Unionism in India has come a long way. Initially from having no
legal backing to illegalizing ―strikes‖ by the unions to granting them
registration procedure and compulsory rec ognition and now having full -
fledged legislations and special courts, trade unions in India have attained
remarkable status/standing in the labour movement. However, there are
still few impediments that the trade unions face such as lack of financial
resou rces and governmental support. Hence, there is still scope for the
development of Trade Unionism in India.
1.5 ROLE OF TRADE UNIONS The new role of trade unions lie in the protection of not only the interest of
workers but also taking care of the organisation interest. They need to take
up many developmental activities. They have to develop positive work
culture, to resolve the conflicting issues by collective bargaining instead of
coercive measures.
They need to adopt the role of educator, counsellor, facilit ator and
motivator instead of coercive bargainer or grievance handler. They must
function as participative management and partner to explore the new
opportunities provided by liberalisation and globalisation. The quote Dr.
N.R. Sheth, (Industrial Journal of Industrial Relations, Oct 2001),
―Unions are at crossroads. They are on divergent path. One wonders they
would like to map the new path early. They have to define their social
responsibilities in relation to unemployed, contract workers. They may
like to explore ways for development of new leadership for new trade
unionism appropriate for the global society in the years ahead.‖
Trade unions must take lead to become educator and information provider
to the workers by explaining them the objectives, the mission and the
plans of the organisation. They must provide counselling and vocational munotes.in

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10 ECONOMICS OF TRADE UNIONS – I guidance to the workers on their career opportunities, investment of their
money, extra -curricular activities, children education etc.
Trade unions should provide friendly advices to the workers on their
social problems like absenteeism, taking alcohol, indebtedness etc. The
role of trade unions should be redefined as developmental institution
rather than protest institution in the organisation. Leaders of trade unions
must build human resource management philosophy for the development
of employees.
In this regard, it will be appropriate to quote Dr. N.R. Sheth (Indian
Journal of Industrial Relations, Oct 2001) –
―HRM-HRD provides a comprehensive leverage to management to feel
responsive to the whole spectrum of workers‘ interests —psychological,
social, economic and organisational. Accordingly, unions are welcome as
far as they exist; they should function essentially as partners in the pursuit
of progress of the enterprise where their constituents work. The
management emphasis is on development of workers as human resources
or capital. The key areas are – sense of participation and ownership,
training, communication, information, understanding, security,
compensation, multi -skilling, reaching out to workers‘ families, emotional
intelligence, trust-building and the like. Unions should be adequately
informed and involved in achieving excellent performance. Bipartite
negotiations should lead to achievement of organisational goals. All
unions‘ leaders have accepted a positive role of unions in HRM -HRD and
achievement of performance objectives. The emerging role of trade unions
pulls unions progressively closer to the managerial functions of HRM -
HRD. There seems to be a broad range of agreement between managers
and unions leaders on the direction of change in this regard.‖
1.6 APPROACHES TO THE ORIGIN OF TRADE UNIONS The various approaches/theories of trade unions can be classified into the
following five types:
1. Revolutionary Theory:
The revolutionary approach/theory of trade union is developed by Karl
Marx. ―This theory is also known as ―the theory of class war and
dialectical materialism‖. According to Marx, trade union was the foremost
organising centre to provide locus for streaml ining the forces of working
classes The trade unions are, for Marx, the instruments to overthrow
capitalism. These are, thus, prime instruments of the class struggle
between proletarian workers and capitalist businessmen. Marx advocated
that the working cl ass must not divert itself from its revolutionary
programme, because it is labour struggle only that can abolish capitalism.
To Marx, workers‟ emancipation involves abolition of capitalism.
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11 Trade Unions and Industrial Relations in India 2. Evolutionary Theory:
This theory also known as ―theory of in dustrial democracy‖ was
enunciated by Sydney and Beatrice Webbs. To Webbs, trade unionism is
an extension of the principle of democracy in the industrial sphere. In
other words, trade unionism is not an instrument to overthrow the
capitalism, but a means o f equalizing the bargaining power of labour and
capital. Trade unionism provides a means, by which workers overcome
managerial dictatorship, on the one hand, and express their voice in the
determination of the conditions under which they have to work, on t he
other.
3. Theory of Industrial Jurisprudence:
According to S. H. Slitcher, the propounder of the ―Theory of Industrial
Jurisprudence‖, workers individually fail in bargaining with employers for
protecting their interests. In his view, trade unionism s erved as a means for
workers to protect them in work. Such an approach of trade unionism,
Slitcher termed as, ―a system of industrial jurisprudence‖.
4. Rebellion Theory:
To Frank Tannenbaum, the propounder of ―Rebellion Theory‖, trade
unionism is a spon taneous outcome in the growth of mechanisation. He
believes that the use of machines leads to exploitation of workers. Thus,
machine is the cause and labour movement, i.e., trade unionism is the
result. In other words, trade unionism is a rebellion approac h against
mechanisation and automatization of industrial society to protect workers‟
interest in the enterprises.
5. The Gandhian Approach:
The Gandhian approach of trade unionism is based on ―class collaboration
rather than class conflict and struggle‖. The idea to take worker‟s due
share from capitalist by reform and self -consciousness among workers led
to the emergence of trade unionism. Thus, the Gandhian approach of trade
unionism is not only related to material aspect, but also moral and
intellectua l aspects.
Gandhi emphasized that the direct aim of a trade unionism is not, in the
last degree political. Instead, its direct aim is internal reform and also
evolution of internal strength. Also, trade unionism, according to the
Gandhian approach is not anticapitalistic as is generally viewed.
1.7 SUMMARY Trade Unionism in India has come a long way. Initially from having no
legal backing to illegalizing ―strikes‖ by the unions to granting them
registration procedure and compulsory recognition and now having full -
fledged legislations and special courts, trade unions in India have attained
remarkable status/standing in the labour movement. However, there are
still few impediments that the trade unions face such as lack of financial munotes.in

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12 ECONOMICS OF TRADE UNIONS – I resources and governmental support. Hence, there is still scope for the
development of Trade Unionism in India.
1.8 QUESTIONS 1. Write note on evolution of trade unions.
2. Give the definition of trade unions and the role of trade unions.
3. Explain the approaches to the origin of trade unions.


*****






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2
ECONOMICS OF TRADE UNIONS – II
Unit Structure
2.0 Objectives
2.1 Introduction
2.2 Bargaining Theory of Wages
2.3 Impact of Unions on Productivity
2.4 Impact of Unions on Wages
2.5 Employment Security and Efficiency
2.6 Unorganised Sector
2.7 Summary
2.8 Questions
2.0 OBJECTIVES  To appreciate the meaning economics of unions and understand the
bargaining theory of wages.
 To understand the impact of unions on productivity and wages.
 To appreciate the relation between employment security and
efficie ncy.
2.1 INTRODUCTION Economists who study unions analyse them as cartels that raise wages
above competitive levels by restricting the supply of labour to various
firms and industries. Many unions have been successful in obtaining
higher wages and better w orking conditions for their members. However,
in the process, they have reduced the number of jobs available in
unionized companies. The loss of economic welfare occurs because of the
basic law of demand i.e., if unions successfully raise the price of labo ur,
employers will purchase less of it. Thus, unions are a major
anticompetitive force in labour markets. Their gains come at the expense
of consumers, non -union workers, the jobless, taxpayers and owners of
companies.
According to Harvard economists Richa rd Freeman and James Madoff,
“Most, if not all, unions have monopoly power, which they can use to
raise wages above competitive levels” (1984, p. 6). Unions‟ power to fix
high prices for their members‟ labour rests on legal privileges and
immunities that t hey get from government, both by statute and by non -
enforcement of other laws. The purpose of these legal privileges is to
restrict others from working for lower wages. Union‟s world over enjoys
many legal privileges. Unions are immune from taxation and fr om MRTP
laws. Companies are legally compelled to bargain with unions. Once the munotes.in

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14 ECONOMICS OF TRADE UNIONS – II government ratifies a union‟s position as representing a group of workers,
it represents them exclusively, whether or not particular employees want
collective representation. In 2002, unions represented about 1.7 million
waged and salaried employees who were not union members in the United
States. Unions often use funds collected from the workers for political
purposes such as political campaigns and voter registration which are not
related to collective bargaining or to employee grievances. Unions are
relatively immune from payment of tort damages for injuries inflicted in
labour disputes, from court injunctions, and from many state laws.
Labour unions cannot prosper in a competi tive environment. Like other
successful cartels, they depend on government patronage and protection.
Worker cartels grew during the two world wars and the Great Depression
of the 1930s. In India, labour laws protecting the rights of workers and
laws relati ng to trade union formation and recognition along with laws
relating to industrial relations protect and help prosper trade unionism in
the country. For instance, the Trade Union Act of 1926 gives the workers
the right to form unions. The Industrial Disput es Act 1947 recognizes the
trade union as a bargaining agent and the employers have the legal
obligation to sit across with the Unions and execute collective wage
agreements.
In the United States, most unions in the private sector are in crafts and
industr ies that have few companies or that are concentrated in one region
of the country. Both factors: few employers and regionally concentrated
employers, make organizing easier. Conversely, the large number of
employers and the regional dispersion of employer‟ s limit unionization in
trade, services, and agriculture. In 2002 unionization rate was 37.5 percent
in the government sector whereas it was only 8.5 percent in the private
sector. It shows that unions do best in heavily regulated, monopolistic
environment s. Even within the private sector, the highest unionization
rates (23.8 percent) were in transportation (airlines, railroads, trucking,
urban transit, etc.) and public utilities (21.8 percent), two heavily regulated
industries. In India, unionization or un ion membership was highest in the
transport, storage and communication industry with 40 per cent
membership, followed by trade, hotels and restaurants with 36 per cent
membership in the year 1997. The primary sector consisting of agriculture,
forestry and fishing had only 21 per cent union membership in 1997.
The Economic Consequences of Unions: In 2002, in the United States,
full-time non -union workers had usual weekly earnings of $587, 21
percent lower than the $740 earned by union members. H. Gregg Lewis ‟s
1985 survey of two hundred economic studies concluded that unions
caused their members‟ wages to be, on average, 14 to 15 percent higher
than wages of similarly skilled non -union workers. Other economists such
as Harvard‟s Freeman and Madoff, and Peter Linneman and Michael
Wachter of the University of Pennsylvania claimed that the union
premium was 20 to 30 percent or higher during the 1980s. In a recent
National Bureau of Economic Analysis study, David Blanchflower and
Alex Bryson found a union wage dif ferential of 18 percent, a relatively
stable premium from 1973 through 1995. munotes.in

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15 Trade Unions and Industrial Relations in India The wage premium varies by industry and stage of the business cycle.
Unions representing garment workers, textile workers, white -collar
government workers, and teachers seem to h ave little impact on wages.
But wages of unionized mine workers, building trades people, airline
pilots, merchant seamen, postal workers, rail workers, and auto and steel
workers exceed wages of similarly skilled non -union employees by 25
percent or more. During the job boom of the late 1990s, the union
premium eroded, following a historical pattern. Union wage agreements
tend to be relatively rigid for three years, so gains lag behind the more
responsive and flexible non -union sector during a boom. The rev erse
happens during an employment slump like that of the early 2000s because
non-union wage growth slumps as hiring weakens, while union wage
gains go up.
The wage advantage enjoyed by unionized workers is due to two factors.
First, monopoly unions raise wages above competitive levels. Second,
non-union wages fall because workers displaced from jobs by high union
wages move into the non -union sector and bid down wages there. Thus,
some of the gains to union members come at the expense of those who
must shi ft to lower -paying or less desirable jobs or go unemployed.
The monopoly success of private -sector unions, however, has brought
their decline. The silent, steady forces of the marketplace continually
undermine them. Linneman and Wachter, along with econom ist William
Carter, found that the rising union wage premium was responsible for up
to 64 percent of the decline in unions‟ share of employment in the last
twenty years. The average union wage premium for railroad workers over
similarly skilled non -railroa d workers, for example, increased from 32
percent to 50 percent between 1973 and 1987; at the same time,
employment on railroads declined from 520,000 to 249,000. By 2002,
railroad employment had slipped to 216,000, down 13 percent since 1987,
while total nonfarm employment grew 26 percent during the same period.
Increased wage premiums also caused declines in union employment in
construction, manufacturing, and communications. The silent, steady
forces of the marketplace continually undermine labour cartel s.
In recent decades, union representation of workers has declined in all
private industries in the United States. A major reason is that employees
do not like unions. According to a Louis Harris poll commissioned by the
AFLCIO in 1984, only one in three U .S. employees would vote for union
representation in a secret ballot election. The Harris poll found, as have
other surveys, that non -union employees are more satisfied than union
workers with job security, recognition of job performance, and
participation in decisions that affect their jobs. And the U.S. economy‟s
evolution toward smaller companies, the South and West, higher -
technology products, and more professional and technical personnel
continues to erode union membership.
In the United States, union membership in the private sector peaked at 17
million in 1970 and had fallen by nearly half to 8.8 million by 2002. munotes.in

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16 ECONOMICS OF TRADE UNIONS – II 2.2 BARGAINING THEORY OF WAGES The bargaining theory of wages was developed by Prof. John Davidson in
1893. The theory holds that wages are determined by the relative
bargaining power of employers and workers. If the bargaining power of
workers is greater than that of the employers, the workers will get a better
deal in terms of wages and working conditions and vice versa. The theory
was put forward by Thornton, Davidson, Maurice Dobb, Sydney Webb
and Beatrice Webb. The theory gained currency after 1933. The theory
was supported by JM Keynes who advocated greater transfer of national
income from the rich to the workers to boost aggregate deman d in the
economy and avert economic crisis. The writings of Adam Smith also
contained some of the ideas of the bargaining theory. Adam Smith stated
that the employers have the advantage in disputes over wage rates because
they can combine much more easily.
The bargaining theory of wages is based on the following assumptions:
1. Wages, hours and working conditions are determined by the relative
bargaining strength of the workers and employers.
2. Without organization and concerted action, there will be a tendency
toward undesirable conditions for workers.
3. No adequate safeguard is found in the operation of the factors at work
in the organized trade.
4. There is a flexible, changeable situation and that by means of
organized effort positive improveme nt can be secured in wages, hours
and other important details of labour contract and in their
administration
Advocates of the theory like Davidson and Dobb and Sydney and Beatrice
Webb maintain that the wage rates will be settled between the upper and
lowe r limits. Employers want to pay less and would not beyond a certain
limit and take into consideration factors like the productivity of labour,
investment in capital equipment, the cost of borrowing money,
competition of the firms and the possibility of sub stituting machinery or
land for labour in production. The workers will take into consideration
their standard of living, self -esteem, opinion of others, working conditions
in other industries, trade union policies etc. The actual determination of
wages wil l fall between these two limits and it will depend upon the
relative bargaining strength of the two parties. The theory states that
wages increase by pressure and the workers will be able to get a higher
share in the national income at the cost of non -wage income earners. The
upper limit of wages will be the marginal productivity of the labour and
the lower will be the amount sufficient to maintain the labour in his
present standard of living. The theory suggests that workers have weak
bargaining power unle ss combined. The bargaining theory also suggests
that if the bargaining power of workers can be strengthened, the
monopolists can be made to part with their extraordinary profits both in munotes.in

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17 Trade Unions and Industrial Relations in India the labour and product markets to the labour and that under favourabl e
circumstances wages higher than the marginal productivity can be exacted
out of monopoly profits.
The bargaining theory of wages is applicable under the conditions of
imperfect competition. It also explains the differential wage rate.
However, the theory has been criticized on the basis of the fact that it is
not a complete theory as it has no long run postulates. It is believed that
collective bargaining will neither bring justice nor economic gain to the
workers. It will further harm the employment pros pects of the workers and
will promote irresponsible behaviour on the part of workers. Bargaining
based wage settlements have its social costs in terms of strikes and
lockouts. Collective bargaining may create differences in wages where
equalization is nece ssary or may bring equalization by coercion where
differentials are necessary.
2.3 IMPACT OF UNIONS ON PRODUCTIVITY Understanding of unions‟ effects on productivity is critical to the
assessment of labour unions, performance and labour law. Productivity
means output for given levels of inputs. A firm that is more productive
than another can produce more output using the same combination of
inputs or, equivalently, produce the same output using fewer inputs.
Increase in productivity attributable to union, me an a real shift in the
marginal product schedule, and not just a movement up the labour demand
curve (implying a higher capital -labour ratio) in response to a higher
wage. If collective bargaining in the workplace were systematically to
increase productivi ty and to do so to such an extent that it fully offset
compensation increases, then a strong argument could be made for
policies that facilitate union organizing. Productivity increases, it was
argued, are affected through the exercise of collective voice along with an
appropriate institutional response from management. According to this
view, unions lower turnover and establish in workplaces more efficient
governance structures that are characterized by public goods,
complementarities in production, and lo ng-term contractual relations. The
thesis that unions significantly increase productivity has not held up well.
Subsequent studies were as likely to find that unions had negative as
opposed to positive effects upon productivity. A large enhancement of
productivity because of unionization is inconsistent with evidence on
profitability and employment. Attention has focused on the dynamic effect
of unionization and the negative effects of unions on growth in
productivity, sales, and employment. Effects upon pr oductivity tend to be
largest in industries where the union wage premium is most pronounced.
This pattern is what critics of the production function test predict that
union density coefficients in fact reflect a wage rather than a productivity
effect. Thes e results also support a "shock effect" interpretation of
unionization, whereby management must respond to an increase in labour
costs by organizing more efficiently, reducing slack, and increasing
measured productivity. Positive effects by unions upon pro ductivity are
typically largest where competitive pressure exists and these positive munotes.in

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18 ECONOMICS OF TRADE UNIONS – II effects are largely restricted to the private, for -profit, sectors. Notably
absent are positive effects of unions upon productivity in public school
construction, public l ibraries, government bureaus, schools, law
enforcement and hospitals. This interpretation of the productivity studies
has an interesting twist: the evidence suggests that a relatively
competitive, cost -conscious economic environment is a necessary
conditio n for a positive effect of unions upon productivity, and that the
managerial response should be stronger, the larger the union wage
premium or the greater the pressure on profits. Yet in such competitive
environments that there should be relatively little managerial slack and the
least scope for union organizing and wage gains. Therefore, the possibility
of a sizable effect by unions upon productivity across the whole economy
appears rather limited.
Evidence for other countries is far more limited. British studies, although
few in number, show a negative relationship between union density and
productivity levels. Evidence for Canada based on an aggregate
manufacturing time -series data for the period from 1926 to 1978, suggests
initially positive union "shock " effects on productivity, although slower
productivity growth due to unionization offsets the positive effects within
5 to 8 years. German evidence is particularly difficult to sort out owing to
the widespread presence both of unions with national or cent ralized
bargaining and of mandatory works councils in union and sometimes in
non-union settings. Brunello (1992) finds that unions, except those
working for small suppliers facing competitive pressure, tend to have
negative effects on productivity (and pro fits) in Japan. Although
international evidence is limited, that which exists is broadly supportive of
our interpretation of the American evidence. (Ref: Unionization and
Economic Performance: Evidence on Productivity, Profits, Investment,
and Growth by Ba rry T. Hirsch Professor of Economics, Florida State
University).
2.4 IMPACT OF UNIONS ON WAGES The study of the impact of unions on the economic performance of firms
and the competitiveness of the economy is important in the context of
Government policy an d the design of labour law. It provides the rationale
for either strengthening or weakening labour legislation governing
bargaining rights and the organizing of unions. Professor Barry T. Hirsch
has conducted a study to research into the effects of unioniz ation on
productivity, profitability, investment, and employment growth. Barry‟s
study is based on United States, Canada, Japan and Britain. He concludes
that the effects of unions upon productivity and productivity growth are
small. They do not offset the cost increase resulting from higher union
wages. The evidence presented in his study clearly indicates that
unionization leads to lower profitability. The impact of unions on
profitability at the level of the industry or the firm is such that unionized
firms have profits that are 10 percent to 20 percent lower than the profits
of non -union firms. Further, the evidence from Britain also suggests that
closed -shop unions have a stronger negative impact on profitability. munotes.in

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19 Trade Unions and Industrial Relations in India Recent research also shows that union m onopolies reduce investment in
physical capital and in research & development and other forms of
innovative activity.
In a study conducted by Professor Hirsch of 500 publicly traded American
manufacturing firms, the capital investment of an average unioniz ed firm
was 6 percent lower than that of a comparable non -union firm. Hirsch also
found that the average unionized firm made 15 percent lower annual
expenditure on R&D. A Canadian study using aggregate data also finds
that unions reduce investment in physi cal capital by a significant margin.
The wage rates are higher in unionized firms. Given higher wages and
lower levels of profitability and investment in unionized firms, the
employment growth is lower. Studies from Canada, the United States, and
Britain o n the effects of unionization upon employment show the negative
impact of unionization upon employment growth. In the case of Canada, a
study conducted in 1993 by Professor Richard Long confirms the
international evidence. This study examined the performan ce of 510
manufacturing firms during the period from 1980 to 1985 and found that
the median growth rate of non -union firms during this period was 27
percent while the growth rate of unionized firms was zero. After making
adjustments in his analysis to acco unt for the fact that unionized firms tend
to be larger than non -unionized firms and found in declining industries, he
concluded that unionized manufacturing firms grew 3.7 percent slower
than comparable non -unionized firms; and unionized firms in the non -
manufacturing sector grew 3.9 percent slower than their non -union
counterparts. In sum, the evidence from research indicates that unions tend
to increase wages but not productivity, reduce profitability, reduce
investment in physical capital and R&D, and, most importantly, lower the
rate of employment growth.
2.5 EMPLOYMENT SECURITY AND EFFICIENCY Employment security and efficiency are inter -related. The question is
whether they are positively related or negatively related. A positive
relationship between e mployment security and efficiency implies that if
the level of employment security is high, efficiency of the workers will
also be high. A negative relationship between the two would imply that
when employment security goes up, efficiency of the employees goes
down. A point to note in the context of India, one may like to say that the
efficiency levels of public sector employees who enjoy high levels of
employment security is low compared to the employees in the organized
private sector who enjoys relativel y lower levels of employment security.
The efficiency levels of employees working in the unorganized sector
where employment security depends on the pleasure of the employer,
efficiency levels may be much higher than their public sector or even
organized p rivate sector counterparts. However, the issue to be considered
is whether employment security alone can influence employee efficiency
or there are a host of other factors which also influence employee
efficiency? munotes.in

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20 ECONOMICS OF TRADE UNIONS – II Employee efficiency may be defined as the amount of physical output per
person hour. However, output is not the function of employee alone. There
are a number of other factors which influence efficiency or output. These
are: working conditions, capital endowment, quality of raw materials,
manageri al system etc.
On an average, employee efficiency in India is considered to be lower than
their counterparts in Europe, United States and Japan. However, with
increasing capital endowment in organized industries such as cotton
textiles has contributed to t he improvement in efficiency of Indian labour.
As against the cotton textile industry, the coal mining industry
experienced a decline in employee efficiency in the middle of the
twentieth century. The reason for such decline cannot be found the
inherent ch aracter of Indian labour but in the circumstances in which
workers work in Indian industries. The ability of the employees depends
upon factors such as diet, housing, climate, hours of work, training, re -
training, working conditions etc. The willingness to work depends upon
the behaviour of the employer, prospects of vertical and horizontal
mobility and the drive and initiative of employees.
The factors that are responsible for the poor efficiency of industrial labour
in India can be stated as follows:
1. Climatic conditions are not congenial to greater efficiency and
productivity.
2. Indian labour is not completely urbanized and therefore prone to
internal migration.
3. Low wages and low standard of living. For instance, only seven per
cent of the lab our force in India works in the organized sector and
enjoy employment security and other benefits.
4. The quality of capital and raw materials is poor and hence efficiency
is also low.
5. The quality of human resources in India is also poor on account of
low levels of education and training.
6. Working hours are long in the unorganized sector and adequate
compensation is not given to the workers.
The efficiency of labour in India can be improved if the causes of low
efficiency are eliminated.
2.6 UNO RGANISED SECTOR The Indian labour market is divided into two segments or sectors. These
are known as Organized and Unorganized sectors. The organized sector of
the labour market is very small and in percentage terms is about 7% of the
total employment in t he country. Manufacturing, electricity, transport and
financial services are largely in the organized sector. In the unorganized munotes.in

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21 Trade Unions and Industrial Relations in India sector, the agricultural sector is the largest sector with sixty -five per cent
of the population directly depending upon it. Ap art from agriculture, the
other industries in the unorganized sector are mining, manufacturing,
construction, trade, transport and community, social and personal services.
Unorganized Labour:
The unorganized sector provides employment to 97% of the labour force.
Unorganized labour by definition constitutes those workers who are not
able to organize themselves and pursue common objectives due to reasons
such as casual nature of employment, ignorance and illiteracy, small and
scattered establishments and sup erior strength of the employer. It includes
construction labour, casual labour, labour employed in small scale
industries, handloom and power loom workers, beedi and cigar workers,
workers in shops and commercial establishments, sweepers and helpers,
tanne ry workers, tribal labour and other unprotected forms of labour.
Contract labour is also a part of the unorganized labour force.
Some of the specific problems of unorganized labour can be stated as
follows:
1. Absence of legislation that will guarantee a minimum of protection
and welfare to all workers in the unorganized sector.
2. The workers are not given a regular and official identity card. Identity
card gives legal identity and recognition to workers.
3. There is no legal protection of employment of unorganized workers.
They are therefore exploited in different ways. Arbitrary dismissals,
denial of minimum wages, delay in payment of wages, absence of a
fixed payment day, absence of compensation to workers injured at the
work place, absence of welf are facilities etc.
4. The unorganized workers are not covered by social security
legislation. They are precluded from enjoying the benefits of
provident fund, pension, medical care, child care and maternity
benefits.
In order to extend legislative prot ection to the unorganized workers, the
National Commission on Labour 2002 has recommended an umbrella
legislation which would guarantee minimum protection and welfare to all
workers in the unorganized sector.
2.7 SUMMARY 1. Economists who study unions ana lyse them as cartels that raise wages
above competitive levels by restricting the supply of labour to various
firms and industries. Unions are a major anticompetitive force in
labour markets. Their gains come at the expense of consumers, non -
union workers, jobless, taxpayers and owners of companies.
2. The bargaining theory of wages is based on the following
assumptions: munotes.in

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22 ECONOMICS OF TRADE UNIONS – II a. Wages, hours and working conditions are determined by the relative
bargaining strength of the workers and employers.
b. Without o rganization and concerted action, there will be a tendency
toward undesirable conditions for workers.
c. No adequate safeguard is found in the operation of the factors at work
in the organized trade.
d. There is a flexible, changeable situation and tha t by means of
organized effort positive improvement can be secured in wages, hours
and other important details of labour contract and in their
administration.
3. The study on the impact of unions on productivity clearly indicates
that unionization leads to lower profitability. The impact of unions on
profitability at the level of the industry or the firm is such that
unionized firms have profits that are 10 percent to 20 percent lower
than the profits of non -union firms. Recent research also shows that
union monopolies reduce investment in physical capital and in
research & development and other forms of innovative activity.
4. A positive relationship between employment security and efficiency
implies that if the level of employment security is high, eff iciency of
the workers will also be high. A negative relationship between the two
would imply that when employment security goes up, efficiency of
the employees goes down.
2.8 QUESTIONS 1. Explain the bargaining theory of wages.
2. Discuss on the impact of unions on productivity and wages.
3. Write a note on employment security and efficiency.
4. Write a note on „Unorganised Sector‟.



*****
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23
MODULE II: INDUSTRIAL RELATIONS
3
INDUSTRIAL RELATIONS – I
Unit Structure
3.0 Objectives
3.1 Introduction
3.2 Definition of Industrial Relations
3.3 Scope of Industrial Relations
3.4 Approaches to Industrial Relations
3.4.1 System Approaches
3.4.2 Class Conflict Approaches
3.5 Summary
3.6 Questions
3.0 OBJECTIVES  To study the definition and scope of industrial relations.
 To study the various approaches to the industrial relations.
3.1 INTRODUCTION Trade unionism is the outcome of the factory system and th e capitalist
order of the society. Modern industrialization in India started from 1850
onwards when the first cotton and jute mills were set up along with the
development of road and rail ways. However, trade unionism in India took
its birth only in the la st quarter of the 19th century. The year 1875 is a
landmark in the history of trade union movement in India because the
factory workers for the first time united together for securing better
working conditions.
3.2 DEFINITION OF INDUSTRIAL RELATIONS Accord ing to Dale Yoder, “industrial relations describe relationships
between management and employees or among employees and their
organizations that characterize or grow out of employment.”
The International Institute of labour Studies has defined it as “soci al
relations in production.” A very idealistic definition of industrial relations
is given by Mead and Metcalfe. According to Mead and Metcalf,
“industrial relations are the composite result of the attitudes and
approaches of employers and employees toward s each other with regard to
planning, supervision, direction and coordination of the activities of an munotes.in

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24 INDUSTRIAL RELATIONS – I organization with a minimum of human efforts and frictions with an
animating spirit of co -operation and with proper regard for the genuine
well-being of a ll members of the organization.”
According to Professor Clegg, industrial relations refer to “the rules
governing employment together with the ways in which the rules are made
and changed and their interpretation and administration.” The essence of
industr ial relations can be found in employer -employee relations as
defined by the parties involved. The employer is represented by the
management and the employees are represented by their trade unions.
Hence industrial relations also refer to management -union r elations. The
most important party involved in industrial relations is the State who
defines and provides the framework in which the system of industrial
relations operates.
3.3 SCOPE OF INDUSTRIAL RELATIONS The study of definitions of industrial relations clearly delimits the scope of
the subject and it includes the following aspects:
1. Labour relations i.e., relations between union and management.
2. Employer -employee relations i.e., relations between management and
workers.
3. Group relations i.e. , relations between various groups of workmen.
4. Community or public relations i.e., relations between industry and
society.
3.4 APPROACHES TO INDUSTRIAL RELATIONS Industrial relation is a multi -disciplinary and inter -disciplinary subject. It
is rooted in social sciences and hence it has political, social, economic and
psychological dimensions. It is also related to other social sciences such as
history, social anthropology, law and management. Industrial relations as
an interdisciplinary discipline dra w from all the social sciences and come
into being as an independent applied discipline. Economics provide an
economic interpretation of the issues involved in industrial relations
through its specialized discipline called labour Economics. Similarly,
sociology explains the social background of the workers and the impact of
shared values, mores and norms on human behaviour through Industrial
Sociology. Industrial psychology provides measuring tools and concepts
in dealing with matters such as recruitment, p lacement, training, fatigue,
morale etc. labour laws and their interpretations and amendments
contribute to the growth of industrial jurisprudence. Quantitative methods
and statistical techniques help in understanding the exact state of industrial
relation s in a country, state or a city.
Due to the multi -disciplinary nature of the subject, a number of social
scientists have put forward their explanations of industrial relations which
are now known as theories or approaches to industrial relations. Some of munotes.in

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25 Trade Unions and Industrial Relations in India the important theories and approaches to industrial relations are explained
below.
3.4.1 System Approaches to Industrial Relations :
The System approach to industrial relations was put forward by John
Dunlop. This approach focuses on the participants in the industrial
relations process, environmental forces and the output. It also studies the
causes of these inter -relations among different aspects of industrial
relations. The system approach is illustrated in Fig. 3.1. The basic
elements of the system approac h are:
1. Participants in the System:
There are three participants. They are: workers and their organizations,
management and their representatives and specialized government
agencies like labour courts. These participants interact within the social
and ec onomic framework. Their interaction involves three significant
strata which Dunlop called as the „Sub -systems of the Industrial Relation
System‟.
2. Ideological Basis:
The relations among the sub -systems are regulated by their ideological
lineages. Accord ing to Dunlop, an ideology is a set of ideas and beliefs
commonly held by the actors that helps to build or integrate the system
together as an entity.
3. The Environment or the Context:
The context or the environment is the ground in which participants
interact. Dunlop has identified three types of environments that are
relevant to industrial relations. These are: the technological characteristics
of the workshop, the market or economic constraints and the locus and
balance of power existing in a society. These three types of environments
or components are known as the subsystems. These subsystems can be
called as the technological subsystem, the economic subsystem and the
political subsystem.
a) The Technological Sub -system. Industrial relations depend u pon the
choice and availability of technology. Thus, industrial relations would
be different under labour - and capital -intensive technologies. Changes
in technology increase employer‟s expectations about the skills of the
workers. The work processes and me thods with modern techniques
reduce manual work and workers acquire greater control over their
work and higher production can be achieved.
b) The Economic Subsystem. Market or economic limitations also
influence industrial relations because the need for labour is closely
associated with the demand for the products. As competition
increases, market shares of firms become uncertain and this in turn
influences industrial relations. munotes.in

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26 INDUSTRIAL RELATIONS – I c) The Political Subsystem. The locus and balance of power in a society
in the form of power centres i.e., workers‟ organizations, the
employers and the government also influence the relationship between
labour and management. In the initial stages, workers and employers
demonstrate their strength to further their interests. The regulatory
role of the government is therefore an important part in shaping the
pattern of industrial relations. A conflict emerges strongly when the
parties are less mature, are power conscious and therefore aggressive.
However, the conflict tends to rece de from the scene when the parties
become more mature, responsible and discreet in the use of power and
learn to accommodate themselves with each other.

Fig. 3.1: Dunlop’s Approach to Industrial Relations
The actors in these sub -systems act react and int eract. Their activities
influence others and are influenced in turn by others. Their interactions
take place under the influence of various types of factors and within
certain environments. For example, economic factors like inflation have a
major impact o n industrial relations. Every inflationary situation leads to
higher incidences of industrial unrest and every recessionary situation
usually leads to a decline of industrial action. This potentially disruptive
issue is dealt with by devising rules for its automatic adjustment. For
instance, in the United States, inflation compensation is subject to
collective bargaining. In India, dearness allowance is settled by linking it
with the Consumer Price Index. Further industrial relations would be
different in a labour -intensive industry as compared to a capital -intensive
industry. The proximity of actors to centres of power would also influence
the process. The economic, social and technological factors operating on
the three actors make them devise rules or leg islation whenever these
factors affect their relationship.
Limitations of the Dunlop’s System Approach:
Dunlop has not paid any attention to behavioural variables like motivation,
perceptions and attitudes and their tendency to concentrate on the rule
making institutions and the settlement of conflict. However, Dunlop‟s
model does take into account the complexity of the industrial relations
process and is flexible to be adapted for use in any country or any munotes.in

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27 Trade Unions and Industrial Relations in India situation. While rules are not the only thing in industrial relations, they
provide the broad guidelines of a system and do help to explain the basic
characteristics. They do not prevent the integration of perceptions and
behavioural elements into an understanding of the system. Hence this
model provides a very useful framework of analysis of the Indian
industrial relations system. Finally, Dunlop‟s model is not normative in
nature but objective enough to explain the causes and consequences of the
various processes involved in industrial relations.
3.4.2 Class Conflict Approaches to Industrial Relations :
According to Karl Marx (1818 -1883), industrial relations between the
workers and the capitalist are contradictory by nature. The contradiction in
relations is the result of contradictory objectives of the classes. Marx
believed that capitalists aim at profit maximization and workers aim at
maximization of wages. The two objectives cannot be reconciled because
industrial relation is a zero -sum game in which one has to lose so that the
other gains. Thus, the capitalists as the owners of the means of production
are in a strong position to gain profits at the cost of wages. This
contradictory and unholy relation can be put to an end only by destroying
the class of capitalists and a classless society is establish ed. A classless
society can be established only through a class struggle. The trade union is
the main instrument of class struggle between the workers (proletariat) and
the capitalists (bourgeoisie). The seeds of self -destruction are ingrained in
capitalis m and they manifest in three important self -destructive
tendencies. These tendencies are:
a) Concentration of wealth and income in the hands of a few big
capitalists:
The working class or have -nots can only sell their labour power and
receive subsistence wages. The capitalist‟s classes are the owners of the
means of production and are habitually exploiting the workers by
extracting surplus value.
b) Competition amongst the capitalists results in competitive
technology and rising organic composition of cap ital:
Since labour is paid only the subsistence wages, there is no possibility of
further wage reduction and the capitalist class therefore has to compete
amongst themselves. This leads to fall in labour power. Since labour
power is the only source of surp lus value or profits, falling labour power
leads to falling surplus value on the one hand and rising industrial reserve
army on the other hand. Increasing pauperization of the workers due to
rising unemployment and progressively shrinking class of the capi talists
along with over production weakens the capitalists‟ class further. Thus,
sowing the seeds of destruction of the capitalist class.
c) Competitive Elimination of Fellow Capitalists:
Competition eliminates fellow capitalists, and those who are elimin ated
joins the ranks of the industrial reserve army and the workers having munotes.in

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28 INDUSTRIAL RELATIONS – I realized the cause of their misery, unites together to overthrow the
capitalist system to make way for socialism.
Marx believed that industrial capitalism gave birth to trade union ism
because for the first time in the economic history of the world, a class of
faceless people called workers was working together in factories. The
working conditions were dehumanizing, wages were often paid below the
subsistence rate and the workers as a class were entirely alienated from the
process of work, from the product of work and finally from the society.
The workers therefore begin to unite or form Trade Unions against the
capitalists‟ class. Marx believed that the trade unions should not limit their
activity to improving wages and working conditions. They should use
their organized power to liberate the workers and destroy the capitalist
system. In order to become a class for itself from being a class in itself, the
workers need to change their economic relations and this is possible only
through a political struggle. He exhorted the workers of the world to unite
and overthrow the capitalist system through a revolution. He believed that
working class will be successful in this struggle to establi sh socialism
wherein the means of production will be owned by the State and the State
will be entirely represented by only one class of people called the working
class since there would be no other class but the working class.
The conflict between the capi talists and the workers represented by trade
unions is inherent under the capitalist system. According to Marx, trade
unionism is only one of the forms of working -class struggle which
emerges during industrial capitalism or factory system. The trade unions
need to be guided to the path of a revolutionary transformation of the
society leading to socialism.
3.5 SUMMARY 1. Industrial relations include the following aspects:
a) Labor relations i.e. relations between union and management.
b) Employer -employ ee relations i.e. relations between management
and workers.
c) Group relations i.e. relations between various groups of workmen.
d) Community or public relations i.e. relations between industry and
society.
2. The System approach to industrial relati ons was put forward by John
Dunlop. It focuses on the participants in the industrial relations
process, environmental forces and the output and also studies the
causes of these inter -relations among different aspects of industrial
relations.
3. According to Karl Marx (1818 -1883), industrial relations between the
workers and the capitalist are contradictory by nature. The
contradiction in relations is the result of contradictory objectives of munotes.in

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29 Trade Unions and Industrial Relations in India the classes. Marx believed that capitalists aim at profit maximi zation
and workers aim at maximization of wages. The two objectives
cannot be reconciled because industrial relation is a zero -sum game in
which one has to lose so that the other gains.
4. Trade unionism is the outcome of the factory system and the capit alist
order of the society. Modern industrialization in India started from
1850 onwards when the first cotton and jute mills were set up along
with the development of road and rail ways. The year 1875 is a
landmark in the history of trade union movement in India because the
factory workers for the first time united together for securing better
working conditions.
5. The Indian labour market is divided into Organized and Unorganized
sectors. The organized sector of the labour market is very small and in
percentage terms is about 7% of the total employment in the country.
Manufacturing, electricity, transport and financial services are largely
in the organized sector. In the unorganized sector, apart from
agriculture, the other industries in the unorganized sector are mining,
manufacturing, construction, trade, transport and community, social
and personal services.
6. The sociological roots of industrial problems can be traced to
sociological factors like value system, customs, norms, symbols,
attitude and perception of both labour and management that affect the
industrial relations in different ways. These factors determine the
behaviour of workers. The social consequences of industrialization
like organization, social mobility, migration generates many soc ial
evils like family disintegration, stress and strain, delinquency,
personal and social disorganization do influence workers efficiency
and productivity which in turn influence industrial relations system of
an industry.
3.6 QUESTIONS 1. Critically exam ine the system‟s approach to industrial relations.
2. Analyse the class conflict approach to industrial relations.
3. Compare and contrast the problems of organized and unorganized
labour in India.
4. Critically examine the sociological approach to l abour market
analysis.
5. Give the definition industrial relations and discuss the scope of
industrial ralations.


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30
4
INDUSTRIAL RELATIONS – II
Unit Structure
4.0 Objectives
4.1 Taylorism
4.2 Fordism
4.3 Post-Fordism
4.4 Neo-Fordism
4.5 Pluralism
4.6 Human Relations School and Organisational Behaviour Approach
4.7 Summary
4.8 Questions
4.0 OBJECTIVES  To study the concept of Taylorism.
 To study the concepts of Fordism, Post -Fordism and Neo -Fordism.
 To study the human relations school and organisational behaviour
approach.
4.1 TAYLORISM Scientific management or Taylorism, was a theory of management that
analyzed and synthesized workflows. Its main objective was improving
economic efficiency, especially labor productivity. It was one of the
earliest attempts to apply science to the engineering of processes and to
management. Its development began with Frederick Wi nslow Taylor in
the 1880s and 1890s within the manufacturing industries. Its peak of
influence came in the 1910s. By the 1920s, it was still influential but had
begun an era of competition and syncretism with opposing or
complementary ideas. Although scien tific management as a distinct theory
or school of thought was obsolete by the 1930s, most of its themes are still
important parts of industrial engineering and management today. These
include analysis, synthesis, logic, rationality, empiricism, work ethic ,
efficiency and elimination of waste, standardization of best practices,
disdain for tradition preserved merely for its own sake or merely to protect
the social status of particular workers with particular skill sets, the
transformation of craft productio n into mass production, and knowledge
transfer between workers and from workers into tools, processes, and
documentation.
The core ideas of scientific management were developed by Taylor in the
1880s and 1890s, and were first published in his monographs A Piece Rate munotes.in

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31 Trade Unions and Industrial Relations in India System (1895), Shop Management (1903) and The Principles of Scientific
Management (1911). While working as a lathe operator and foreman at
Midvale Steel, Taylor noticed the natural differences in productivity
between workers, which were driven b y various causes, including
differences in talent, intelligence, or motivations. He was one of the first
people to try to apply science to this application, that is, understanding
why and how these differences existed and how best practices could be
analys ed and synthesized, then propagated to the other workers via
standardization of process steps. He believed that decisions based upon
tradition and rules of thumb should be replaced by precise procedures
developed after careful study of an individual at wor k, including via time
and motion studies, which would tend to discover or synthesize the "one
best way" to do any given task. The goal and promise were both an
increase in productivity and reduction of effort.
In management literature, the greatest use of the term "scientific
management" is with reference to the work of Taylor and his disciples
("classical", implying "no longer current, but still respected for its seminal
value") in contrast to newer, improved versions of efficiency -seeking
methods. In poli tical and sociological terms, Taylorism can be seen as the
division of labour pushed to its logical extreme, with a consequent de -
skilling of the worker and dehumanization of the workers and the
workplace. Taylorism is often mentioned along with Fordism, b ecause it
was closely associated with mass production methods in factories, which
was its earliest application. Today, task -oriented optimization of work
tasks is all pervasive in industry.
Scientific management was one of the first attempts to systematica lly treat
management and process improvement as a scientific problem. It was
probably the first to do so in a "bottom -up" way, which is a concept that
remains useful even today, in concert with other concepts. Two corollaries
of this primacy are that (1) s cientific management became famous and (2)
it was merely the first version of a long -developing way of thinking, and
many versions have come since. Nevertheless, common elements unite
them. With the advancement of statistical methods, quality assurance and
quality control could begin in the 1920s and 1930s. During the 1940s and
1950s, the body of knowledge for doing scientific management evolved
into operations management, operations research, and management
cybernetics. In the 1980s total quality managemen t became widely
popular, and in the 1990s "re -engineering" went from a simple word to a
mystique (a kind of evolution that, unfortunately, draws bad managers to
jump on the bandwagon without understanding what the bandwagon is).
Today's Six Sigma and lean manufacturing could be seen as new kinds of
scientific management, although their evolutionary distance from the
original is so great that the comparison might be misleading. In particular,
Shigeo Shingo, one of the originators of the Toyota Production Sys tem,
believed that this system and Japanese management culture in general
should be seen as a kind of scientific management.
Peter Drucker saw Frederick Taylor as the creator of knowledge
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32 INDUSTRIAL RELATIONS – II knowledge about how to improve work processes. Although the typical
application of scientific management was manufacturing, Taylor himself
advocated scientific management for all sorts of work, including the
management of universities and government. For e xample, Taylor
believed scientific management could be extended to "the work of our
salesmen". Shortly after his death, his acolyte Harlow S. Person began to
lecture corporate audiences on the possibility of using Taylorism for "sales
engineering" [Person was talking about engineering the processes that
salespeople use —not about sales engineering in the way that we use that
term today]. This was a watershed insight in the history of corporate
marketing.
Today's militaries employ all of the major goals and t actics of scientific
management, if not under that name. Of the key points, all but wage
incentives for increased output are used by modern military organizations.
Wage incentives rather appear in the form of skill bonuses for enlistments.
Scientific manag ement has had an important influence in sports, where
stop watches and motion studies rule the day. (Taylor himself enjoyed
sports, especially tennis and golf. He and a partner won a national
championship in doubles tennis. He invented improved tennis racq uets and
improved golf clubs, although other players liked to tease him for his
unorthodox designs, and they did not catch on as replacements for the
mainstream implements.)
Scientific Management and its relationship to mechanizati on,
automation, and off -shoring:
Scientific management evolved in an era when mechanization and
automation were still in their embryonic stages. Two important corollaries
flow from this fact: (1) The ideas and methods of scientific management
were exactly what was needed to be add ed to the American system of
manufacturing to extend the transformation from craft work (with humans
as the only possible agents) to mechanization and automation; but also, (2)
Taylor himself could not have known this, and his goals did not include
the ext ensive removal of humans from the production process. During his
lifetime, the very idea would have seemed like science fiction, because not
only did the technological bridge to such a world not yet look plausible,
but most people had not even considered t hat it could happen.
In between craft production (with skilled workers) and full automation lies
a natural middle ground of an engineered system of extensive
mechanization and partial automation mixed with semiskilled and
unskilled workers in carefully des igned algorithmic workflows. Building
and improving such systems requires knowledge transfer, which may seem
simple on the surface but requires substantial engineering to succeed.
Although Taylor's original inspiration for scientific management was
simply to replace inferior work methods with smarter ones, the same
process engineering that he pioneered also tends to build the skill into the
equipment and processes, removing most need for skill in the workers.
This engineering was the essence not only of sci entific management but
also of most industrial engineering since then. It is also the essence of munotes.in

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33 Trade Unions and Industrial Relations in India (successful instances of) off -shoring. The common theme in all these cases
is that businesses engineer their way out of their need for large
concentrations of skilled workers, and the high -wage environments that
sustain them.
Effects of Scientific Management on labo r relations in market
economies:
Taylor's view of workers was complex. Anyone who manages a large
team of workers sees from experience that Taylor wa s correct that some
workers could not be relied upon for talent or intelligence. Today
enterprises still find that talent is a scarce resource. But he failed to leave
room in his system for the workers who did have talent or intelligence.
Some of them woul d be duly utilized during the early phases (the studying
and designing), but what about smart workers in years afterwards who
would start out among the ranks of the drones? What opportunities would
they have for career advancement or socioeconomic advancem ent? He
also failed to properly consider the fate of the drone -ish workers
themselves. Maybe they did lack the ability for higher -level jobs, but what
about keeping them satisfied or placated in their existing roles?
Taylorism took some steps toward addres sing their needs (for example,
Taylor advocated frequent breaks and good pay), but Taylor nevertheless
had a condescending view of less intelligent workers, whom he sometimes
compared to draft animals. And perhaps Taylor was so immersed in the
vast work im mediately in front of him (getting the world to understand
and to implement scientific management's earliest phases) that he failed to
strategize about the next steps (sustainability of the system after the early
phases).
The human relations school of mana gement evolved in the 1930s. Some
scholars, such as Harry Braverman, insisted that human relations did not
replace Taylorism but rather that both approaches were complementary -
Taylorism determining the actual organization of the work process, and
human r elations helping to adapt the workers to the new procedures.
Today's efficiency -seeking methods, such as lean manufacturing, include
respect for workers and fulfilment of their needs as inherent parts of the
theory. (Workers slogging their way through work days in the business
world do encounter flawed implementations of these methods that make
jobs unpleasant; but these implementations generally lack managerial
competence in matching theory to execution.) Clearly a syncretism has
occurred since Taylor's day , although its implementation has been uneven,
as lean management in capable hands has produced good results for both
managers and workers, but in incompetent hands has damaged enterprises.
Implementations of scientific management usually failed to account for
several inherent challenges:
1. Individuals are different from each other: the most efficient way of
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34 INDUSTRIAL RELATIONS – II 2. The economic interests of workers and management are rarely
identical, so that both the measurement processes and the retraining
required by Taylor's methods are frequently resented and sometimes
sabotaged by the workforce.
Taylor himself, in fact, recognized these challenges and had some good
ideas for meeting them. Nevertheless, his own imp lementations of his
system (e.g., Watertown Arsenal, Link -Belt Corporation, Midvale, and
Bethlehem) were never really very successful. Many managers who later
followed Taylor did even worse jobs of implementation. Typically, they
were less analytically tal ented managers who had latched onto scientific
management as the latest fad for cutting the unit cost of production. Like
bad managers even today, these were the people who used the big words
without any deep understanding of what they meant. Taylor knew t hat
scientific management could not work unless the workers benefited from
the profit increases that it generated. Taylor had developed a method for
generating the increases, for the dual purposes of owner/manager profit
and worker profit, realizing that t he methods relied on both of those results
in order to work correctly. But many owners and managers seized upon
the methods thinking that the profits could be reserved solely or mostly for
themselves and the system could endure indefinitely merely through force
of authority. Workers are necessarily human: they have personal needs
and interpersonal friction, and they face very real difficulties introduced
when jobs become so efficient that they have no time to relax, and so rigid
that they have no permission to innovate.
4.2 FORDISM Fordism refers to the system of mass production and consumption
characteristic of highly developed economies during the 1940s to1960s.
Fordism means mass consumption combined with mass production to
produce sustained economic grow th. The period from 1970s to 1990s has
been a period of slower growth and increasing income inequality. During
this period, the system of organization of production and consumption has
undergone a second transformation. This new system is referred to as th e
"flexible system of production" (FSP) or the "Japanese management
system." On the production side, FSP is characterized by dramatic
reductions in information costs and overheads, Total Quality Management
(TQM), just -in-time inventory control, and leaderl ess work groups and on
the consumption side, by the globalization of consumer goods markets,
faster product life cycles, and far greater product/market segmentation and
differentiation.
Henry Ford was once a popular symbol of the transformation from an
agricultural to an industrial, mass production, mass consumption
economy. The first of these transformations was from craft production to
mass production. This helped to create the market, based on economies of
scale and scope, and gave rise to giant organiza tions built upon functional
specialization and minute divisions of labour. Economies of scale were
produced by spreading fixed expenses, especially investments in plant and munotes.in

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35 Trade Unions and Industrial Relations in India equipment and the organization of production lines, over larger volumes
of output, thereby reducing unit costs. Economies of scope were produced
by exploiting the division of labour - sequentially combining specialized
functional units, especially overheads such as reporting, accounting,
personnel, purchasing, or quality assurance, in va rious ways so that it was
less costly to produce several products than a single specialized one. It
also created a variety of public policies, institutions, and governance
mechanisms intended to mitigate the failures of the market, and to reform
modern ind ustrial arrangements and practices.
Ford's main contributions to mass production/consumption were in the
area of process engineering. The distinctive feature of his system was
standardization - standardized components, standardized manufacturing
processes, and a simple, easy to manufacture and repair standard product.
Standardization required nearly perfect interchangeability of parts. To
achieve interchangeability, Ford exploited advances in machine tools and
gauging systems. These innovations made possibl e the moving, or
continuous, assembly line, in which each assembler performed a single,
repetitive task. Ford was also one of the first to realize the potential of the
electric motor to reconfigure work flow. Machines that were previously
arrayed about a c entral power source could now be placed on the assembly
line, thereby dramatically increasing throughput. The moving assembly
line was first implemented at Ford's Model -T Plant at Highland Park,
Michigan, in 1914, increasing labour productivity tenfold and permitting
price cuts from $780 in 1910 to $360 in 1914. Hence, the term ‗Fordism‘
mean "to standardize a product and manufacture it by mass means at a
price so low that the common man can afford to buy it."
Under mass production, not only were parts inte rchangeable, so too were
assemblers. Assembly line work is unpleasant in a mass production
environment. It is physically demanding, requires high levels of
concentration, and can be excruciatingly boring. As a consequence, Ford
experienced very high labour turnover, 380 percent in 1913. (Even today,
double -digit absenteeism is common in mass -production assembly plants,
necessitating a buffer stock of utility workers, who fill in for the
assemblers that fail to report at the start of each shift). facts, Ford dealt
with labour turnover by doubling pay to $5 a day; that other
manufacturer's emulated Ford's wage policies along with his production
methods; and that eventually all employers were forced to bring wages
into line with those offered unskilled labour i n manufacturing. In other
words: premium pay for putting up with what Gramsci described as mass
production's "monotonous, degrading, and life draining work process."
Regardless of the means, unskilled assembly workers eventually reaped
substantial gains fr om increased industrial productivity - a forty percent
reduction in working hours and a twenty -five-fold increase in wages. In
the English -speaking world, unions enforced artificial scarcity to win
supra -competitive wages for their members, sometimes on th eir own,
sometimes in cooperation with other unions, and sometimes in collusion
with specific firms. In the social -market economies of Northern Europe,
workers did even better. Coordinated wage setting between national munotes.in

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36 INDUSTRIAL RELATIONS – II associations of employers and nationa l labour organizations, usually led
by blue -collar unions, achieved both high wages and considerable income
equality, almost without strikes.
However, the ability of unskilled manufacturing employees to gain and
hold supra -competitive wages ultimately depe nded upon their political
power. By the 1950s, the rise of mass production had made them the
largest single group in every developed country. Already organized by
their employers, they were easily mobilized on behalf of their own
interests. In every develo ped country, labour unions emerged as the best -
organized and often the most powerful political force. Their preferences
were reflected not only in labour laws, but in public policy generally. They
were the architects and chief supporters of the post -war Ke ynesian welfare
state, with its goals of full employment, social security, and income parity.
Consequently, some even referred to the welfare state as the Fordist state.
Despite gains to unskilled industrial workers, Ford's massproduction
system was critic ized. Frederick Taylor, who coined the term Fordism
directed his criticism at the deskilling of assembly line workers, likening
Ford's assemblers to trained gorillas. Italian Marxist, Antonio Gramsci
observed in Americanism e Fordism (written in 1929 -32, b ut published in
1949), that "Taylor expresses the real purpose of American society,
replacing in the worker the old psycho -physical nexus of qualified
professional work, which demanded active participation, intelligence,
fantasy, and initiative, with autom atic and mechanical attitudes. This is not
a new thing, it is rather the most recent, the most intense, the most brutal
phase of a long process that began with industrialism itself. This phase
will itself be superseded by the creation of a new psycho -physi cal nexus,
both different from its predecessors and superior. As a consequence, a part
of the old working class will be eliminated from the world of work, and
perhaps from the world."
4.3 POST -FORDISM Post-Fordism (Flexibilism) is the name given to the dom inant system of
economic production, consumption and associated socio -economic
phenomena, in most industrialized countries since the late 20th century. It
is contrasted with Fordism, the system formulated in Henry Ford's
automotive factories, in which work ers work on a production line,
performing specialized tasks repetitively.
Post-Fordism is characterized by the following attributes:
1. Small -batch production.
2. Economies of scope.
3. Specialized products and jobs.
4. New information technologie s. munotes.in

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37 Trade Unions and Industrial Relations in India 5. Emphasis on types of consumers in contrast to previous emphasis on
social class.
6. The rise of the service and the white -collar worker.
7. The feminization of the work force.
4.3.1 Theories of post -Fordism :
Post-Fordism can be applied in a wi der context to describe a whole system
of modern social processes. Because Post -Fordism describes the world as
it is today, various thinkers have different views on its form and
implications. As the theory continues to evolve, it is commonly divided
into t hree schools of thought: Flexible Specialization, Neo -Schumpeterian,
and the Regulation School.
1. Flexible Specialization:
Proponents of the Flexible Specialization approach (also known as the
neo-Smithian approach) to post -Fordism believe that fundament al changes
in the international economy, especially in the early 1970s, forced firms to
switch from mass production to a new tactic known as Flexible
Specialization. Factors such as the oil shocks of 1973, increased
competition from foreign markets (especi ally Southeast Asia) due to
globalization, the end of the post -World War II boom, and increasing
privatization made the old system of mass producing identical, cheap
goods through division of labour uncompetitive.
Instead of producing generic goods, firms now found it more profitable to
produce diverse product lines targeted at different groups of consumers,
appealing to their sense of taste and fashion. Instead of investing huge
amounts of money on the mass production of a single product, firms now
needed to build intelligent systems of labour and machines that were
flexible and could quickly respond to the whims of the market. The
technology originally associated with flexible production was the
numerical controller, which was developed in the United Stat es in the
1950s; however, the CNC, developed in Japan, later replaced it. The
development of the computer was very important to the technology of
flexible specialization. Not only could the computer change characteristics
of the goods being produced, but i t could also analyse data to order
supplies and produce goods in accordance with current demand. These
types of technology made adjustments simple and inexpensive, making
smaller specialized production runs economically feasible. Flexibility and
skill in t he labour was also important. The workforce was now divided
into a skill -flexible core and a time -flexible periphery. Flexibility and
variety in the skills and knowledge of the core workers and the machines
used for production allowed for the specialized p roduction of goods.
Modern just in time manufacturing is one example of a flexible approach
to production.
Likewise, the production structure began to change on the sector level.
Instead of a single firm manning the assembly line from raw materials to munotes.in

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38 INDUSTRIAL RELATIONS – II finished product, the production process became fragmented as individual
firms specialized on their areas of expertise. As evidence for this theory of
specialization, proponents claim that Marshallian "industrial districts," or
clusters of integrated firms, ha ve developed in places like Silicon Valley,
Jutland, Smaland, and several parts of Italy.
2. Neo -Schumpeterianism :
The Neo -Schumpeterian approach to post -Fordism is based upon the
theory of Kondratiev Waves (also known as Long Waves). The theory
holds tha t a "techno -economic paradigm" characterizes each long wave.
Fordism was the techno -economic paradigm of the fourth Kondratiev
Wave, and post -Fordism is thus the technoeconomic paradigm of the fifth,
which is dominated by Information and Communication Tech nology
(ICT). Notable NeoSchumpeterian thinkers comprise Carlota Perez and
Christopher Freeman, as well as Michael Storper and Richard Walker.
Regulation School The Regulation approach (also called the neo -Marxist
or French Regulation School), was designed to address the paradox of how
capitalism has both a tendency towards crisis, change and instability as
well as an ability to stabilize institutions, rules and norms. The theory is
based on two key concepts. "Regimes of Accumulation" refer to systems
of pr oduction and consumption, such as Fordism and post -Fordism.
"Modes of Regulation" refer to the written and unwritten laws of society
which control the Regime of Accumulation and determine its form.
According to Regulation theory, every Regime of Accumulat ion will reach
a crisis point at which the Mode of Regulation will no longer support it,
and society will be forced to find new rules and norms, forming a new
Mode of Regulation. This will begin a new Regime of Accumulation,
which will eventually reach a c risis, and so forth. Proponents of
Regulation theory include Michel Aglietta, Robert Boyer, Bob Jessop, and
Alain Lipietz.
4.3.2 Changes from Fordism to post -Fordism :
Post-Fordism brought on new ways of looking at consumption and
production. The saturatio n of key markets brought on a turn against mass
consumption and a pursuit of higher living standards. This shift brought a
change in how the market was viewed from a production standpoint.
Rather than being viewed as a mass market to be served by mass
production, the consumers began to be viewed as different groups
pursuing different goals who could be better served with small batches of
specialized goods Mass markets became less important while markets for
luxury, custom, or positional good became more sig nificant. Production
became less homogeneous and standardized and more diverse and
differentiated as organizations and economies of scale were replaced with
organizations and economies of scope.
The changes in production with the shift from Fordism to pos t-Fordism
were accompanied by changes in the economy, politics, and prominent
ideologies. In the economic sphere, postFordism brought the decline of munotes.in

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39 Trade Unions and Industrial Relations in India regulation and production by the nation -state and the rise of global
markets and corporations. Mass marketi ng was replaced by flexible
specialization and organizations began to emphasize communication more
than command. The workforce changed with an increase in internal
marketing, franchising, and subcontracting and a rise in part -time,
temporary, self -employed , and home workers. Politically, class -based
political parties declined and social movements based on region, gender,
or race increased. Mass unions began to vanish and were instead replaced
by localized plant -based bargaining. Cultural and ideological cha nges
included the rise in individualist modes of thought and behaviour and a
culture of entrepreneurialism. Following the shift in production and
acknowledging the need for more knowledge -based workers, education
became less standardized and more specializ ed. Prominent ideologies that
arose included fragmentation and pluralism in values, post -modern
eclecticism, and populist approaches to culture. Italy and Japan are the
known examples of post -Fordism.
4.3.3 Criticisms :
The main criticism of post -Fordism a sserts that post -Fordism mistakes the
nature of the Fordist revolution and that Fordism was not in crisis, but was
simply evolving and will continue to evolve. Other critics believe that
post-Fordism does exist, but coexists with Fordism. The automobile
industry has combined Fordist and postFordist strategies, using both mass
production and flexible specialization. Ford introduced flexibility into
mass production, so that Fordism could continue to evolve. Those who
advocate postFordism, however, note that c riticism that focuses primarily
on flexible specialization ignores post -Fordist changes in other areas of
life and that flexible specialization cannot be looked at alone when
examining post -Fordism. Another criticism is that postFordism relies too
heavily on the examples of the Third Italy and Japan. Some believe that
Japan is neither Fordist nor post -Fordist and that vertical disintegration
and mass production go hand in hand. Others argue that the new, smaller
firms in Italy didn‘t develop autonomously, b ut are a product of the
vertical disintegration of the large Fordist firms who contracted lower
valueadded work to smaller enterprises. Other criticisms argue that
flexible specialization is not happening on any great scale, and smaller
firms have always e xisted alongside mass production. The term "post -
fordism" is gradually giving way in the literature to a series of alternative
terms such as the "knowledge economy", "cognitive capitalism", the
"cognitive -cultural economy," and so on.
4.4 NEO -FORDISM A ran ge of factors discussed above including increasing negative
implications of boring work environments, and lack of choice and
flexibility have caused global transition from ‗specialisation‘ to
‗flexibilisation‘, also known as ―Neo -Fordism‖ framework. Accord ing to
the latter framework ―the ‗flexible‘ worker lacks a job for life, but instead
moves and retrains to meet altered market demands‖. Moreover, the level munotes.in

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40 INDUSTRIAL RELATIONS – II of flexibility of post -Fordist workers relate to working hours, salaries and
benefits received, st andards of health and safety etc.
Moreover, social and economic model known as ‗post -Fordism‘ or ‗Neo -
Fordism‘ has emerged during the technological revolution in 1970‘s and
1980‘s.
Significant technological changes resulting in the development of
computer -aided design (CAD), computer -aided manufacturing (CAM),
computer -integrated manufacturing (CIM), computer numerical control
(CNC) and others in 1970‘s have altered manufacturing processes with
negative implications to Fordism.
All of these have given rise to the emergence of alternative frameworks
and systems to Fordism that include total quality management (TQM),
lean manufacturing, just -in-time (JIT). Importantly, ―the post -Fordist
regime of accumulation replaces the Fordist one with an emphasis on
qualit y-competitive production for shifting and differentiated markets
using qualified and highly skilled flexible labour, and is supported by a
post-Fordist mode of regulation in which there is reduction state
intervention on labour markets, a shift from respon sibility to welfare
provision from the state to the employers or private individuals, and a
more flexible and varied approach to employment relations‖.
In other words, global market environment in the second half of the
twentieth century and the beginning of the twenty first century became
highly uncertain and competitive with increasing numbers of businesses
finding additional sources of competitive advantages through
technological breakthroughs and greater integration of information
technology in various organisational processes.
Therefore, post -Fordist era has emerged with fundamentally alternative
values and principles to Fordism to enable businesses to meet the
requirements of new global business landscape realities.
4.5 PLURALISM In pluralism the organ ization is perceived as being made up of powerful
and divergent sub -groups - management and trade unions. This approach
sees conflicts of interest and disagreements between managers and
workers over the distribution of profits as normal and inescapable.
Consequently, the role of management would lean less towards enforcing
and controlling and more toward persuasion and co -ordination. Trade
unions are deemed as legitimate representatives of employees. Conflict is
dealt by collective bargaining and is viewed not necessarily as a bad thing
and if managed could in fact be channeled towards evolution and positive
change. Realistic managers should accept conflict to occur. There is a
greater propensity for conflict rather than harmony. They should anticipate
and r esolve this by securing agreed procedures for settling disputes. The
implications of this approach include: munotes.in

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41 Trade Unions and Industrial Relations in India 1. The firm should have industrial relations and personnel specialists
who advise managers and provide specialist services in respect of
staffing a nd matters relating to union consultation and negotiation.
2. Independent external arbitrators should be used to assist in the
resolution of disputes.
3. Union recognition should be encouraged and union representatives
given scope to carry out their rep resentative duties.
Kerr is one of the advocates of pluralism. He says that the social
environment is an important factor in industrial conflicts. Organized
workers are more likely to strike as compared to unorganized groups.
When industrial jobs become mo re pleasant and employees get more
integrated into the wider society, strikes will be less frequent. Ross and
Hartman‘s comparison of strikes across countries reveals the declining
incidence of strikes on account of greater industrialization and
developmen t of appropriate institutional framework to settle industrial
conflicts. According to Ross and Hartman, there is a decline in strikes
across the world even while union membership is growing.
Pluralistic theories on capital -labor relations came into existen ce in the
sixties and seventies when England experienced a resurgence of industrial
conflicts. Flanders and Fox were the British exponents of pluralism.
According to Flanders, conflict is inherent in the industrial system and
collective bargaining is the m ethod to resolve industrial disputes. Fox
distinguishes between two aspects of relationship between capital and
labor. The market relationship is concerned with the terms and conditions
of hiring labor. This relationship is economic in character and is bas ed on
contracts executed between the parties. The second aspect is about the
relationship between management and labour, the nature of their
interactions, negotiations between union and management, distribution of
power in the organization and participatio n of union in joint decision
making.
4.6 HUMAN RELATIONS SCHOOL AND ORGANISATIONAL BEHAVIOUR APPROACH The roots of human relations approach to capital labour relations can be
traced to the Hawthorne Studies at the Western Electric Company in
Chicago during the First World War period. The rise of democratic
leadership during and after the two great wars had the greatest impact in
terms of popularity of the human relations approach. It was believed that a
more satisfied employee group could be achieved throug h human relations
approach and this can lead to improvement in productivity. The human
relations approach in the modern times covers almost all areas of capital
labour relations and includes safety, production control, cost control,
company organization, c ompany policies, job evaluation, incentive
payment, employee motivation and attitudes, group dynamics,
communications, counselling and democratic leadership. The relations
between labour and capital as embodied in the management or enterprise munotes.in

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42 INDUSTRIAL RELATIONS – II is one of hum an relations. The establishment and maintenance of
industrial peace is an important task before a developing country like
India.
According to Dale Yoder and others, human relation approach is a device
for three -way communication and employees‘ participatio n in decision
making process. Thus, greater attention is paid to human aspect of the
employee than technical and economic aspects. According to Keith
Davies, human relations are ―the integration of people into a work
situation that motivates them to work t ogether productively, co -
operatively and with economic, psychological and social satisfactions.‖
The goals of human relations are to get people to produce, to cooperate
through mutuality of interest and to gain satisfaction from their
relationships. The hu man relations school was founded by Elton Mayo and
later propagated by Roethlisberger, Whitehead and Whyte. This approach
focuses on certain policies and techniques to improve employee morale,
efficiency and job satisfaction. It encourages the small work g roup to
exercise considerable control over its environment. Industrial relations
problems arise due to improper management of human resources. These
problems can be solved by managing the dynamics of human behaviour at
the individual and group level. Human resource management policies
related to leadership and motivation has a deep impact on the behaviour of
workers at the work place. For example, a manager using autocratic style
designs a close supervision system and feels that display of authority
would d rive people to work. But this style leads to dissatisfaction and
hatred among people. However, under a democratic style of leadership,
desired organizational behaviour can be cultivated if employees‘ needs
and wants are properly satisfied. The manager work ing with a democratic
style positively motivates people. No leadership style is complete in itself.
Different situations demand different styles appropriate to the occasion. In
order to maintain good human relations in general and industrial relations
in particular, the study of human needs is of great importance. There are
four basic needs. These are: physiological, safety, social and egoistic
needs. The physiological needs include food, water, clothing shelter, sex
etc. These needs are important for the p reservation and efficiency of
human race. The safety and security needs include physical security,
financial and job security. The social needs include need for
companionship, belonging and affection. The egoistic needs are higher
order needs and relates t o one‘s desire for self -esteem. These needs are
interdependent and overlapping i.e. more than one need or a combination
of needs at different levels may sought to be satisfied by individuals. It is
therefore necessary for the management to design a suitabl e motivational
strategy to provide an environment for their optimum need satisfaction
required for maintaining good human relations in the organization. Human
Relations Management techniques are greatly useful in maintaining
harmonious industrial relations . The workers are likely to achieve greater
job satisfaction, get involved in the work and integrate their objectives
with the objectives of the organization.
munotes.in

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43 Trade Unions and Industrial Relations in India Psychological Approach to Capital - Labor Relations :
According to the psychological approach to industrial relations, the
problems of industrial relations are deeply rooted in the perception and the
attitude of focal participants. Mason Harie studied the influence of
individual‘s perception on his behavior. He studied the behavior of two
different gr oups namely, union leaders and executives. Both the groups
were asked to rate a photograph of a middle aged person. The Union
leaders rated the person in the photograph as manager whereas the
executives the rated the person as Union leader. Mason Harie mad e the
following conclusions from his study: 1. The general impression about a
person is radically different when he is seen as a representative of
management from that of the person as a representative of labor. 2. The
management and labor see each other a s less appreciative of each other‘s
position. 3. The management and labor see each other as less dependable.
4. The management and labor see each other as deficient in thinking
regarding emotional characteristics and interpersonal relations.
4.7 SUMMARY 1. Scientific management or Taylorism, was a theory of management
that analyzed and synthesized workflows. Its main objective was
improving economic efficiency, especially labor productivity. It was
one of the earliest attempts to apply science to the engi neering of
processes and to management. Its development began with Frederick
Winslow Taylor in the 1880s and 1890s within the manufacturing
industries.
2. Fordism means mass consumption combined with mass production to
produce sustained economic growth. T he period from 1970s to 1990s
has been a period of slower growth and increasing income inequality.
3. Henry Ford was once a popular symbol of the transformation from an
agricultural to an industrial, mass production, mass consumption
economy. The first o f these transformations was from craft production
to mass production.
4. Proponents of the Flexible Specialization approach (also known as the
neo-Smithian approach) to post -Fordism believe that fundamental
changes in the international economy, especiall y in the early 1970s,
forced firms to switch from mass production to a new tactic known as
Flexible Specialization.
5. The Neo -Schumpeterian approach to post -Fordism is based upon the
theory of Kondratiev Waves (also known as Long Waves). The theory
holds that a "techno -economic paradigm" characterizes each long
wave. Fordism was the techno -economic paradigm of the fourth
Kondratiev Wave, and post -Fordism is thus the techno -economic
paradigm of the fifth, which is dominated by Information and
Communicatio n Technology (ICT). munotes.in

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44 INDUSTRIAL RELATIONS – II 6. According to Regulation theory, every Regime of Accumulation will
reach a crisis point at which the Mode of Regulation will no longer
support it, and society will be forced to find new rules and norms,
forming a new Mode of Regulat ion. This will begin a new Regime of
Accumulation, which will eventually reach a crisis, and so forth.
Proponents of Regulation theory include Michel Aglietta, Robert
Boyer, Bob Jessop, and Alain Lipietz.
7. The implications of this approach include:
a. The firm should have industrial relations and personnel specialists
who advise managers and provide specialist services in respect of
staffing and matters relating to union consultation and negotiation.
b. Independent external arbitrators should be use d to assist in the
resolution of disputes.
c. Union recognition should be encouraged and union representatives
given scope to carry out their representative duties.
8. The human relations approach in the modern times covers almost all
areas of capital l abor relations and includes safety, production control,
cost control, company organization, company policies, job evaluation,
incentive payment, employee motivation and attitudes, group
dynamics, communications, counseling and democratic leadership.
The re lations between labor and capital as embodied in the
management or enterprise is one of human relations.
4.8 QUESTIONS 1. Write note on
1) Taylorism.
2) Fordism
3) Post - Fordism
4) Neo – Fordism
5) Pluralism
2. Explain human relations school an d organizational behavior approach.

*****
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45
MODULE 3: INDUSTRIAL RELATIONS IN
INDIA
5
INDUSTRIAL RELATIONS IN INDIA – I

Unit Structure
5.0 Objectives
5.1 Trade Unions and Workers: Industrial Sociology of Workers in India
5.2 History of Trade Unions
5.3 Growth of Trade Unions
5.4 Structure of Trade Unions
5.5 Trade Unions and Contract Labour
5.6 Employer‟s Organisations: Role of Managerial Class in Industrial
Relations
5.7 Summary
5.8 Questions
5.0 OBJECTIVES  To study the history of trade unions.
 To study the growth of trade unions.
 To stud y the structure of trade unions.
 To study the independent and white -collar unions in India.
5.1 TRADE UNIONS AND WORKERS: INDUSTRIAL SOCIOLOGY OF WORKERS IN INDIA The industry is a microcosmic social world and the workshop is a
community made up of variou s individuals and groups with differing
personalities, educational background, family background, emotions, likes
and dislikes and a number of personal factors such as attitudes and
behaviour. These differences create problems of conflict and competition
among the members of an industrial society. The sociological roots of
industrial problems can be traced to sociological factors like value system,
customs, norms, symbols, attitude and perception of both labour and
management that affect the industrial rela tions in different ways. These
factors determine the behaviour of workers. The social consequences of
industrialization like organization, social mobility, migration generates
many social evils like family disintegration, stress and strain, delinquency,
personal and social disorganization do influence workers efficiency and munotes.in

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46 INDUSTRIAL RELATIONS IN INDIA – I productivity which in turn influence industrial relations system of an
industry. Industrialization gets momentum; a set of new industrial and
social patterns emerges and, in its wake, ne w relationships, institutions,
behavioural patterns and techniques of handling human resources
develops. These influences determine industrial relations in more than one
way.
Social change influences both labour and management and therefore
industrial rel ations. For instance, modern management has become
professional and there is a greater reliance on the use of behaviour
techniques in dealing with human behaviour. Decision making has become
decentralized; ideas about authority, power and control have unde rgone
big changes. The profile of industrial worker has changed. He is no more a
migrant but settled urban worker. A process of industrial acculturation of
the working class has set in social mobility and a mixed industrial
workforce has emerged.
The role of state and political parties has been redefined in the light of
these changes. These complex changes have had a deep impact on
industrial relations whereby they have become more practical than
ideological. The concepts of haves and havenots have gone wi th the wind
and now industrial relations are determined by the balance of power.
Conflict and collaboration have become issue based and not ideology
based.
5.2 HISTORY OF TRADE UNIONS The historical development of trade unionism in India can be studied
under various time periods. Each time period has a dominant characteristic
and hence it is known by it. These time periods are as follows:
1. Social Welfare Period (1875 -1918).
2. Early Indian Trade Union Period (1918 -1924).
3. The Period of Militant Tr ade Unionism (1924 -1935).
4. The Period of Intensive Trade Union Activity (1935 -1939).
5. The Period of Polarization of Trade Union Movement (1939 - 1946).
6. The Post Independent Period (1947 onwards).
1. Soc ial Welfare Period (1875 -1918):
In 1875, M r. SS Bangalee started an agitation in Bombay to protect
against the inhuman working condition in factories. The first factory
commission was appointed in Bombay in 1875 and the first factory Act
was passed in 1881. Mr. NM Lokhande, a factory worker, who b ecame a
union leader, organized agitations and made representations to the second
factory commission appointed in 1884. Mr. Lokhande organized a mass
meeting of 10,000 workers in April 1890 in Bombay demanding reduced
hours of work, weekly rest days, mid -day recess and compensation of munotes.in

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47 Trade Unions and Industrial Relations in India injuries. In response, the Bombay Mill Owners Association granted a
weekly holiday to mill workers. Subsequently, Mr. Lokhande started the
Bombay Mill -hands Association of which he was the elected president.
The first working class newspaper was also started.
After 1890, a large number of labor associations came into existence. The
Amalgamated Society of Railway Servants of India was set up in 1897,
the Printers Union in 1907, the Kamgaar Hitwardha Sabha in 1910 and the
Social Service League was also set up in 1910. All these associations
cannot be considered as trade unions. They were actually labor welfare
associations. The working class had not realized the evils of modern
factory system. There was no solid, stable and well o rganized union to
make use of the right to strike effectively and as a result there was not a
single strike during this period. The labor movement in India during this
period was wholly unorganized and social in character. They lacked
definite aims and con stitutions. Mr. Lokhande himself was more of a
philanthropic promoter of labor legislation and of workers welfare than a
pioneer of labor struggle. Dr. Punekar has therefore characterized this
period as the Social Welfare Period of Indian Trade Union Movem ent.
2. Early Indian Trade Union Period (1918 -1924):
The labor movement truly began with the end of the First World War.
Economic and political conditions contributed to the new awakening. Mr.
BP Wadia formed the first industrial union in 1918 known as the Madras
Labor Union. Between 1919 and 1923, a number of unions came into
existence. In Ahmedabad, craft unions like spinners and weavers unions
were set up which federated into the industrial union known as the Textile
Labor Association of Ahmedabad. The A ll India Trade Union Congress
was formed in 1920. The AITUC gave status to the labor movement and
provided a platform for debate and discussions. A large number of strikes
were organized during this period in Madras and other states. In 1920,
about 200 str ikes were declared all over the country. In 1922, there were
about 278 strikes involving more than four lac workers.
The Political and Economic conditions were favorable to the growth of
trade unionism during this period. Economic boom, inflation and const ant
wages created discontentment and fostered class consciousness amongst
the suffering workers and motivated them for collective action. Further,
the setting up of the International Labor Organization in 1919 and the
Russian revolution helped tremendously the labor movement in India.
However, the unions formed during this period were not stable and
permanent. Most of the unions got dissolved once the immediate
objectives were achieved. Nonetheless, some very good and stable trade
unions were formed during this period. The Indian workers were
awakened and foundations were laid down for further development. Dr.
Punekar has described this period as the Early Indian Trade Period.
3. The Period of Milit ant Trade Unionism (1924 -1935):
This period saw the signs of militant tendencies and revolutionary trade
unionism in the labor movement in the country. During this period, the munotes.in

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48 INDUSTRIAL RELATIONS IN INDIA – I communists controlled the labor movement and conducted some of the
most violent strikes in India. In 1929, the All India Trade Union Congres s
was split. The moderate section under the leadership of Mr. NM Joshi, Mr.
VV Giri and others set up a separate organization known as the National
Trade Union Federation for co -ordinating the activities of non -Communist
trade unions. In 1928 -29, a large n umber of strikes were organized in
Bombay, Kanpur, Sholapur and Jamshedpur. The Royal Commission on
Labor was appointed in 1929 who submitted the report in March 1931. In
1931, at the Calcutta session of the trade union congress, another split took
place a nd the extreme left wing under the leadership of Mr. SV Deshpande
and BT Ranadive set up the All India Red Trade Union Congress. In 1934,
a conference of All India Textile Workers was held to protect against
wage cuts and retrenchment and a country -wide ge neral strike was
organized. The Government of India declared the communist party as an
unlawful association. The Indian Trade Union Act was passed in 1926
which provided for voluntary registration of trade unions. During this
period, the difference in thin king of the trade union leaders came into the
open and trade unions came to be formed along the lines of political
ideologies. Thus the Indian trade union movement took its ideological
roots during this period.
4. The Period of Intensive Tr ade Union Activi ty (1935 -1939):
In 1935, a new Constitution of India was adopted under which labor
representatives could get themselves elected through labor constituencies.
As a result, efforts for trade union activity got intensified. In 1935, the Red
Trade Union Congre ss was merged with AITUC. In 1938, the National
Trade Union Federation affiliated itself with AITUC. These two major
events brought about a period of trade union unity and the revival of trade
union activity. The number of trade unions increased from 101 i n 1935 to
169 in 1939. The reasons for revival were not far too many. Popular
ministries in the provinces promised to implement the election manifesto
which talked about giving greater rights to the workers. A provision was
made for labor seats in the legi slatures through registered trade union
constituencies. Employers realized the inevitability of trade unions and
changed their attitude towards labor unions. However, during this period,
the number of strikes went up to 399 in 1939. The Digboi Oil Field St rike
of 1939 was the most notable one because the Viceroy had to intervene to
bring about settlement.
5. The Period of Polarization of Trade Union Movement (1939 - 1946):
By the beginning of the Second World War, trade unionism has
consolidated in India. Wa r brought boom to economic activities and trade
unions made considerable progress during this period. In 1940, the
National Trade Union Federation dissolved itself and merged with
AITUC. However, on account of new differences, AITUC was again
weakened by D r. Aftaab Ali, the president of Seamen‟s Association,
Calcutta by dis -affiliating from AITUC and Mr. MN Roy formed the
Indian Federation of Labor in 1941. The Hindustan Mazdoor Sevak Sangh
was working to organize labor throughout the country on Gandhian munotes.in

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49 Trade Unions and Industrial Relations in India principles. The Sangh, however, acted as an advisory body and not as a
federation of trade unions. The splitting and weakening of AITUC in 1941
was on account of the ideological differences amongst its constituents.
While AITUC was neutral to the war effort of British India, its constituent
led by Mr. MN Roy gave all out support to the British war effort.
6. The Post In dependent Period (1947 onwards):
This period is also known as the period of political pluralism. After the
war, the political climate was unce rtain which led to confusion within the
trade union movement. The process of polarizing on the basis of political
ideologies and program began during this period. There were strong
differences between the communists and the congress men. The congress
men f elt a need to develop a trade union movement on Gandhian lines so
that it suits with the aims and programs of their Government. After the
war, there was recession and rationalization in the Indian industry. As a
result, there was wide spread labor unrest i n numerous industries and
services. Consequently, the Indian Trade Union movement became a
vigorous force and socialism became the guiding philosophy of the
movement. The Government of India had recognized INTUC, AITUC,
UTUC and HMS for representation at n ational and international
conferences. The BMS affiliated to the BJP was formed in the year 1955
and with the emergence of the Samyukta Socialist Party; the Hind
Mazdoor Panchayat was formed in 1965. When the communists divided
themselves into CPI and CPM, AITUC came under the CPI and the CPM
formed a new all India labor organization known as the Center of Indian
Trade Unions (CITU) in the year 1970. The split in the UTUC led to the
formation of a new organization known as UTUC (Lenin -Sarani).
The National Federation of Indian Trade Union Congress (NFITUC), the
National Labor Organisation (NLO) and the Trade Union Coordination
Center (TUCC) which came into existence in the last quarter of the 20th
century. Thus there are ten central trade union organizations recognized by
the Government of India. Other all India federations such as the All India
Bank Employees Association, National Federation of Post and Telegraph
Workers etc have also come into existence. However, a large number of
small unions prefer to ope rate as separate units and therefore are
independent of the central leadership. Further, the central leadership of
trade unions is in the hands of politicians and not the working class.
Notwithstanding the above, there has been considerable improvement in
the socio -economic conditions of labor in the country.
The New Industrial Policy of 1991 was a major departure from the earlier
policies. Accordingly, the objective was to make India the largest free
market economy of the world by the turn of the 20th cent ury and this
objective was to be achieved through liberalization, privatization and
globalization. Both liberalization and privatization resulted in the
rationalization of a number of firms in the private as well as public sector,
privatization of public s ector firms and closure of unviable units. The
Government also tried to amend the labor laws to make it more industry
friendly. The Industrial Disputes Act, 1947 and the Indian Trade Union munotes.in

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50 INDUSTRIAL RELATIONS IN INDIA – I Act 1926 were sought to be amended in a manner detrimental to the
interests of labor. In response to the new policy, the central trade unions,
particularly the communist unions launched wide spread agitation in the
form of morchas, bandhs and strikes and were successful in stopping anti -
labor legislation in the country.
5.3 GROWTH OF TRADE UNIONS The trade -union is a phenomenon of the modern industrialized society. It
is a group of workers engaged in a particular trade for the purposes of
securing better wages, shorter hours of work and improved conditions of
labour. In th e modern capitalistic society the worker is a hired employee
with little attachment to the factory or office other than to his wages.
The early trade unions were small organisations of working men seeking
some means of mitigating their weakness against the employer. They had,
however, to face the hostility of Government. Both in England and on the
Continent the workers were prevented from exercising the right of uniting
for self defense.
Thus, in 1729 the Irish Parliament passed a statute whereby combinatio ns
of any trade were prohibited. The British Act of 1799 was a very strong
measure penalizing the workers unions. „The operatives‟ combinations”,
wrote Weber, “were regarded as being in the nature of a mutiny against
their employers and masters; destructiv e of the discipline necessary to the
expansion of trade; and interfering with the right of the employer to do
what he liked with his own capital” However, little by little the truth began
to dawn on many minds that the workers had a right to unite in order to be
capable of defending themselves against the capitalists and their pressure
upon the Government.
Thus in modern times the trade unions are not merely tolerated but also
recognized as essential in the economic structure of the country. Their size
and number have greatly increased and now they play a significant role in
the determination of wages, working hours and conditions.
5.4 STRUCTURE OF TRADE UNIONS There are various structural types of unions have emerged over a period of
time. These are: craft unions, industrial unions, general unions,
occupational unions, and national unions/federations. Here, the main
features of each of these types of unions are outlined.
5.4.1 Craft Unions :
A craft union is an organisation of workers engaged in a particular craft or
a trade or in a single or related trades/crafts. Such organisations link
together those workers who have similar skills, craft training and
specialisation. Craft unions are found amongst non -manual employees and
professional workers. munotes.in

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51 Trade Unions and Industrial Relations in India Examples are : Crane Drivers‟ Association in a steel plant, Air India‟s
Pilots‟ Association, stenographers‟ associations etc. The logic behind the
formation of such unions is that the skilled workers belonging to the same
craft face similar problems.
A craft union may cover all workers engaged in that craft in a particular
plant / unit of an industry or in different plants of a particular industry
located in a particular area or in different industries located in a particular
area. Again, craft unions may cover all work ers engaged in that craft
irrespective of the industry in which they are employed. Thus,
stenographers though working in different industries may form a union of
stenographers only.
One of the advantages of the craft unions is that they provide firm basis
for solidarity of trade unions. Skilled craft unions have a greater ability to
organise than unskilled workers, because they have stronger individual
bargaining power and the organisational skills to operate a successful,
business -like organisation.
The na tural bonds of common interest, friendship and mutual respect
among the members of a craft ensure intensive solidarity. Craft unions
have been the hardiest, surviving even in the most difficult times.
Historically speaking, it was these unions that lent st ability to the trade
union movement.
The craft unions, however, have some weaknesses. The main weakness is
that when several small unions of craft type are organised in a plant, and
each signing its own agreements with the employer, which may expire at
different times, not only does the joint action become difficult for the
whole lot of unions operating in the plant, but also the employer may play
one union against the other taking advantage of the multi -union situation.
Another source of weakness for the c raft union flows from the gradual
extinction of craft distinctions due to the rapidly advancing technology,
which leads to the displacement of the traditional crafts.
Yet another point of weakness of the craft unions is that the members of
these unions (sk illed workers) have the tendency of being self -centred, and
as such, they do not provide any support and guidance needed by the bill k
of unskilled workers. Needless to say, such tendency of the members of
the craft unions undermines labour solidarity
5.4.2 Industrial Unions :
An industrial union is an organisation of workers which links all
categories of workers in any one industry regardless of the differences in
craft, skill, grade, position, or sex. The membership of an industrial union
is normally large . Industrial unions may be formed at the plant level (e.g.
Tata Workers‟ Union in TISCO), regional level (Bihar Sugar Workers‟
Federation), and national level (Colliery Mazdoor Sabha of India). munotes.in

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52 INDUSTRIAL RELATIONS IN INDIA – I One of the advantages of an industrial union is that the union in a
particular industry can cover the interests of all categories of workers in a
single agreement with the employer (s). Another point of strength of the
industrial unions is that by attempting to organise different categories of
workers - skilled, semi -skilled, and unskilled - into homogeneous organic
groups, they create a feeling of solidarity among the workers, and thus
contribute significantly to the trade union movement.
A major weakness of the industrial unions is that these unions, crowded
with the unskilled workers are, evidently, unable to meet the specific
needs and protect the interests of the skilled workers whose number is
small.
5.4.3 General Unions :
A general unionis one whose membership covers workers employed in
many industries, employments and crafts. The Jamshedpur Labour Union
is an example of this type of union. The membership of this union covers
workers belonging to the steel industry and the engineering industries such
as cable, tube, locomotive, tinplate etc. located in Jamshedpur.
The general unions are ideal from the solidarity point of view. However, it
requires a very high degree of consciousness among the workers
representing various industries to form this type of unions.
5.4.4 Occupational Unions :
Cobble (1991) has coined thee term occupational unionism in her book on
unionism in her book on unions of waitresses in the American context.
Later, in 1993, Wial (1993) used this term in his paper on emerging
organisational structure of unionism in low -wage services in USA.
An occupat ional union is essentially a craft union minus the skilled
workers.
Wail describes an occupational union as one in which low wage workers
are organised geographically along loose lines. For example, in USA,
Justice for Janitors, a programme of the Service Employees International
Union, organises all janitors (working in building services industry) in a
geographical area into a single local union. It then seeks to persuade all the
employees in the area to have a uniform set of economic terms of
employment f or janitors. A similar strategy is utilised Hotel and
Restaurant Employees Union for hotel workers, and “District 1199' of the
Health care Employees Union in nursing homes. This form of unionism
may be especially appropriate where there are grounds for sol idarity such
as race and ethnicity that are capable of taking the place of the bonds of
craft. (Wheeler: 2000, p. 109).
Trade Union Federations As trade unions realise that in the competitive
business environment most of their problems cannot be tackled on their
own, they formed large unions and trade union federations at the
industrial, national and international levels. All India Port and Dock munotes.in

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53 Trade Unions and Industrial Relations in India Workers‟ Federation is an industrial federation operating at the national
level. UP Chini Mazdoor Federation is a n example of industrial federation
operating at the regional level. The British Trade Union Congress and the
AFL -CIO (American Federation of Labour and Congress of Industrial
Organisations), AITUC, INTUC, HMS, UTUC and CITU are the
examples of national lev el centres of trade unions.
The World Federation of Trade Unions (WFTU) and the International
Confederation of Free Trade Unions (ICFTU) are examples of
international level federations.
The federations are loose associations. As such, the individual unio ns that
federate themselves possess the real power and enjoy maximum
autonomy. While the federations formulate policies and provide guidance
to the unions that are under theirfold, it is the local units that implement
the policies. The local units, due to their direct and day -to-day contact
with the real rank -and-file workers, enjoy more power as compared to the
federations. Another reason for their being influential is that it is these
units that are the main sources of providing funds to the federations.
5.5 TRADE UNIONS AND CONTRACT LABOUR Contract labor is not recorded on the payroll. It is not directly paid by the
employer. The principal employer is not directly responsible for the
payment of wages or any other matter arising out of employment of
contra ct labor. The benefit of contract labor to the principal employer is in
terms of cheap labor and avoidance of other attendant costs that may arise
out of regular employment such as provision of welfare facilities, paid
leave, social security, bonus, admini strative costs, installation of plant and
machinery which otherwise is provided by the contractor etc. Contract
labor can be divided into two categories, namely; persons employed in job
contracts and labor contracts. Big firms offer job contracts or certai n
operations, for example, loading and unloading of material to contractors.
In this case, the contractor employs his own labor and also pays them.
In case of labor contracts, the contractor supplies only labor to the
principal employer for employment in v arious categories of work. The
contractor is responsible for payment of wages as determined by him to
the workers. Contract labor is employed as unskilled and skilled labor.
Unskilled labor include categories such as loaders, cleaners, sweepers,
helpers et c and skilled labor include categories such as turners, fitters,
electricians, gas cutters, carpenters, blacksmiths etc. Contract labor is
generally found in industries such as engineering, textile, carpet weaving,
building constructions, irrigation projec ts, road construction etc. Out of
these, mining and building industries are found to be the major employers
of contract labor.
Contract labor was one of the most exploited forms of labor. Both the
contractor as well as the principal employer did not bother about contract
labor. The Government of India therefore passed the Contract Labor Act
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54 INDUSTRIAL RELATIONS IN INDIA – I (Regulation and Abolition) Act, 1970 provides for the regulation of the
conditions of work, health and safety, wages and other amenities for the
welfare of contract labor. A contractor is required to provide canteens, rest
rooms, latrines, urinals, drinking water, washing facilities and first aid
boxes for the use of contract labor. If a contractor fails to provide the
amenities or to make payment of wages, the principal employer will be
liable to provide the amenities or to make payment of wages to the
contract labor and the principal employer can recover such expenses from
the contractor.
The objective of the Act is to prohibit the employment of contract labor
and wherever it is not possible to prohibit, conditions of work of contract
labor is sought to be improved. The Act is applicable to every
establishment employing twenty or more workmen as contract la bor and to
every contractor employing twenty or more workmen. The Act further
empowers the Central and State governments to apply the provisions of
the Act to any establishment or contractor employing less than twenty
workmen. The Central Government has pr ohibited employment of
contract labor in categories of work in coal, iron ore, limestone, dolomite,
manganese, chromite, magnesite, gypsum, mica and fire clay mines,
building industry, and railways. Contract labor is prohibited in the Central
Food Corporat ion of India godowns and Port Trust.
5.6 EMPLOYER’S ORGANISATIONS: ROLE OF MANAGERIAL CLASS IN INDUSTRIAL RELATIONS The Indian Trade Union Movement gathered momentum only in the
1920s. Until then there was no serious threat from the workers to the
employer s and hence there were no employers‟ associations. In 1919, the
International Labor Organization was formed to advance and protect the
interests of labor around the world. Labor legislation under the influence
of ILO gathered momentum only in the 1920s and world over the member
countries of ILO legislated on the conventions and recommendations
made by ILO in connection with industrial relations and labor welfare.
Thus a strong need for establishing employers‟ associations was felt only
in the 1920s.
5.6.1 Employers’ Association s before and after Independence:
A beginning was made in the 1930s when the first two employers‟
associations were formed in the year 1933 by English industrialists to
protect their interests. These were the All India Organization of I ndustrial
Employers established and headquartered in Delhi and the Employers‟
Federation of India established and headquartered in Bombay. This was
followed by the establishment of an indigenous association called the All
India Manufacturers‟ Organization in 1941 in Bombay, representing the
medium scale industry.
The AIOIE and the EFI merged together to form the Council of Indian
Employers in 1956 so that they could effectively represent their stand
point on various issues to the government of India. Associ ations like the munotes.in

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55 Trade Unions and Industrial Relations in India Indian Jute Mills Association and the Employers‟ Federation of India were
registered under the Indian Trade Union Act 1926. The Associated
Chambers of Commerce and Industry (ASSOCHAM) set up in 1920 and
The Federation of Indian Chambers of Commerce and Industry (FICCI)
set up in 1927 were later registered under the Indian Companies Act 1956.
While the FICCI represented Indian business interests, the ASSOCHAM
represented English business interests. Both FICCI and ASSOCHAM are
headquartered in Delhi. There are employers‟ associations which are also
registered under the Societies Registration Act 1960. The chief executives
of the public sector enterprises formed an association called the Standing
Conference of Public Enterprises (SCOPE) and beca me a member of the
Council of Indian Employers. The CIE is a member of the International
Organization of Employers, located at Brussels. The small scale industries
have an association of their own. It is known as the Federation of
Associations of Small Ind ustries in India (FASII). The FASII was set up in
1959 and is located in Delhi.
Employers‟ Associations in India are operating at three different levels
and in three different capacities. The three levels are local, regional and
national. There are also in dustry level employers‟ associations in the
cotton and jute textile industry and also in the engineering, cement, and
paper and sugar industries.
5.6.2 Objectives of Employers’ Associations:
The general objectives of employers‟ associations as stated by M r. Naval
Tata are as follows:
1. To represent employers‟ view points in a unified manner to the
government.
2. To establish industrial harmony and develop stable and healthy
industrial relations.
3. To promote collective bargaining at different level s and establish
industrial democracy.
4. To represent employers at national and international forums such as
the State and national level labor conferences and commissions and
the ILO.
5.6.3 Assessment of Employers’ Associations :
The contribution of empl oyers‟ association in the field of industrial
relations is found to be limited. The employers‟ federations at the central
level do not participate in collective bargaining. The Chambers of
Commerce also do not participate in this process. It is only the in dustry
level associations that are actively involved in collective bargaining.
Employers‟ associations are formed by employers to promote their own
economic interests. They are also called nonprofit organizations because
no part of their income can be dist ributed to its members. The National
Labor Commission feels that the employers‟ associations should also munotes.in

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56 INDUSTRIAL RELATIONS IN INDIA – I pursue some social objectives along with the persuasion of their economic
interests. According to the NLC, the social responsibilities of employers‟
associations are as follows:
1. Their policies and programs should be consistent with the social
objectives of the community and the country.
2. The needs of the a developing economy, the requirements of planned
growth, maintenance of industrial peace, pr omotion of national
integration, obtaining cooperation from workers unions to improve
productivity and maintaining high standards of quality and prices in
the international market should be uppermost in the minds of
employers‟ associations.
Employers‟ asso ciations in India are not entirely united and integrated.
They should therefore integrate themselves to present a unified view to the
government and to themselves.
5.7 SUMMARY 1. Industrial relations includes the following aspects:
a) Labor relations i. e. relations between union and management.
b) Employer -employee relations i.e. relations between management and
workers.
c) Group relations i.e. relations between various groups of workmen.
d) Community or public relations i.e. relations between indu stry and
society.
2. The System approach to industrial relations was put forward by John
Dunlop. It focuses on the participants in the industrial relations
process, environmental forces and the output and also studies the
causes of these inter -relations among different aspects of industrial
relations.
3. According to Karl Marx (1818 -1883), industrial relations between the
workers and the capitalist are contradictory by nature. The
contradiction in relations is the result of contradictory objectives of
the classes. Marx believed that capitalists aim at profit maximization
and workers aim at maximization of wages. The two objectives
cannot be reconciled because industrial relation is a zero -sum game in
which one has to lose so that the other gains.
4. Trade unionism is the outcome of the factory system and the capitalist
order of the society. Modern industrialization in India started from
1850 onwards when the first cotton and jute mills were set up along
with the development of road and rail ways. The yea r 1875 is a
landmark in the history of trade union movement in India because the
factory workers for the first time united together for securing better
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57 Trade Unions and Industrial Relations in India 5. The Indian labor market is divided into Organized and Unorganized
sectors. The o rganized sector of the labor market is very small and in
percentage terms is about 7% of the total employment in the country.
Manufacturing, electricity, transport and financial services are largely
in the organized sector. In the unorganized sector, apart from
agriculture, the other industries in the unorganized sector are mining,
manufacturing, construction, trade, transport and community, social
and personal services.
6. The sociological roots of industrial problems can be traced to
sociological factors like value system, customs, norms, symbols,
attitude and perception of both labor and management that affect the
industrial relations in different ways. These factors determine the
behavior of workers. The social consequences of industrialization like
organization, social mobility, migration generates many social evils
like family disintegration, stress and strain, delinquency, personal and
social disorganization do influence workers efficiency and
productivity which in turn influence industrial relations system of an
industry.
5.8 QUESTIONS 1. Critically examine the system‟s approach to industrial relations.
2. Analyze the class conflict approach to industrial relations.
3. Trace the history of trade union movement in India.
4. Explain objectives an assessment of Employer‟s Association .
5. Write note on contract labour .


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6
INDUSTRIAL RELATIONS IN INDIA – II
Unit Structure
6.0 Objectives
6.1 Meaning of Industrial Conflict
6.2 Forms of Conflict
6.3 Strikes
6.4 Lockouts
6.5 Absenteeism
6.6 Employee Turnover
6.7 Causes of Industrial Disputes
6.8 Consequences of Industrial Disp utes
6.9 Trends in Industrial Disputes
6.10 Summary
6.11 Questions
6.0 OBJECTIVES  To know the Meaning and forms of Industrial Conflict.
 To study the concepts of strikes, lockouts, conflict, absentism and
employee turnover.
 To study the causes and consequen ces of industrial disputes.
 to analyze the tends in industrial disputes.
6.1 MEANING OF INDUSTRIAL CONFLICT Industrial conflict A term which refers to all expressions of dissatisfaction
within the employment relationship, especially those pertaining to t he
employment contract, and the effort bargain. The many different kinds of
industrial conflict may be divided into two broad classes —informal and
formal.
6.2 FORMS OF CONFLICT There are two forms of conflict as formal industrial conflict and informal
industrial conflict.
6.2.1 Formal Industrial Conflict:
Formal industrial conflict is reserved for organized expressions of conflict
articulated through a trade -union or other worker representative. Its
supposed purpose is strategic or instrumental rather than (or as well as)
expressive and may often involve workers who, by themselves, have no munotes.in

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59 Trade Unions and Industrial Relations in India feelings or personal involvement regarding the issues at stake in the
dispute. Its characteristic form is the organized strike: that is, a withdrawal
of labour such as to constitute a temporary breach of contract, using the
collective strength of the workforce to avoid sanctions and achieve
adjustments to pay or conditions of work. Strikes may be reinforced by
other types of formal sanction such as the go -slow and work to rule. They
may be confined to those directly affected or may take the form of
sympathy strikes by workers in related jobs and industries. Strikes are
deemed to be official if they have been called at the behest of the union
leadership and in accordance wit h the law and with procedural collective -
bargaining agreements. The term unofficial or ‗wildcat‘ is applied to
strikes waged through unrecognized leaders such as shop stewards, or by a
non-recognized union, or in some other way which breaches established
collective -bargaining laws and procedures. Obviously, there is not a clear
distinction in practice between wildcat strikes and some of the more
collective forms of unofficial conflict.
6.2.2 Informal Industrial Conflict:
Informal industrial conflict is so labelled because it is not based on any
systematic organization, results directly from a sense of grievance, and
supposedly is wholly expressive in nature. Many forms of industrial
sabotage which appear irrational would constitute industrial conflict in th is
sense, as would purely individualized and even unconscious forms of
protest, including absenteeism, frequent job -changing, negligence, and
even accidents at work. Industrial sociologists have also regarded
spontaneous walk -outs and strikes as examples o f informal industrial
conflict, as well as the constant opposition to management expressed in
workgroup norms regulating output, restrictive practices, secrecy, or other
guarded treatment of superiors. The idea of informal industrial conflict
thus draws at tention to the roots of behaviour which may appear
incomprehensible from the point of view of management. Used too
widely, however, it loses its vigour.
6.3 STRIKES 6.3.1 Definition and Meaning of strikes :
According to Peterson, ―Strike is a temporary ces sation of work by a
group of employees in order to express their grievance or to enforce a
demand concerning changes in work conditions.‖
Section 2(q) of the Industrial Disputes Act 1947, defines a strike as ―a
cessation of work by a body of persons employ ed in any industry acting in
combination or a concerted refusal under a common understanding of a
number of persons who are or have been so employed to continue to work
or to accept employment.‖ According to this definition, a strike has three
important el ements. They are: a group of workers, stoppage of work or
refusal to do work and collective or concerted action. munotes.in

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60 INDUSTRIAL RELATIONS IN INDIA – II Stoppage of work should be the result of concerted action on the part of
workmen for realizing a demand. Such a stoppage even for a few hours
will qualify to be a strike. The stoppage of work or concerted refusal to
work must be in defiance of the authority of the employers. The purpose
of the collective action should be to stop working or to refuse to perform
normal duties.
6.3.2 Types of Strik es:
Strikes can be broadly classified into two. They are:
1) Primary strikes, and
2) Secondary strikes.
Primary strikes are generally aimed against the employer with whom the
dispute exists. They may take the form of stay -away strike, stay -in, sit -
down, pen -down or tools -down strike, go -slow and work -to-rule, token or
protest strike, lighting or catcall strike, picketing or boycott.
Secondary strikes are strikes in which the pressure is applied not against
the primary employer but against some third pe rson who has good trade
relations with him who are severed and the primary employer incurs a
loss. Such strikes are popular in the USA but not in India because in India
the third person does not have any locus standi so far as the dispute of
workers with t heir employer is concerned.
6.4 LOCKOUTS The term ‗lockout‘ refers to the action of an employer in temporarily
closing down or shutting down the undertaking or refusing to provide its
employees with work with the intention of forcing them either to accept
the demands made by them or to withdraw the demands made by them on
him. Under the Industrial Disputes Act, 1947, a ―Lockout‖ means the
closing of a place of business or employment or the suspension of work or
the refusal by an employer to continue to empl oy any number of persons
employed by him. A lockout can thus be described as follows:
1. A lockout is the closure of an industrial undertaking because of the
existence of or apprehension of an industrial dispute, violence and
damage to property.
2. It is the suspension of employment in so far as the employer refuses to
give work to the workmen until they yield to his demand or withdraw
the demands made on him or because of closing down of a place of
employment and the suspension of the work.
3. A locko ut is an antithesis of a strike. Just as the employees by going
on a strike force the employer to accept their demands, the employer
lock them out of his premises and not allow them to return to work
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61 Trade Unions and Industrial Relations in India 4. A lockout is used to coerce or force workmen to come to terms. The
lockout involves an overact on the part of the employer and an
element of ill -will. In the absence of this overact or ill -will, the
temporary suspension of work would not amou nt to a lockout and the
workmen cannot claim wages for the period of closure.
The following cannot be considered as lockout:
1. Prohibiting an individual employee is not a lockout.
2. Termination of employment by retrenchment does not amount to a
locko ut.
3. Termination of services of more than one person at the same time
would not be a lockout.
4. Declaration of a lockout by an employer merely on the ground that the
workmen have refrained from attending to work is not a lockout.
Similar to a stri ke, lockout also leads to loss of production and suspension
of the payment of wages to the workers.
6.5 ABSENTEEISM ―Persistent absences from a job or commitment without having a valid
reason for them is called absenteeism.‖
6.5.1 There are two forms of Ab senteeism:
1. Innocent :
If employees have authentic reasons to take leaves of absence.
For example, them or their family members getting sick, babysitter
cancelling at the last moment, etc.
2. Culpable :
If the reason for the unplanned absence from work is not au thentic.
For example, employees lying about being sick or just wanting to stay
home.
6.5.2 Absenteeism Calculation :
Use the absenteeism formula to calculate the percentage of absenteeism
for the firm:
Absenteeism Rate = (Average # of Employees X Missed Wor kdays) /
(Average # of Employees X Total Workdays) * 100
Use the absenteeism formula to calculate the percentage of absenteeism
for an employee: munotes.in

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62 INDUSTRIAL RELATIONS IN INDIA – II Absenteeism Rate = ((# of unexcused absences)/total period) x 100 = % of
Absenteeism
6.5.3 Causes of Absenteeis m:
1. Babysitting or taking care of elders :
If employees have children or elders at home that need to be taken care of
and usual arrangements haven‘t worked out, or if the dependent is injured
or sick, they might have to stay home.
2. Tireness or pressure :
Excessive workload, presentations/meetings that put pressure on
employees, and being undervalued can discourage employees and make
them not want to come to work.
For example, caregivers cancelling or unexpected school holidays.
3. Intimidation and persecu tion:
Intimidating circumstances like harassment and persecution in the
workplace are likely to make employees avert the situation and not want to
show up to work.
4. Depression :
When employees turn to alcohol or substances as self -medication for their
unhappiness and depression, it can give rise to substance abuse.
5. Sickness :
Doctors‘ appointments, sicknesses, and injuries can compel a person to not
show up to work. These are the most reported reasons for absences but are
sometimes not the real reason.
6. Employees can get into accidents both outside and at work :
Persistent injuries like backaches and neck aches, in addition to extreme
injuries, are the most commonly reported reasons for absences. They
usually call in sick in such cases.
7. Disconnection :
Disengaged employees that do not have the motivation to attend work and
are not devoted to their company, jobs, or colleagues are likely to skip
work.
8. Partial shifts :
Both workplace morale and productivity are negatively influenced by
practices like lo nger breaks, leaving early and late arrivals, which are also
considered to be absenteeism.
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63 Trade Unions and Industrial Relations in India 9. Job seeking :
Absenteeism can occur when employees are looking for a job, visiting
head -hunters, attending job interviews, or working on resumes.
10. Transportati on setbacks :
Being late to work due to delayed transportation means or because
employees stay far.
11. Poor work ethic :
Not committing to your company or your work, finishing projects later
than the deadlines, coming in to work late, etc., are all forms of poor work
ethics.
6.6 EMPLOYEE TURNOVER 6.6.1 Introduction:
Employee turnover refers to the shifting of workforce in and out of an
organization and hence it is also referred to as the interfirm mobility of
labor. Employee turnover may be defined as ―the r ate of change in the
working staff of a concern during a definite period‖. Employee turnover
measures the extent to which existing employees leave and new
employees enter into services of an organization in a given period.
Employee turnover is also defined as the measurement of inarticulate labor
unrest because strikes are articulated expressions of labor unrest.
Employee turnover measures the morale of the employees and their
efficiency. The higher is the rate of turnover the lower is the morale and
effici ency. These two aspects are central to the success of a organization
and hence needs to be seriously addressed.
Statistically, employee turnover is expressed as the ratio of yearly or
monthly separations to the average number of full time employees for tha t
period. It is assumed that the total number of jobs available in a concern
are constant. Employee turnover is measured in the following ways:
1. According to the total replacements formula, employee turnover is
expressed by the formula:
R T = × 100 W where R is total replacements and W is average working force.
2. According to total avoidable separations like quits, discharges etc,
employee turnover is expressed as: S - U T = × 100 W munotes.in

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64 INDUSTRIAL RELATIONS IN INDIA – II where S stands for separations, U stands fo r unavoidable separations
(retirements, deaths etc) and W is the average work force.
3. According to total accession plus separations, employee turnover is
expressed by the formula: (P1 + P2) 365 T = A + S ÷ × 2 M Where A stands for acce ssion, S for separation, P1 and P2 for total
number of employees at the beginning and at the end of the month
respectively and M stands for the number of days in the month for which
the figures were obtained.
4. Normally, employee turnover is computed in terms of percentage of the
number of terminations of employment to the number employed during
the period for which measurement is desired. Thus, employee turnover is: S T = × 100 F Where T represents turnover, S stands for total separa tion during the
period and F for average labor force during the period.
6.6.2 Causes of Employee Turnover :
Retirement, resignation, lay -offs and dismissals are the common causes of
employee turnover. Out of these, retirement is the inevitable cause.
Howeve r, both resignation and dismissals can be reduced by implementing
employee retention policies in the organization. Unavoidable turnover
which is also called Natural Turnover arises because of factors like death,
retirement, lay -offs and frictional unemploy ment. Employees may be laid
off due to reduction in work on account of recession, seasonal variation
and competition. Resignations and dismissals are found to be the main
causes of turnover. Resignation may be due to dissatisfaction about the
working condi tions, poor wages, bad health, sickness, family
circumstances etc. Dismissals may occur due to participation in strikes,
misconduct, insubordination, disciplinary action in cases of inefficiency
etc. The badli system in the textile industry was found to be an important
cause of employee turnover. Employee turnover is also high amongst the
highly paid managerial staff because of the belief that the more you shift
from one organization to the other, the higher you will be on the growth
ladder. Employee turnov er is high amongst new employees, unattractive
jobs, less skilled workers and young persons.
6.6.3 Consequences of Employee Turnover :
Employee turnover lowers the efficiency of employees and they are not in
a position to enjoy the benefits of loyalty. Empl oyee solidarity is adversely
affected by high turnover. The employers also lose on account of turnover.
The productivity of employees during the learning period is low which munotes.in

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65 Trade Unions and Industrial Relations in India means the cost of learning is borne by the employer. Once the employee
becomes suf ficiently skilled in his work and he or she leaves the
employment, it is clearly a loss to the employer. However, if employee
turnover is equally high across the industry, loss of skilled staff may be
made good by acquiring skilled staff coming from other firms in the
industry. However, acquisition of new employees is always at a higher
cost. High employee turnover, however, prevents optimum utilization of
resources in the country.
6.6.4 Remedies to Reduce Employee Turnover :
In order to reduce employee tur nover across the industry, a scientific study
of the problem needs to be made to assess the extent of turnover across the
industries and across the plants within industries. The recruitment or
placement policy of the firm should be scientific enough to pla ce the right
person in the right place at the right time. There is a great likelihood of a
misfit to leave the firm in a short period of time. Recruitment, placement
and training policies of the firms must be correct to reduce the problem of
employee turno ver. Job specifications and man specifications should be
matched before selection and placement is done. Finally, enlightened
employee supervision, good working conditions, better standard of wages,
a good system of career advancement, good separation bene fits and an
empathetic management can definitely reduce the problem of employee
turnover.
6.7 CAUSES OF INDUSTRIAL DISPUTES The causes of industrial disputes are as follows –
1. Economic Causes:
a) Demand for increase in wages on account of increase in all India
Consumer Price Index for Industrial Workers. The demand for
increase in wages may be raised for all categories of factory workers.
b) Demand for higher gratuity and other retirement benefits.
c) Demand for higher bonus.
d) Demand for certain allowances such as hou se rent allowance, medical
allowance, night shift allowance, conveyance allowance.
e) Demand for paid holidays
f) Reduction of working hours
g) Better working conditions, etc.
2. Political Causes:
Trade union in India are controlled by various political parties. In m any
cases, their leadership vests in the hands of persons who are more munotes.in

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66 INDUSTRIAL RELATIONS IN INDIA – II interested in achieving their political interests rather than the interests of
labourers.
3. Personnel Causes:
Sometimes, industrial disputes arise because of personnel problems like
discissal, retrenchment, layoff, transfer, promotion etc.
4. Indiscipline:
Industrial disputes also take place because of indiscipline and violence on
the part of the workforce. Lock -outs are resorted to by the managements to
curb indiscipline and violence.
6.8 CONSEQUENCES OF INDUSTRIAL DISPUTES Consequences of industrial disputes are often far -reaching as they disturb
the economic, social and political life of a country. Industrial disputes
create turmoil between the management and the labour and are in fact
symptoms of poor industrial relations. An organisation being in the grip of
symptoms of poor industrial relations. An organisation being in the grip of
tense industrial relations finds it impossible to introduce any innovation or
effect any productivity impr ovement exclusively through the various
industrial engineering techniques. Poor industrial relations within an
organisation are not only harmful for it, but are also against the interests of
the society as a whole. The adverse effects of industrial conflic ts may be
enumerated as follows:
1. Disturbance of industrial peace
2. Resistance to change
3. Frustration among employees
4. Intensification of social tension
5. Adverse effect on the economy
In general, industrial disputes are harmful, undesirable and even
dangerous. T hey create unrest in industry and create tension among the
employers and the employees.
6.9 TRENDS IN INDUSTRIAL DISPUTES Table No. 6.1
Trends in Intensity of Industrial Disputes, 2001 -2011 Sr. No. Year Disputes Workers Involved Man-days Los (000) 1. 2001 674 987778 23767 munotes.in

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67 Trade Unions and Industrial Relations in India 2. 2002 579 1079434 26586 3. 2003 552 1815945 30256 4. 2004 447 2072221 23866 5. 2005 456 2913601 29665 6. 2006 430 1810348 20324 7. 2007 389 724574 27167 8. 2008 421 1579298 17434 9. 2009 392 1625505 13365 10. 2010 425 1059664 17912 11. 2011 91 48156 321
Above table should be the trends in industrial disputes.
6.11 QUESTIONS 1. Explain the forms of conflict.
2. Explain the meaning and types of strikes .
3. Give note on Lockouts.
4. Give note on Absenteeism.
5. Write note on Emp loyee Turnover.
6. Explain the causes and consequences of industrial disputes.


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MODULE 4: ROLE OF THE STATE IN
INDUSTRIAL RELATIONS IN INDIA
7
ROLE OF THE STATE IN INDUSTRIAL
RELATIONS IN INDIA – I
Unit Structure
7.0 Objectives
7.1 Introduction
7.2 Labour Policy in India: Pre and Post -Reform Scenario
7.3 Impact of Globalisation
7.4 Tripartism
7.5 Labour Legislation Affecting Industrial Relations: Statutory and Non -
Statutory Measures to Settle Industrial Disputes
7.6 Summary
7.7 Questions
7.0 OBJECTIVES  To know the pre and post reform scenario of labour policy in India.
 To know the concept of Tripartism.
 To know the statutory and Non - Statutory measures to settle industrial
disputes.
7.1 INTRODUCTION The role of state and industrial relations restructures the general
framework of global industrial relations, using a comparative a pproach
(European Union, France, Spain, Germany, Italy, Japan, China, USA,
Brazil, South Africa and India). It is an important to consider the
challenges and future prospects and to propose a new agenda for the state.
The new era of industrial relations, w hich has reached a stage where the
nature of work has been slowly changing in the recent decades, seems to
have been systematically examined and analysed, as “lingering renewals”
have been noticed after the economic crisis. The state‟s intervention in the
essential economic structures of 2008 has been revived. In the terms of
globalization, industrial relations are evolving in a new direction due to
the internationalization of the economy and increasing competitive
pressures.
Industrial relation is a study area that examines the relationship between
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69 Trade Unions and Industrial Relations in India tool for resolving various industrial disputes. This idea was developed by
the Industrial Revolution in the late nineteenth century. Indust ry can be
seen as an economic activity, that is, the production, manufacture or
processing of goods or services or administration by a group of people.
Relationship refers to the relationship and communication between the
business and the employer in the w orkplace.
7.2 LABOUR POLICY IN INDIA: PRE AND POST -REFORM SCENARIO Labour, along with land, capital and industry, is a component of
production, and the labour market is a market where workers compete for
jobs and workers compete for workers. In the neo -conservative
framework, it is assumed that capital and labour can change for each other
directly and easily. However, it should be understood that labour as an
input for production is very different from the capital in the production
process. The labour forc e belongs to the poor and it sells its labour force to
meet its basic minimum needs through productive employment. But when
this labour force is replaced by capital, it results in a change in the form of
unemployment or employment (i.e., change from wage e mployment to
self-employment). Therefore, it can be said that even if the economy is on
the path of high growth (i.e., due to over -deployment of capital), if no
„meaningful‟ provision is made to the labour force of that nation, then no
objective of high ec onomic growth will be achieved. Given that the labour
force has a d irect impact on the lives of workers, the issue of labour
market reforms is a very sensitive issue as a whole, which in a way will
affect the economy as a whole.
Labour market reform seeks to change labour market organizations and
product relations that are characterized by various laws, rules and
regulations that have a direct and indirect effect on labour demand, labour
supply, wages, and so on. These laws and regulations are intended to
protect the rights of workers and their social security and to prevent
exploitation of workers by employers. In the recent years, the issue of
labour market reform has been at the centre of policy discussions in India,
with a flurry of arguments from both q uarters.
(1) Amendments to the Apprenticeship Act, 1961:
This Act was amended in December, 2014 to give more response to
industry and youth. The Apprentice Incentive Scheme was launched to
encourage learner candidates working in Micro, Small and Medium
Enterprises (MSMEs) in the field of architecture. Given the large
employment potential in the micro, small and medium enterprises sector,
this step could increase the productivity of the workers and increase
efficiency while ensuring massive job creation.
(2) Shram Suvidha Portal :
This is an integrated labour portal scheme launched for timely resolution
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70 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – I development. Key features of this portal include: (i) Special Labour
Identification Number (LIN) to facilitate online registration; (ii) self -
certification to help industries file self -certified and simplified single
online returns instead of 16 separate returns; (iii) Transparent labour
inspection scheme to reduce corruption. According to the risk-based
criteria, the inspection will be done through computerized system and the
inspection reports are uploaded by the labour inspector within 72 hours.
(3) Employees State Insurance Corporation under Project
Panchadeep (ESIC):
Its objective is to di gitize internal and external processes to ensure
efficiency in services, especially to employers and insured persons.
(4) Digitization of information under Universal Account Number
(UAN) and Employees Provident Fund (EPF):
Digitization of EPF member infor mation and allocation of Universal
Account Number (UAN) to each member to facilitate accessibility of
member accounts. UAN is linked with bank account, Aadhar card and
other KYC details to promote financial inclusion. Direct access to EPF
accounts allows m embers to access and integrate into previous accounts.
(5) National Health Insurance Scheme (NHIS):
This is a scheme for unorganized workers under the Unorganized Workers
Social Security Act, 2008. It is a smart card -based cashless health
insurance plan w ith maternity benefits and cover of Rs 30,000. It is
proposed to extend the National Health Insurance Scheme (NHIS) for all
unorganized workers in unorganized sector below the poverty line (BPL)
families on a family floater basis in phases every year.
(6) The National Vocational Training -Management Information
System (NCVT -MIS)
Portal has been developed to streamline the evaluation / certification of
Industrial Training Institute (ITI), Apprentice Scheme and all NCVT
training courses.
(7) Under Employees P rovident Fund (EPF):
Digitization of complete information of 42.3 million EPF members and
allocation of Universal Account Number (UAN) to each member, which
facilitates accessibility of member accounts. UAN is linked with bank
account, Aadhar card and oth er KYC details to promote financial
inclusion. Direct access to EPF accounts will allow members to access and
integrate into previous accounts. Online pensioners can view their account
and distribution details online. The statutory salary limit under the
Employees Provident Fund and Various Provisions (EPF & MP) Act is
Rs. Was extended to. 15,000 per month and minimum pension of Rs.
1,000 has been started.
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71 Trade Unions and Industrial Relations in India (8) For Unorganized Workers:
The National Health Insurance Scheme (NHIS) is a scheme under the
Unorg anized Workers Social Security Act, 2008. This is a smart card -
based cashless health insurance plan, which includes maternity benefits. It
is proposed to extend RSBY to all unorganized workers in unorganized
sector below poverty line (BPL) households on a family floater basis at Rs
30,000 per family in phases.
(9) National Career Services Portal:
The government is bound to provide free employment services to its
citizens. This is changing with the launch of the National Career Services
(NCS) portal in July 2015. NCS is envisioned as a digital portal that will
provide job seekers and employers with a nationwide online platform for
dynamic, efficient and job matching.
(10) Payment of Bonus (Amendment) Act, 2015:
The law passed in December 2015, the eligibili ty for bonus payment of the
Payment of Bonus Act, 1965 is Rs. 10,000 to Rs. 21,000 per month. This
decision will not only increase the bonus pay of the employees but also
make them more eligible for it.
(11) National Child Labour Project (NCLP) Scheme:
In 2015, the Government of India launched the National Child Labour
Project (NCLP) scheme under which children aged 9 -14 years are
discharged / enrolled in NCLP special training. Centres, where they were
introduced to the mainstream education system, includi ng bridge
education, vocational training, lunch, scholarships, health care, etc.
Children in the age group of 5 -8 years are directly connected to the formal
education system in close coordination with Sarva Shiksha Abhiyan
(SSA). The government has also pr oposed an amendment to the Child
Labour (Prevention and Regulation) Act, 1986, which seeks to impose a
complete ban on the employment of children under 14 years of age and to
add an age restriction on the age of children under the right to free and
compuls ory education. The amendment also includes provisions for
harsher penalties for employers.
7.3 IMPACT OF GLOBALISATION One of the goals of liberalization is to make Indian industries globally
competitive. In this direction, the Government of India has purs ued three
types of reforms: one, abolishing the complex network of industrial
controls, industrial licensing and licensing systems; Two, the liberalization
of foreign trade and currency transactions and three, the establishment of a
number of measures to f acilitate the flow of foreign direct investment
(FDI). These measures were introduced in 1991 and the liberalization
process is still ongoing. It was argued that removing barriers to entry and
licensing would force Indian enterprises to face international competition
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72 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – I and products. Trade reforms aimed at bringing Indian industries to the
forefront of the global market will force them to produce high quality
goods. By removing import re strictions and currency transactions, they
will be able to import better quality materials, components and
technologies. FDI inflows will increase technology and productivity and
improve the productivity of Indian enterprises.
Globalization directly and in directly affects industrial relations systems
and also the factors around them. For example, the internationalization of
markets, the free movement of capital and workers, increasing
competition, and the importance of markets all affect global industrial
relations systems. While this accelerates economic interdependence
between countries, it can lead to convergence in global industrial relations.
As more organizations begin to take their business globally, work
standards and pay scales begin to level, and o rganizations will have to
make changes to their recruitment strategies to prepare for work culture
differences. Developing countries are considering hiring more workers
from developing countries to bridge the gap between supply and demand.
Lack of workers could jeopardize their economic growth, international
competitiveness and productivity performance.
Positive Outcomes:
Licensing, removal of government restrictions on industries and
liberalization of foreign investment have reduced the time and money
spent in the formal process of obtaining government approval. This has
shifted the focus of the industry to the actual business of production thus
reducing the cost of the project. Exports have increased and trade has
increased. Policies in the field of forei gn investment have attracted the
inflow of foreign capital, especially in areas such as electrical equipment,
services and telecommunications. Indian industry and financial institutions
have invested abroad. Many Indian companies have joint ventures with
foreign companies. They are becoming internationally competitive. India
is expanding its export orientation by establishing SEZ (Special Economic
Zone) and realizing its international presence through mergers and
acquisitions. Increasing competition and the flow of foreign knowledge
have made industrial workers more efficient and skilled. Industrial
productivity has increased, which is reflected in higher industrial wages.
The incidence of industrial diseases has decreased. In this competitive
environment, g oods produced by Indian industries are sold at competitive
prices, providing high quality satisfaction to Indian consumers. The small
business sector is getting stronger with the provision of priority loans,
microfinance and other types of loans. Some SSEs have grown into mid -
level functions.

Negative Impact:
Some sectors were already well established while open to foreign
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73 Trade Unions and Industrial Relations in India and hindering their own research and development efforts. The use of
foreign technology cannot be adapted to the Indian situation. Sometimes
multinational corporations deliberately use less sophisticated technology
in their subsidiaries. There is a lot of competition in the market which puts
a lot of pressure on dome stic enterprises to increase productivity and
improve product quality. Rising urban industrial wages are much higher
than rural laborers, leading to income inequality. There is an uncontrolled
growth of consumerism and there are plenty of alternatives to t he problem
that abounds as consumers. Businesses are driven solely by private profits.
Globalization has in fact increased the intensity of capital in production
and has adversely affected employment as workers have been replaced by
machinery. Globalizatio n poses risks to domestic enterprises such as price
fluctuations, profit volatility and uncertainty of supply and demand.
7.4 TRIPARTISM During the period 1957 to 1965, the Government felt the necessity to
consolidate labor policy. Tripartism in the field of labor got consolidated
during this period. Labor legislations were enacted during the second and
third five year plans and the Three Codes were adopted. These three codes
were concerned with the code of discipline for managements and unions.
The Second Five Year Plan (1956 – 61) emphasized on the increased
association of labor with management. It stated that the representative
union should have sole right of taking up with management, matters of
disputes in connection with wages, allowances and other ter ms and
conditions of service. It placed a restriction on the number of outsiders as
office bearers of unions and called for protection of office bearers against
victimization. In response to the workers‟ demand for voluntary
arbitration, the Second plan ca lled for the use of voluntary arbitration in
settlement of disputes. The Central Government amended the Industrial
Disputes Act to include Section 10A which provided for reference of
disputes to voluntary arbitration and de -linked the Arbitration Act, 1940
from voluntary arbitration. The Employees‟ Provident Fund Act was
extended to cover industries and commercial establishments having
10,000 workers or more. The Employees‟ State Insurance Act was
proposed to be extended to workers‟ families. Joint Manageme nt Councils
were introduced to ensure workers‟ participation in management of the
industry.
The Third Five Year Plan (1961 -66) included the following aspects of
labor policy:
1. Revival and improvement of the Three Codes introduced in 1958.
2. Emphasi s on voluntary arbitration to replace adjudication.
3. Emphasis on Workers‟ Participation in Management.
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74 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – I 5. Enlarging the coverage of the ESI scheme to 3 million workers‟
families by extending t he coverage of the Act to establishments
employing 20 from the earlier 150.
These policy aspects gave workers a sense of equality and status and gave
a realistic tone to the slogan of „Equal Partners in the creation of Wealth‟.
A National Safety Council w as set up in 1966. A Bonus Commission was
set up to regularize the payment of bonus.
Tripartism became a norm in the field of Labor with India becoming a
member of the International Labor Organization in 1919. Industrial
relations policies and principles i n India have been shaped by tripartite
consultations at the national and industry levels. Tripartism was
institutionalized because of the realization that decisions in labor policy
could not be imposed without participation of the two main parties
concerne d. The Government, the Labor Organizations and the Industrial
Organizations are the three pillars of tripartism. At present, there are 44
tripartite committees at the national level. Several tripartite meetings are
held from time to time, such as the sickn ess in the National Textile
Corporation, the National Renewal Fund and labor rationalization. At the
State levels, tripartite meetings are held on specific issues from time to
time.
7.5 LABOUR LEGISLATION AFFECTING INDUSTRIAL RELATIONS: STATUTORY AND NON -STATUTORY
MEASURES TO SETTLE INDUSTRIAL DISPUTES Important legislations influencing industrial relations in India are the
Trade Unions Act 1926, the Industrial Disputes Act 1947, the Industrial
Employment (Standing Orders) Act 1946, the Factories Act 1948 a nd the
Workmen‟s Compensation Act 1923.
1. The Trade unions Act, 1926:
The Trade Unions Act was passed in 1926 and came into effect from 01st
June, 1927. The Act was amended in 1970 so that it becomes applicable to
Jammu and Kashmir also and this amendmen t came into force from 01st
September, 1971. All trade union activities in India are governed by this
Act. It was originally enacted to protect the union leaders. The Act was
amended in 1929 to provide registration of trade unions. The Act provides
for the formation, procedure, registration including conditions of
registration, advantages of registration and he immunities available to the
union leaders from both civil and criminal laws while involving
themselves in the union activities of a registered trade union. The Indian
Trade Union Act of 1926 defines trade union as “Any combination,
whether temporary or permanent, formed primarily for the purpose of
regulating the relation between workmen and workmen, between
workmen and employers or between employers and employers or for
imposing restrictive conditions on the conduct of any trade or business and
includes any federation of two or more trade unions”. It is an association
of wage earners, formed for the purpose of collective action for the munotes.in

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75 Trade Unions and Industrial Relations in India defense of its professional interest bound by the Trade Union Act.
Combination stands for the union of any type of people which need not
necessarily be workmen whereas „association‟ stands for a union of
workmen. A trade union is an association of workmen. A trade disput e has
been defined as “any dispute between employers and workmen or between
workmen and workmen or between employers and employers which is
connected with the employment or nonemployment or the terms of
employment or the conditions of labor, of any person” [Section 2(g)].
2. Industrial Disputes Act 1947 :
The Industrial Disputes Act 1947 is the basic legislation concerning
industrial adjudication in India. The Act provides a basic legal framework
for dealing with industrial disputes and their settlement. It aims at
improving the service conditions of the industrial workforce and peace and
harmony in the industrial sector. Minimizing conflict between
management and workmen and ensuring social justice come under the
purview of this Act. Comprehensive provisions have been made both for
the settlement of disputes and prevention of disputes in certain industries.
The Act which came into force on 01st April, 1947 introduced the
principle of compulsory conciliation and adjudication of industrial
disputes in certain c ases and created two new institutions namely: Works
Committee and Tribunal.
The Act defines industrial disputes as “any dispute or difference between
employers and employers or between employers and workmen or between
workmen and workmen which is connected with the employment or non -
employment or the terms of employment or with the conditions of labor of
any person [Section 2(K)]. Where any employer discharges, dismisses,
retrenches or otherwise terminates the services of an individual workman,
any dispute or difference between that workman and his employer
connected with or arising out of, such discharge, dismissal, retrenchment
or termination is deemed to be an industrial dispute notwithstanding that
no other workman nor any union of workmen is a party to the dispute
[Section 2(k), 2A].
Industry under the Act is defined as “any systematic activity carried on by
co-operation between an employer and his workmen (whether such
workmen are employed by such employer directly or by or through any
agency including a contractor) for the production, supply or distribution of
goods or services with a view to satisfy human wants or wishes (not being
wants or wishes which are merely spiritual or religious in nature) whether
or not (a) any capital has been invested for th e purpose of carrying on such
activity or (b) such activity is carried on with a motive to make any gain or
profit and includes (i) any activity of the Dock Labor Board established
under the Dock Workers Act, 1948 and (ii) any activity relating to the
prom otion of sales or business or both carried on by an establishment but
does not include amongst other things any agricultural operation except
integrated agricultural operations, hospital or dispensaries, educational,
scientific, research or training instit utions, khadi or village industries, any
domestic service. munotes.in

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76 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – I The authorities for prevention or settlement of disputes under the Act
include (1) Grievance Settlement Authority, (2) Works Committee (3)
Conciliation Officer, (4) Board of Conciliation, (50 Court of Inquiry, (6)
Labor Court, (7) Tribunal, (8) National Tribunal and (9) Arbitrator. The
Labor Court, Tribunal and National Tribunal are authorities for
adjudication of industrial disputes whereas Conciliation Officer and Board
of conciliation are concili ation authorities. Cases of voluntary arbitration
are referred to Arbitrator. Grievance Settlement Authority is intended to
deal mainly with individual disputes. Works Committee is a machinery for
the prevention of industrial disputes.
3. Workmen’s Compens ation Act, 1923:
The first step in the direction of social insurance was taken by the
Government of India in 1923 by passing the Workmen‟s Compensation
Act. The Act imposes an obligation on employers to pay compensation to
workers for accidents arising out of and in the course of employment,
resulting in death or total or partial disablement for a period exceeding
three days. The Act is applicable to all categories of workers employed for
the purpose of employer‟s trade or business. No compensation is payab le
if the injury not resulting in death is caused by the fault of the worker e.g.,
due to influence of drinks, drugs, willful disobedience of an order etc.
Compensation is payable in the case of workers who contract occupational
diseases. Compensation is p ayable for death, permanent total disablement,
partial disablement and temporary disablement. The Act is administered
by the State Governments through Commissioners for Workmen‟s
Compensation. The Act does not apply in areas where the Employees‟
State Insu rance Act operates. Employees drawing a salary of Rs.4000/ - or
less per month are eligible for compensation. The minimum amount of
compensation is Rs.80, 000 for death and Rs.60,000/ - for permanent total
disablement. For funeral expenses Rs.2500/ - is paid.
4. Industrial Employment (Standing Orders) Act, 1946 :
The Act applies to every industrial establishment employing 100 or more
workmen but the Central and State governments can apply the provisions
of the Act to any industrial establishment employing less than 100
workmen. However, a two months‟ prior notice by notification in the
official gazette is necessary. The Act does not apply to (i) industries
covered by relevant sections relating to standing orders (Chapter VII)
under the Bombay Industrial Relatio ns Act, 1946 and (ii) industrial
establishments except those under the control of the central government to
which the Madhya Pradesh Industrial Employment (Standing Orders) Act,
1961 applies.
The appropriate government is the central government in respect of
industrial establishments under the control of the central government or a
railway administration or in a major port, mine or oil field and state
government in all other cases [Section 2(b)]. The employer of every
industrial establishment covered under the Act is required to submit to the
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77 Trade Unions and Industrial Relations in India for adoption in his industrial establishment. The draft should make
provision for every matter set out in the Schedule and where model
standing orders have been prescribed it should be in conformity with the
model. The Schedule of the Act includes the following:
1. Classification of workmen (permanent, temporary, apprentice,
probationers or badlis). Manner of intimating workmen periods and
hours of work, holidays, pay -days and wage rates.
2. Shift working, attendance and late coming. Conditions of, procedure
in applying or and the authority which may grant leave and holidays.
Requirement to enter premises by certain gates and liability to searc h.
3. Closing and re -opening of sections of the industrial establishment and
temporary stoppage of work and the rights and liabilities of the
employer and workmen arising there from.
4. Termination of employment and the notice thereof to be given by th e
employer and workmen.
5. Suspension or dismissal for misconduct and acts or omissions which
constitute misconduct.
6. Means of redress for workmen against unfair treatment or wrongful
exactions by the employer or his agents or servants and any other
matter which may be prescribed. The certifying officer is required to
forward a copy of the draft standing orders to the trade union of
workmen, if any, or where there is no trade union to the workmen in
the prescribed manner together with a notice in the prescribed form
for raising objections. After making the required modifications, the
certifying officer will certify the draft standing orders and send copies
of the same to the employer and the trade union or the representatives
of workmen within seven da ys of certification [Section 5].
5. The Factories Act, 1948 :
The Factories Act, 1948 regulates service and working conditions of
workers in India. Under the Act, a factory has been defined to include all
industrial establishments employing ten or more wor kmen where power is
used and twenty or more workmen in all other types of industrial
establishments. The Act deals with the basic minimum facilities relating to
health, safety and welfare of workers. A worker is one who is employed in
the establishment and engaged in the manufacturing process directly or
through some agency for wages or otherwise. The concept of employment
involves employer, employee and a contract of employment. The
employer is one who employs or engages the services of another person
while employee is the one work works for another and the employment is
the contract of service between the employer and the employee subject to
the control and supervision of the employer.
The Factories Act 1948 prescribes the procedure for approval, licensing
and registration of factories. The Factories Act, 1948 is generally munotes.in

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78 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – I applicable to all factories as defined under the Act. Chapter 5 of the
Factories Act deals with labor welfare. Sections 11 to 20 of the Act deals
with the health of the workers. Sections 21 to 41 deal with the safety of the
workers and Sections 42 to 50 deals with the welfare of the workers.
Provisions pertaining to health, safety and welfare are as follows:
1. Sections 11 to 20 Dealing with Health of the Workers.
2. Sections 21 to 41 Dealing with Safety of the Workers.
3. Sections 42 to 50 Dealing with Welfare of the Workers.
7.6 SUMMARY 1. Employers‟ Associations in India are operating at three different
levels and in three different capacities. The three levels are local,
regional and national. There are also industry level 219 employers‟
associations in the cotton and jute textile industry and also in the
engineering, cement, and paper and sugar industries.
2. Section 2(q) of the Industrial Disputes Act 1947, defines a strike as “a
cessation of work by a body of persons employed in any industry
acting in combination or a concerted refusal under a common
understanding of a number of persons who are or have been so
employed to continue to work or to accept employment.”
3. Under t he Industrial Disputes Act, 1947, a “Lockout” means the
closing of a place of business or employment or the suspension of
work or the refusal by an employer to continue to employ any number
of persons employed by him.
4. An employer intending to close do wn an industrial establishment
under Section 25K of the Industrial Disputes Act 1947, has to apply to
the appropriate government at least 90 days before the date on which
the intended closure is to become effective for prior permission to
close down his un dertaking. The application must state clearly the
reasons for intended closure of the undertaking. A copy of the
application is also to be served simultaneously on the representatives
of the workers concerned. Permission for closure is not necessary in
case of undertakings set up for the construction of buildings, bridges,
roads, canals, dams or other construction work.
5. In addition to wages paid to the employees, the employer also pays a
part of the profits to the workers on a yearly basis. While Bonus is
paid on a yearly basis as a matter of statutory requirement under the
Payment of Bonus Act 1965, profit sharing between the employers
and the employees is a matter of proactive and enlightened
management. Profit sharing is based on an agreement between the
employer and the employees.
6. Worker‟s participation in management has to be at the following three
levels: a. At the shop level b. At the departmental level c. At the top -munotes.in

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79 Trade Unions and Industrial Relations in India level Workers participation influences the decision -making authority
at thes e three levels with regard to policy formulation and execution.
Further, participation results in the voluntary acceptance of the
responsibilities by workers. 220
7. Important legislations influencing industrial relations in India are the
Trade Unions Ac t 1926, the Industrial Disputes Act 1947, the
Industrial Employment (Standing Orders) Act 1946, the Factories Act
1948 and the Workmen‟s Compensation Act 1923.
7.7 QUESTIONS 1. Comment on the role of Employers‟ organizations in Labour
Management relations .
2. Describe the role of Tripartism in Industrial Relations in India.
3. Describe labour legislation affecting industrial relations.
4. Explain the pre and post reform scenario of labour policy in India.


*****

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80
8
ROLE OF THE STATE IN INDUSTRIAL
RELATIONS IN INDIA – II
Unit Structure
8.0 Objectives
8.1 Workers Participation in Management
8.2 Voluntary Retirement Schemes
8.3 Social Security Measures
8.4 Unemployment Insurance
8.5 Occupational Safety and Health M anagement Systems
8.6 India and ILO
8.7 Summary
8.8 Questions
8.0 OBJECTIVES  To know the workers participation in management.
 To study the Voluntary Retirement Schemes.
 To study the social security measures.
 To know about unemployment insurance.
 To study f unctions of ILO.
8.1 WORKERS PARTICIPATION IN MANAGEMENT 8.1.1 Meaning:
The special advisory committee set up by the Government of Jamaica
defined workers participation in management as “the extension of
individual‟s human rights at the work place”. It f urther stated that the
procedures, rules and styles of management should bring recognition,
treatment and attention to the worker as a human being and not as a mere
statistical unit of production.
Workers participation in management seeks to bridge the ga p between
managerial and operative functions by authorizing the workers to take part
in managerial functions. Workers participation in management has to be at
the following three levels:
1. At the shop level.
2. At the departmental level. munotes.in

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81 Trade Unions and Industrial Relations in India 3. At the top level.
Workers participation influences the decision making authority at these
three levels with regard to policy formulation and execution. Further,
participation results in the voluntary acceptance of the responsibilities by
workers.
8.1.2 Structure:
The scheme of workers participation in management consists of
committees, councils and the appointment of Worker Directors. The
committees and councils are joint bodies in which the management
representation is either absent or proportionately less than tha t of the
workers. The elected representatives of the workers are the members of
the committees and councils. The arrangement of worker Directors
provides that the association of workers should send their representatives
on the Board of Directors.
8.1.3 Objectives:
The following are the objectives of the scheme of workers participation in
management:
1. Promote increased productivity for the greater benefit of the
enterprise, employees and the community.
2. To create a better understanding between the worker and their role in
the working of the industry and the process of production.
3. To satisfy the workers need of self expression leading to industrial
peace, better relations and increased co -operation.
The basic objective of the scheme of workers participation in management
is to bring about a change in the attitudes of the parties so that mutual
suspicion is replaced by mutual trust, antagonism by understanding and
stable industrial peace is established. Thus the most significant objective is
to improve industrial relations.
8.1.4 Evolution of Workers’ Participation In Management In India :
The scheme of workers participation in management in India was
sponsored by the Government of India. The demand for participation in
management never came from the trade unions. Section 3 of the Industrial
Disputes Act, 1947 empowered the central and state governments to order
employers of industrial establishments employing 100 or more workmen
to constitute Works Committees. In 1947, according to the Industrial
Truce Resolution adopted at the Industries Conference, Unit Production
Committees were recommended to be set up in industrial establishments
for promoting the efficiency of workers and improving production. Under
the industrial policy resolution of 1948, t he Government of India accepted
the need for establishing bipartite production committees. In 1958, the
scheme for Joint Management Councils was introduced. In 1977, WPM
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82 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – II sector. In 1976, Article 43 A was inserted in the Indian Constitution under
the Directive Principles of State Policy. Article 43 A of the DPSP states
that “the State shall take steps by suitable legislation or any other way to
secure the participation of workers in the ma nagement of undertakings,
establishments or other organizations engaged in any industry.” In 1983, a
new scheme of Employees‟ Participation in Management for public sector
undertakings was introduced. In 1990, a comprehensive bill in respect of
WPM was int roduced in the parliament. The bill is yet to be passed.
The following are the main schemes of WPM implemented in India:
1. Works Committee, 1947.
2. Joint Management Councils, 1958.
3. Board Level Participation, 1970.
4. Shop Councils and Joint Co uncils under old 20 point program, 1975.
5. Unit Councils and Joint Councils in Commercial and Service
organizations in the public sector, 1977.
6. Institutions of Employees‟ Participation in Management for Public
Sector Undertakings, 1983.
7. Joint Councils in Government services, 1956 and
8. Institutions in some private sector enterprises.
8.2 VOLUNTARY RETIREMENT SCHEMES Under this scheme, the employee is offered to retire voluntarily by the
industry before the date of retirement. Voluntary retir ement schemes are
adopted to reduce the number of employees. Workers, officers of industry
associations, officers of co -operative societies etc. can take voluntary
retirement. Both public and private sector enterprises can offer voluntary
retirement scheme . This scheme is also known as "Golden Handshake".
By voluntary retirement, the strength of the employees is reduced, thus
reducing the overall cost of the enterprise. There are many rules and
regulations under voluntary retirement. One of the most basic r ules is that
a retiring employee cannot apply to another industry related to the same
industry.
8.2.1 Objectives:
The main objective of the scheme is to reduce the number of employees in
the industry who are unable to pay their salaries due to financial
constraints. The company can reduce costs by proposing voluntary
retirement. Under this scheme, many benefits are also offered to the
employees, such as rehabilitation facilities to the employees, advice on
managing funds etc. which will automatically improv e their income.
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83 Trade Unions and Industrial Relations in India 8.2.2 Features:
1. Under the scheme, employees are offered voluntary retirement from
the service. This retirement occurs before the date of retirement.
2. Voluntary retirement is not a form of forced retirement. Leaving or
retaining a jo b is entirely in the hands of the employees.
3. The voluntary retirement scheme is applicable only to those
employees who have completed 10 years of service or have completed
40 years of age.
4. The scheme is offered by both public and private sector ent erprises.
5. This scheme is also known as "Golden Handshake".
6. Through voluntary retirement of employees, the number of enterprises
is reduced to reduce costs.
7. A person retiring voluntarily is not allowed to apply in another
industry related to the same industry.
8. Various benefits like rehabilitation facilities, coun selling etc. are
provided by the industry to the person retiring voluntarily.
9. Retired employees are also compensated which is tax free up to a
certain amount.
10. Provident funds and allowances are paid to the employees at the time
of retirement.
8.2.3 Compensation:
i) Compensation under voluntary retirement scheme is calculated on the
last drawn salary of the employee.
ii) The payment made by the industry is equal to 3 months‟ salary of
each full year of service of the employee or the salary of the employee
at the time of retirement is multiplied by the service of the month
remaining before the original date.
iii) In the case of Public Sector Banks, the compensation is calculat ed on
the basis of 45 days salary for each year of service or salary for the
remainder period whichever is less.
8.2.4 Advantages:
i) The employee's 45 days salary for each completed service or the
monthly salary at the time of retirement whichever is les s is
multiplied by the month remaining before the normal date of service.
ii) The employee also receives provident fund and gratitude payments.
iii) Compensation received at the time of voluntary retirement is tax free
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84 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – II iv) Employees also offer benefit packages to employees opting for
voluntary retirement.
8.2.5 Eligibility:
i) The age of the applicant should be at least 40 years.
ii) The applicant should have been working in the industry for at least 10
years.
iii) With the exception of directors of co -operatives or co -operative
societies, only employees of co -operative societies can avail the
benefits of this scheme.
8.3 SOCIAL SECURITY MEASURES Social security measures have a twofold significance for every developing
count ry. First, social security is an important step towards the goal of a
Welfare State in which the living and working conditions of the people are
improved and are protected against the uncertainties of the future. Second,
social security is important in str engthening the industrialization process.
It enables workers to become more efficient and reduces wastage on
account of industrial disputes. Person -days lost on account of sickness and
disability is also reduced. Lack of social security hinders production and
prevents the formation of a stable and efficient labor force. Social security
is therefore a wise investment which gives good dividends in the long run.
In India, the Central Government had taken the following social security
measures to provide protec tion to industrial workers:
1. Workmen‟s Compensation Act, 1923
2. Employees‟ State Insurance Act, 1948
3. Coal Mines Bonus Scheme and Provident Fund Act, 1948
4. Dock Workers (Regulation and Employment) Act, 1948
5. Plantation Labor Act, 1951
6. Employees‟ Provident Fund Act, 1952
7. Assam Tea Plantation Act, 1955
8. Maternity Benefit Act, 1961
9. Seamen‟s Provident Fund Act, 1966 161
10. Employees‟ Family Pension Scheme, 1971
11. Survivorship Pension Scheme
12. Old Age Pension Sche me
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85 Trade Unions and Industrial Relations in India 14. Employees‟ Deposit Linked Insurance Scheme, 1976
1. Workmen’s Compensation Act, 1923 :
The first step in the direction of social insurance was taken by the
Government of India in 1923 by passing the Workmen‟s Co mpensation
Act. The Act imposes an obligation on employers to pay compensation to
workers for accidents arising out of and in the course of employment,
resulting in death or total or partial disablement for a period exceeding
three days. The Act is applica ble to all categories of workers employed for
the purpose of employer‟s trade or business. No compensation is payable
if the injury not resulting in death is caused by the fault of the worker e.g.,
due to influence of drinks, drugs, willful disobedience of an order etc.
Compensation is payable in the case of workers who contract occupational
diseases. Compensation is payable for death, permanent total disablement,
partial disablement and temporary disablement. The Act is administered
by the State Government s through Commissioners for Workmen‟s
Compensation. The Act does not apply in areas where the Employees‟
State Insurance Act operates. Employees drawing a salary of Rs.4000/ - or
less per month are eligible for compensation. The minimum amount of
compensati on is Rs.80,000 for death and Rs.60, 000/ - for permanent total
disablement. For funeral expenses Rs.2500/ - is paid.
2. Employees’ State Insurance Act, 1948 :
The Employees‟ State Insurance Act, 1948 is yet another step in the
direction of social insurance in India. The Act provides certain benefits to
employees in case of sickness, maternity and employment injury and
applies to all factories run with power and employing more than 10
persons or factories run without power but employing more than 20
persons. The Act does not apply to seasonal factories and covers workers
whose wages do not exceed Rs.4000/ - per month. The Act is administered
by the Employees/ State Insurance Corporation. The Scheme of Insurance
is financed by the Employees‟ State Insurance Fund raised through
contribution from employers and employees and grants, donations and
gifts from the Central and State Governments, local authorities or any
other individual or body. The employers contribute four per cent of the
wages payable to the employee s covered and the employees contribute at
the rate of 1.5 per cent of their wages. The State Governments contribute a
minimum of 12.5 per cent of expenditure on medical care.
3. Coal Mines Bonus Scheme and Provident Fund Act, 1948 :
The Act is applicable t o all coal mines in the country except Jammu and
Kashmir. There are four coal mines bonus schemes operating in the States
having coal mines. The schemes provide an incentive to the workers to be
more regular in attendance and thereby provide a stable labor force in the
coal mining industry. In order to reduce absenteeism, provision for
payment of quarterly bonus is made for those workers who put in specified
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86 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – II The scheme applies to all emp loyees in the coal mines whose monthly
basic earnings do not exceed Rs.730. Bonus is not payable to workers
employed by or through a contractor on construction of roads and
buildings. The schemes (other than the Assam Schemes) require the
payment of a quar terly bonus at 10% of basic earnings in the quarter
provided certain conditions relating to minimum attendance are fulfilled.
The bonus is payable within two months of the quarter. The responsibility
of the administration of the scheme is on the Chief Labo r Commissioner.
4. Dock Workers (Regulation and Employment) Act, 1948 :
The safety, health and welfare of the dock workers are covered by the
Indian Dock Workers Regulation, 1948. The Act is in operation in the
major ports of Bombay, Calcutta, Madras, Vish akhapatnam, Cochin,
Mormugao and Kandla. The workers are broadly divided into monthly and
reserve pool workers. The monthly workers are regular workers and enjoy
security of employment. The other category of workers are registered in a
pool and employed th rough the Dock Labor Boards. The Dock Workers
are provided at least eight holidays with pay in a year. They are employed
by rotation to ensure equal opportunities of employment for all the pool
workers. The workers enjoy benefits of provident fund and grat uity.
Separate housing schemes have been drawn up for them. They are also
given medical facilities and certain concessions in the matter of their
children‟s education. Canteen and fair price shops are also provided for
them.
5. Plantation Labor Act, 1951 :
Labor in plantation is entitled to medical health, maternity and other
benefits under the Plantation Labor Act, 1951. The Act provides for
setting up garden, hospital, group hospitals and dispensaries for treatment
of plantation workers and their families . Sick leave of 14 days to
plantation workers is given provided sickness is certified. During the
period of leave, the workers are 163 paid @ 66% of their daily average
earnings. Benefits such as medical, health and maternity are provided to
plantation wor kers under the Act.
6. Employees’ Provident Fund Act, 1952 :
The Act provides for setting up of compulsory provident funds for
employees in factories and other establishments. The purpose of the Act is
to provide Social Security to employees after separati on or retirement or
for his dependents in case of early death. The rate of contribution payable
by the employers and the employees under the Act is 8.33 % of pay. This
rate was revised to 10% by the Central Government in respect of
establishments employing 50 or more persons. Under the Scheme,
employers are required to maintain a contribution card for each employee
and these cards are subject to inspection by the EPF commissioner. Each
employee is entitled to interest on the amount deposited in the fund. In
case of death of a member, amount standing to his credit is to be paid to
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87 Trade Unions and Industrial Relations in India partial withdrawals to subscribers in situations like illness, invalidation etc
and to provide funds to enable them to discharge their social
responsibilities like marriage of sister/brother/daughter/son or higher
education of children or construction of house.
7. Assam Tea Plantation Act, 1955 :
The Act covers all categories of employees in tea plantations in Ass am.
The employees‟ contribution is 8% of the wages with a matching
contribution by the employers. A group insurance scheme was introduced
for the provident fund members in 1963. Under the scheme a blanket
policy was taken by the Board for all provident fun d members of the age
group 18 -40. Male members are covered for Rs.500, women for Rs.250
and staff for Rs.1000 each. Insurance premium is deducted from the
provident fund of the members by the Board of Trustees. Under a national
agreement, Rs.135 is payable as bonus to each worker employed in
plantation in Assam since 1956. A pension fund scheme was introduced in
1967. The scheme provides for payment of pension benefits to plantation
workers in addition to the Provident Fund. Pension is paid from the
accumul ated undisbursed interest amount of the Provident Fund.
8. Maternity Benefit Act, 1961 :
In order to remove the differences relating to maternity provisions under
the various maternity benefit Acts of the Central and State Governments,
the Central Governme nt passed a new Act called the Maternity Benefit
Act of 1961. The Act is applicable to those establishments where the
Employees‟ State Insurance Act is not applicable. The 1995 amendment to
the Act provided six weeks leave with wages to women employees in
cases of medical termination of pregnancy, two weeks leave with wages to
women employees who undergo tubectomy operation and leave with
wages for a maximum period of one month in case of illness arising out of
medical termination of pregnancy or tubectomy. The Maternity Benefit
(Amendment) Act 1995 came into force on 01st February, 1996.
9. Seamen’s Provident Fund Act, 1966 :
The problems of seamen working on board of the ships for small periods
re of a special nature and hence the Seamen‟s Provident Fund ac t was
passed in 1966. Every seaman engaged or employed as a member of the
crew of a ship under the Merchant Shipping Act of 1958 but excluding
certain categories of officers and other employees were covered by the
scheme. Every employer covered under the A ct is required to contribute to
the fund for the period from July 1964 to July 1968 @ 6% of the wages
paid and thereafter @ 8% in respect of each seaman employed by him. A
matching contribution should be made by the seaman.
Since the provident fund measure is not considered adequate for the
contingencies of death or invalidity, the National Commission of Labor,
1969 recommended conversion of a part of Provident Fund into
retirement -cum-family pension. Accordingly, the Government of India
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88 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – II covered by the Coal Mines Provident Fund Act 1948, Employees
Provident Fund Act 1952 and Assam Tea Plantation Act 1955.
10. Employees’ Family Pension Scheme, 1971 :
The Employees Provident Fund Act, 1952 was amended to provide for
introduction of Employees Family Pension Scheme in 1971. The scheme
provides long term protection to the family of the workers who dies
prematurely in service. It is applicable compulsorily to all the member of
employees Providen t Fund Scheme. The benefits available under the
scheme were family pension, life assurance benefits and retirement cum -
withdrawal benefits. The Scheme was further amended in 1995 and
renamed as “The Employees Pension Scheme 1995”. The new scheme is
aimed a t providing economic support during old age and survivorship
coverage to the member and his family. Employer‟s contribution of 8.33%
is credited to the Pension Fund. The Central Government‟s contribution is
1.16% of the wages of the employees. The scheme i s compulsory for all
persons who were members of the Family Pension Scheme, 1971 and also
for those who became members of the Employees‟ Provident Fund from
16 November 1995 that is the date of the introduction of the new scheme.
11. Old Age Pension Scheme
The States of UP, Kerala, Andhra Pradesh, Bihar, Tamil Nadu, Punjab,
West Bengal and Rajasthan have introduced Old Age Pension schemes.
The objective is to help needy persons who have no source of income.
These schemes have statutory backing and provide pension to destitute
aged 60 and above with no income or source of income or relative to
support them. The amount of old age pension is however very small and
negligible.
12. Old Age Pension Scheme in the Public Sector :
The industrial employees of the Sta tes and the Central Government are
entitled to non -contributory pension as a part of their service conditions.
Under the Central Government‟s family pension scheme 1964, an
employee who retires in the normal course gets a pension which is
recurring till de ath and also lump sum in the form of gratuity. In the event
of his death, his dependents become entitled to family pension and
gratuity.
13. Payment of Gratuity Act, 1972 :
The Act is applicable in the entire country. It applies to every factory,
mine, oil field, plantation, port and railway company, shop or
establishment and other establishments in a State in which ten or more
persons are employed. The Act covers all employees who are employed to
do any skilled, semi -skilled or unskilled, manual, supervisor y, technical or
clerical work. The Act does not apply to such a person who holds a post
under the Central or State Government and is governed by any other Act
or by any rules providing for payment of gratuity. The Act was amended
in the year 1994 to remove the wage ceiling of Rs.3500/ -. munotes.in

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89 Trade Unions and Industrial Relations in India An employee covered under the Act is entitled to gratuity on the
termination of his employment on his superannuation, retirement,
resignation, death or disablement.
14. Employees’ Deposit Linked Insurance Scheme, 1976 :
The L abor Provident Fund Laws (Amendment) Ordinance 1976 was put
into force to introduce a new social security scheme known as the Deposit -
Linked Insurance Scheme to provide insurance cover to the members of
the Coal Mines Provident Fund and the Employees‟ Prov ident Fund
without payment of any premium by such members. The Ordinance
provides that in case of death of an employee who subscribes to provident
fund covered under the Employees‟ Provident Fund Act 1952, the
employee entitled to receive his provident fun d money would also be
entitled to an additional payment equivalent to the „average balance‟ with
provident fund of the dead person during the preceding twelve months.
The benefit amount payable shall be Rs.15000 plus 25% of the amount in
excess of Rs.l5000 subject to a ceiling of Rs.25000. The minimum average
balance required to be eligible is Rs.500/ - during the last 12 months over
during the period of his membership, whichever is less. The employers
and the Central Government are required to contribute at the rate of 0.5
and 0.25% respectively of the wage bill of the employees every month.
The Government also introduced a pension scheme for the benefit of
provident fund subscribers.
Conclusion:
A scheme of unemployment insurance and a scheme of Comprehens ive
Integrated Social Security are under the consideration of the Government
of India. All existing measures of social security can therefore be
considered as piece meal efforts. Further, the existing schemes of social
security covers only organized worker s which constitute only a small
fraction of the workforce in India. A scheme of unemployment insurance
for those who are involuntarily unemployed must come in force to provide
meaningful social security to the workers in India. A comprehensive
scheme of in tegrated social security is required to cover all categories of
population in the country.
8.4 UNEMPLOYMENT INSURANCE Unemployment has always been a major problem in India, leading to
major problems such as rising crime rates and suicide rates. According to
a report by the Centre for Monitoring Indian Economy (CMIE), as of
March 2018, 31 million people in India are unemployed. Unemployment
in India has not improved. In such a scenario, many experts have
questioned the existence and viability of unemploymen t insurance.
Under unemployment insurance, the insured gets benefits if they lose their
job without any guilt. This insurance is provided primarily by the
government and not by insurance companies, and benefits may be
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90 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – II help them get an insurance claim for unemployment. In the situations such
as self -employment or voluntary unemployment, the person is not eligible
for any claim.
The majority of the Indian population is unaware of th is, but the Indian
government provides benefits to the unemployed. India's labour laws are
designed to ensure the welfare of the country's working population. Many
benefits are provided to employees under the Labour Act and insurance
benefits are provided under the Employees State Insurance Act, 1948.
Awareness of these benefits is very low, and therefore the majority of
unemployed citizens in India cannot avail these benefits. Rajiv Gandhi
Shramik Kalyan Yojana (RGSKY) is an insurance scheme provided by th e
Government of India to the unemployed.
8.4.1 Rajiv Gandhi Shramik Kalyan Yojana (RGSKY)
The RGSKY scheme was launched by the Central Government on April 1,
2005. All employees are entitled to these benefits under the Employees
State Insurance (ESI) Act. Employees are paid benefits if they become
unemployed involuntarily. This may be due to workplace injury and
increased disability due to business closure. The benefits of the scheme
and other terms and conditions are revised from time to time. This is a
policy designed for the benefit of Indian youth in the view of the rising
unemployment in the country.
8.4.2 Features of RGSKY
 Individuals with three years of experience under ESI Act are eligible
for benefits under RGSKY.
 Allowances are provided for a maxim um period of 1 year.
 Insurance claims are made within 6 months of becoming unemployed.
 Medical benefits are provided to the insured and his / her family
during these 24 months.
 Allowance provision stops as soon as the beneficiary starts work.
 Unemployment insurance cannot be provided by a private insurance
company due to rising unemployment rates. The government needs to
take initiative in this regard. Although the policy was introduced in
2005, it did not reach the general public, where public awareness is
most needed.
8.5 OCCUPATIONAL SAFETY AND HEALTH MANAGEMENT SYSTEMS Occupational hazards are a risk associated with employment. More than
1.8 lac workers die every year due to occupational accidents and diseases
and 110 million workers are affected by empl oyment related injuries. munotes.in

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91 Trade Unions and Industrial Relations in India Prevention is always better than cure. Occupational health is a preventive
measure taken to prevent and pre -empt all possible accidents and diseases
that workers may otherwise go through in employment. The International
Labor Organ ization vide its recommendations has influenced governments
across the world to enact legislation on occupational health services. In
1981, the ILO adopted a convention and recommendation on occupational
safety and health and the working environment which defines a national
policy and action to be developed at the level of the industrial units.
The objectives of occupational safety are as follows:
1. Ensure protection to workers against health hazards arising out of
work and the work environment.
2. Ensure the physical, psychological and mental welfare of the workers.
The functions of occupational health services are as follows:
1. Identification of occupational hazards and diseases and suggest
preventive as well as controlling measures.
2. To ensur e safe exposure limits to hazardous work processes by
rotating the workers periodically so that no single worker is exposed
to his or her own detriment.
3. To impart health education to all workers.
Occupational health and safety is greatly neglected in India due to the
relative backwardness of the Indian economy. This is very true of the
unorganized sectors of the economy where the workers are thoroughly
exposed to all kinds of hazards without any kind of protection at the work
place or any kind of comp ensation to the workers if they suffer from
accidents or diseases. The National Commission on Labor, 2002 has
recommended a comprehensive legislation for the workers working in the
unorganized sector. Once the legislation is put in place, occupational
health and safety will be greatly improved in Indian industries.
Occupational Diseases :
Occupational diseases are relatively less known to the people. Since
occupational diseases afflict only a small minority of workers, there is no
effective cure available f or occupational diseases. However, occupational
diseases can be prevented if effective protective and preventive measures
are taken in the industries. Occupational diseases can be defined as those
diseases which arise out of or during the course of employm ent.
Some of the occupational diseases are as follows Asbestosis, Silicosis,
Bagassois, Byssionosis, Caisson Disease, Coal Miners‟ Pneumoconiosis,
Telegraphists‟ Cramp, Lead Poisoning, Phosphorous Poisoning, Anthrax,
Mercury Poisoning, Manganese Poisoning etc.
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92 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – II 8.6 INDIA AND ILO The ILO was established on 11th April, 1919 as part of the League of
Nations. India is a founder member of the ILO. At present, the ILO has
175 members. It is a tripartite institution consisting of representatives of
Governments, E mployers and Workers of the member countries. The
membership of the ILO ensures the establishment and growth of tripartite
system in the member countries.
8.6.1 Aims and Objectives of the ILO :
The aims and objectives of the International Labor Organizatio n are as
follows:
1. To remove injustice, hardship and privation of large masses of toiling
people all over the world.
2. To improve their living and working conditions and thus establish
universal and lasting peace based upon social justice.
3. The regulation of hours of work, laying down the maximum work
load for day and week.
4. To give suggestion and recommendations on the prevention of
unemployment.
5. To take suitable steps for protection of the workers against sickness,
disease and injury a rising out of employment.
6. To take steps and give special attention for the protection of children
young persons and women.
7. To take steps for the recognition and implementation of the principle
of equal remuneration for work of equal value.
8. To take steps for the recognition and implementation of the principle
of freedom of association.
9. To make provision for vocational and technical education.
10. To take steps for the protection of interests of those workers who have
been employed in co untries other than their own.
8.6.2 Constitution of the ILO :
The ILO consists of the International Labor Conference, the Governing
Body and the International Labor Office. The Conference is the supreme
deliberative organ of the ILO which meets annually at Geneva which is
the headquarters of the ILO. National representation on the conference
consists of two government representatives and one each from the
employers‟ and the workers‟ organizations. The Governing Body, elected
by the Conference, is the execut ive council composed of 28 government
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93 Trade Unions and Industrial Relations in India Ten Governments hold permanent seats on the Governing Body because
of their industrial importance. They are Brazil, China, Germany, France,
India, Italy, Japan, USA, Russia and UK. The remaining 18 government
seats are elected by the Conference. The International Labor Office is
responsible for collection and distribution of information on subjects
relating to the conditions of Industrial life and l abor, examination of
subjects coming up before the Conference and Committees and
preparation of documents thereon, conduct of special investigations etc. It
publishes the monthly International Labor Review, the fortnightly Industry
and Labor and other peri odicals.
8.6.3 Functions of the ILO :
An important function of the ILO is the formulation of international
standards in the form of International Labor Conventions and
Recommendations. Member countries are required to submit conventions
to their competent national authorities with a view to ratification. If a
country ratifies convention it agrees to bring its laws into line with its
terms and to report periodically how these regulations are being applied.
There is no need for ratification of recommendation s. Member states are
234 obliged to consider them so that their provisions are given effect to by
legislative action. Conventions when ratified have a legal sanction behind
them and compliance to a recommendation is optional for all
governments. The consti tution of the ILO lays down that after a
Convention is adopted it has to be placed before the highest legislative
body for each country within one year or 18 months for ratification in
exceptional cases and if it is not ratified each government has to give
reasons for such non -ratification. The Conventions and Recommendations
together constitute the International Labor Code. The conventions and
recommendations lay down minimum international standards for labor
legislation and other measures.
The following a re the broad subjects under which the conventions and
recommendations can be classified:
1. Basic human rights.
2. Employment.
3. Conditions of work and social policy.
4. Social Security.
5. Industrial relations.
6. Employment of women.
7. Employment of children and young persons.
8. Special categories of workers (e.g. Seaman, Fishermen, Tribal
Workers, Migrant Labor etc).
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94 ROLE OF THE STATE IN INDUSTRIAL RELATIONS IN INDIA – II 10. Tripartite consultation.
The ILO since its inception has adopted more than 180 conventi ons and
more than 190 recommendations. India has thus far ratified 39
Conventions of the ILO.
1. International division of labor and its implications for developing
countries.
2. Role and functions of ILO.
3. Structural adjustment policies and their impact on labor.
8.7 SUMMARY The ILO was established on 11th April, 1919 as part of the League of
Nations. India is a founder member of the ILO. At present, the ILO has
175 members. It is a tripartite institution consisting of representatives of
Government s, Employers and Workers of the member countries. The
membership of the ILO ensures the establishment and growth of tripartite
system in the member countries.
8.8 QUESTIONS 1. What are the objectives of workers participation in management.
2. Explain soc ial security measures.
3. Write note on „Voluntary Retirement Schemes‟.
4. Write note on „Unemployment insurance‟.
5. Explain the aims and objectives of ILO.
6. Explain the functions of the ILO.



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