In defence of TPP - the loss of jobs

The opposition from labour unions in the US ( and labour activists everywhere in the world) to the TPP is that it will lead to the loss manufacturing jobs (read in the US) and therefore it is anti labour. I have some sympathy for the view of the labour unions in the US, but absolutely no sympathy for the "global labour activists".

In every change of  the status quo, including opening up of trade, there will be winners and losers. When international trade is made more easy, by whatever means, the risk of American manufacturing jobs being lost is real. Labour intensive activity will migrate from higher cost locations to lower cost locations - that's an indisputable fact of economics. Therefore there has to be some sympathy for the US unions' opposition to every trade deal with a foreign country.

The balance sheet of wins and losses for the US looks like this. Jobs will be lost, especially in manufacturing. US consumers win in terms of lower costs of products. If international trade were to be substantially reduced, inflation will soar in the US. Prices of all goods will rise to levels which will put them out of reach of many people making it hard for even the poor in the US to enjoy the quality of life they currently have. Increased economic activity leads to rise in taxes for the US government - don't believe all that spin about evil corporations hiding their money overseas ; this is a point I am happy to debate separately. The increased economic activity does create more jobs, but not enough to compensate for the loss of jobs and in any case it is mismatched in terms of skill levels. So the only constituency that has some case for objecting to the TPP ( and every trade deal) is the US labour unions.

The group that deserves utter contempt are the international "labour activists" who are protesting against the TPP.  As we have seen, jobs will be lost in the US, but they will migrate to lower cost, and poorer countries . These are the societies that desperately need economic betterment through jobs.  Secondly, by lowering the cost of labour, there is a defence against machines taking over these jobs. That is why iPhones are still assembled by hand in China and clothes stitched by hand in Bangladesh. In sum total, there are more jobs created and preserved in the world than it would have been if manufacturing were to be done in high costs countries. You would have thought this is in net good for the world.

It is also an indisputable fact that labour is exploited in poor countries.The US, to its credit, through various trade agreements and via the TPP, is trying to minimise this. In particular, US negotiators want TPP members to implement and enforce the 1998 Declaration on Fundamental Principles and Rights at Work of the ILO. This includes the freedom of association, right to collective bargaining, a ban on forced or compulsory labor, the abolition of child labor, and a ban on discrimination in employment. The US also wants countries not to exempt their special economic zones from the labour laws of the rest of their country. These are all sticking points in the negotiations, but this is what the US has been strongly negotiating for.  If there were no TPP, it would be laissez faire for labour exploitation in each country. The TPP at least attempts to get some common protection for labour in every country. And the "international activists" are opposing this.

So yes, international trade will hurt US jobs. It has been doing so for many decades. But if you see it from a global perspective, the world would be a better place with the TPP, than without it. Having said that, I have sympathy for, and would not argue against the opposition of the US trade unions.

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Agree with Red Ed

I never thought I would never agree with anything in Mr Miliband's economic policy. If you are wondering who Mr Miliband (or Red Ed as he is sometimes called) is, he is the head of the Labour Party in the UK. In case you haven't been looking, there is a general election about to happen in the UK, which nobody in the world other than the most dedicated Anglophile (this blogger is one) has even noticed. Such is the UK's relevance in the world today - how far has the Empire fallen.

Red Ed, is called so, because he is just one step short of being a Commie in economic policy. So how is it that I can agree anything at all with him ?

Well, he has just announced that he will control the infamous zero hour contracts that seems to be so popular with big employers in the UK.  I have blogged on this before and I find this practice an abomination.

Zero hour contracts are where you enter into a contract with a company which is as one sided as a contract can ever be. You are bound to the company - you have to come to work as soon as the company calls you. The company is bound to nothing - they don't have to call you even once. You sit every morning by the telephone, not knowing if you have work that day or not. If you are called, you have rush to work. They may call you to work for 1 hour, 3 or 5 or 8 - that is their choice. You have to take it and are paid by the hour. You can't work anywhere else because if you are called and you don't turn up instantly, you are fired. Obviously there are no benefits - no leave, no retirement benefits, no medical benefits, no nothing.

Predictably, Britain's companies are shouting down Red Ed.  They must be ashamed of their two facedness. Why don't the bosses be on zero hour contracts. On the days, when they are goofing around doing nothing, they shouldn't get paid. Not one senior manager in the UK is on zero hours contract. Frankly, they should all be - if they turn up for work only every alternate day, the company would actually do better. In the television interviews that are part of the election campaign, David Cameron, UK's Prime Minister and the leader of the Conservative Party had to admit that he himself could not live on a zero hours contracts. Red Ed has gleefully said that if something is not good enough for UK's Prime Minister, its not good enough for the people !

Both ends of the spectrum relating to employment are wrong. In the Red corner is France - with guaranteed life time employment, a million benefits and no obligation to work (in the public sector, at least). In the Blue corner is the UK where an employee is treated as a piece of shit and not a human being.  Both these systems deserve to be thrown into the dustbin.

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No french fries in Japan

If you go to a McDonald's in Japan, be prepared for no french fries (freedom fries ?). Or, at best, if you smile nicely at the young girl, you might get a small fries. No wolfing down the one tonne abomination called large fries. The end of the world has arrived !! What on earth has happened ?

Well, the problem is not in Japan, but in the US. There is a big mess in the ports on the US West Coast. McDonald's ships frozen fries to Japan through these ports. Shipments are getting massively delayed. McD don't make french fries in Japan at all - all of it is sourced from the US. Hence the problem in Japan.

What is the mess on the US West Coast ports ? Well, almost everything is a mess. They account for more than half of all US maritime trade and the two ports of Los Angeles and Long Beach account for some 40% of US shipping.  There are are a number of problems across all these ports.

Firstly there is a labour dispute going on. The union and the management of these ports have been negotiating for 7 months now and have made no headway. As usual, pay, working hours, etc etc are in dispute. Now the Pacific Maritime Association, the management group, wants President Obama to intervene and appoint a mediator. As if the President has nothing else to do. Solve your problems yourselves, you lot. I thought businesses wanted governments to leave them alone, not intervene. Well, this speaks of the real demands of businesses from governments - leave us alone when the times are good and come in and pick up the pieces when times are bad.

Secondly, as is happening in almost everywhere in the US, infrastructure is not keeping pace. Container ships have doubled in size and yet US ports have made little investments to handle such behemoths. This is a general problem with US infrastructure everywhere - ports, airports, roads, whatever. Everything is slowly going down and there is little money to spend on them. The citizens of the US would rather spend on dropping bombs on others (Defence),  doling themselves out (Social Security) and cossetting the elderly, even if they are comatose (Medicare). The crumbling of infrastructure is slow and therefore incrementally not noticed. It takes an infrequent visitor to see how far the US has slipped. Today, the drive from JFK to Manhattan, is inferior to the drive from Bangalore Airport to Whitefield - and that really says something.

The third problem, of all things, is a shortage of truck chassis to haul containers in and out. I have no idea why this is so. And apparently there are more factors, unique to the region and specific to the industry.

This is a real shame. When economic growth is at a huge premium, surely you cannot afford to lose because of bad planning, poor infrastructure and intransigent unions.

Ah well; Mr Tamaguchi has to simply control his craving for fries. Perhaps the union workers in Long Beach are concerned about his cholesterol levels ! It just goes to show, how in today's interconnected world of business, a completely unrelated problem in one corner of the world might have repercussions in the other corner. And "drastic repercussions" if you are like Mr Tamaguchi looking for his fix.

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Give the unemployed a break

One of the great degrading experiences in life is to be without a job, apply hopefully for one, and not even get a response. The sense of emptiness, the feeling of no hope, is a low point in life. If you are in a position of being able to hire, at least send a rejection note politely worded and pointing out why they didn't fit your requirements. Call as many as possible for an interview (just the mere fact of being called is a climb out of the pit of despair) . Treat them fairly even if you are not going to hire them. Please.

When there is a clear discrimination against you, it becomes even worse, and really hard to bear. All through the past, gender discrimination was a big issue. It's now still there, but has at least reduced, so much so that its not the biggest discriminating factor I believe. Two other categories suffer worse discrimination

- The "old". If you are above 45, you have no hope of getting a new job if you have lost your current one

- Those with a gap in their CV - either because they lost a job and couldn't get another one for some time or , for women, for taking a career break for children.

The former will be the subject matter of a future post, but this time I want to highlight the plight of those who have been unemployed for some time. A month or two is OK. When it crosses six months, then you virtually have lost all chance of  getting another job. This is especially acute in Europe and the US - research after research has shown that those unemployed for 6 months or more don't even get called for interviews even if overqualified for the job.

Obama has struck a deal with US companies who are agreeing to review their hiring practices to eliminate this discrimination. This is a good move in a country where post the financial crisis, many people lost their jobs and have had great difficulty in finding another one.

My argument has long been that companies should actively seek out such people rather than discriminate against them. Other things being equal, people to whom life has dealt a blow, are invariably better workers than those who have had a smooth time. When you have faced the bitter experience of unemployment, you will value the job much more. You work diligently and try your best to keep it rather than go on strike. You have a rounded attitude to life - you are likely to treat colleagues and business partners with more regard and respect. You are likely to take a more long term view. All extremely desirable qualities in employees. My experience in my working life has invariably been this - people who have struggled to get jobs, or who faced personal tragedies or who suffered on some account or the other were, almost without exception, better performers pound for pound. So much so that I started to positively discriminate in favour of them !!

So here is a plea. Treat those applying for a job with greater sensitivity and care. Even if there are 1000 applications for every job. And do not discriminate against the unemployed. Its a small cost to do this and it's the human thing to do. Especially if you mouth inanities as "people are my greatest asset" and crap like that. HR types - are you listening .

Its also a smart thing to do, for you never know when you would be on the other side of this equation.

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The awful Zero Hours Contract

This eminent and good friend has often remarked that I have turned into a socialist (even a communist) in my old age. He claims my writing in this blog is veering constantly to the left. Other readers of my blog ,might wonder, if this is left leaning then what will the true loony left be called. But I know I am going to get a mouthful from him for this post, which is admittedly leftwards tilting.

On matters relating to labour and worker law, I have often argued that countries have brought excessive legislation defending the existing worker and making it expensive to employ any more.Who in his right mind will employ a worker in France, for example. All this misguided legislation only keeps out a large portion of the young out of the workforce. Companies need some flexibility to ramp their worforce up or down based on conditions of their business and marketplace. Minus this flexibility, no modern company is going to hire.

But companies have gone to the other extreme and misused the flexibility to create completely unfair job practices. Take the case of the "Zero Hour Contract" - a British invention and used to the hilt by a wide swathe of so called respectable companies. As a worker you enter into a contract with the employer . but there are no working hours guaranteed, hence the name zero hours contract, You are expected to sit glued to the telephone. When they want you, they'll call you. You have to jump like a jackrabbit and run to the office or factory or store or whatever and you work for the hours they tell you to. You get paid (often the minimum wage) for the hours that you do. Then off you go without knowing whether you have to return tomorrow or not. Back to the vigil by the telephone. During this time, you cannot accept any other employment, even if the phone never rings. And when it rings, if you cannot come to work, you've really lost it and won't get an opportunity for quite some time.

Sports Direct has become the notorious poster boy for this with apparently 20,000 of their total 23,000 employees on Zero Hour Contracts.

This sort of behaviour is why companies and businessmen are hated by the general public, who think they have no scruples or morals in the eternal quest to make more money. Flexibility in the labour pool is one thing. But to keep 90% of your workforce 'flexible" and not even telling them whether they have to come to work tomorrow or not, is surely extreme. There is no business in the world which cannot know how many workers it needs for the next one month at least.  Some sort of rostering is surely possible. And preventing the guy from finding work elsewhere when you have nothing for him, is positively outrageous.

In such an atmosphere, how can there by any training or skills building. What sort of employee commitment can you expect.  Will the worker have one good word to say about the company. And you think this is an efficient business model. And this is a sustainable approach for success . Only a moron can think so.

Peculiarly, one of the organisations discovered to be using this rather widely is Buckingham Place !!  Pip Pip, Your Majesty - this is just not cricket !

Employers have to understand, and demonstrate, that if they want softer laws, they will have to behave reasonably and not exploit. If they can't, or won't, then they should stop moaning about excessively rigid labour laws.

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I want to be a garbage collector

The story that two garbage cleaners in New York were fined and forced to retire after being caught accepting a tip of $ 5 caught my eye.  Not for the reason you might think. This story would provoke hoots of laughter in my country where nothing happens in the public service without a gratuity.  Even in NY, this must be an incredulous story - every man and a dog demands tips shamelessly for just existing in the same space as you. But the real reason this story has prompted this post was buried somewhere in the middle.

 

The two garbage men apparently netted $100,000 each, including overtime. Granted that they had put in long years of service. Granted that they probably earned lots of overtime. But still a wage of $ 100,000 for a garbage collector shows everything that is wrong about the United States. No wonder they lose jobs by the droves to India and China. No wonder unemployment is a stubborn problem.

 

But this post is not to highlight the completely unrealistic pricing for labour in the US, as compared to the world. This post is instead about a global problem - automatic salary increases every year.

 

If you spend enough years on any job, even that of a garbage collector, you will reach levels of $ 100,000. If you start at $ 20,000 a year and get a 5% rise every year , you'll land up with a $100,000 salary in 33 years. That is presumably what happened to these two guys. Imagine the situation in India where anything less than a 10% raise a year leads to a strike. If you start at an annual salary of Rs 5 lakhs, an entry level salary for a qualified graduate,  and keep demanding 10% salary rises, by the time you retire after 35 years, your salary even staying in the same job, will be Rs 1.4 crores.

 

Now you see why there is age discrimination in employment and the older you are, the quicker you are fired. Now you see why there are large scale job losses.

 

Salary levels have to follow some form of a normal distribution over the years, if you stay on the same job.  You start low and as you gain more experience and you become more efficient, your salary should increase. It should probably reach a peak when you are say 40, and then begin a slow decline so that you can remain competitive with the younger folks who are trying to displace you. I know this sounds heretic, but I would rather take cuts in my salary than lose my job altogether. The trick is to price yourself, just a shade below the market rate (not go for the highest salary possible). If that involves annual salary decreases, then so be it.

 

Of course, you can, and should, upskill and move on to a higher value job. But if you stay in the same job, automatic salary increases every year is a one way ticket to losing the job.

 

So, how about negotiating a salary reduction, instead of a raise. At first read this might seem like an insane idea. But think about it .....

 

Its an altogether different matter as to why somebody who was earning $100,000 a year, asked and took a $5 gratuity !

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A tragedy all around

If it wasn't so sad, it would have been a classic case study where everybody was at fault. The Marikana miners strike in South Africa is a disaster where every party - the miners, the company, the unions, the police and the government deserve censure for the way they have conducted themselves.

Here is what happened. One of the platinum mines belonging to the mining giant Lonmin is in the Marikana area in South Africa. In early August there was a flash strike over pay demands. The situation escalated badly and resulted in a violent incident on 16th August when police firing resulted in 34 miners being  killed and 78 injured. Prior to this 2 police officers had also been killed. Since the infamous Sharpeville massacre in 1960, this was the worst violence in South Africa, and certainly the blackest day in the post apartheid era.

The company Lonmin deserves some of the blame. Its workers are poor and live in shantytowns without any decent housing. Since 2001, the price of platinum has quadrupled in the market. And yet the wages of the workers have risen by only a small amount. When profits are soaring and there are not commensurate benefits to employees, the situation is ripe for unrest. Lonmin also appears to have done little by way of social responsibility, and the little it did was often the subject of political patronage. It is impossible to be in an island of profits when surrounded by poverty. With such inequality, the flashpoint was inevitable.

The strike by workers was over a demand to triple their wages. Those of us in India, who remember Datta Samant would recall such absurd demands and militant action. No company is going to triple  wages in one go. There is also no doubt that miners resorted to some violence - two policemen were killed and it appears that their weapons were snatched and used against the police.

The unions were heavily politicised.  The dominant union was affiliated to the ruling ANC and an outsider union of the opposition was trying to break in. One upmanship on taking extremist stands and violence seems to have resulted.

The police have certainly overreacted. Yes two of their own were killed and they seem to have extracted revenge.  They were corralling workers with barbed wire and when threatened, resorted to extreme force with live ammunition. But was the force justified ? There is hardly any industrial dispute in the world where 34 people have been killed.

The government has behaved awfully. For long it has been indifferent to the appalling inequities in South African society and a small black elite has gone very rich through massive corruption. After this incident happened, the public prosecutor arrested some 270 striking miners and charged them with the murder of the 34 under an apartheid era law! The outrage was universal, and they have since had to withdraw and release the miners.

The real tragedy is on those who died - miners and policemen - and the injured. Nothing is going to bring back the dead. Is any business worth the loss of so many lives. And is any cause for agitation worth this price ?

South Africa has a real problem with inequality and seems to have no sensible way to tackle it.  It is of course, a global problem with no easy answers, but in South Africa the problem can be seen at its most acute form. If it does not find even a partial answer, the spectacle of Zimbabwe looms.

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Kyon nahin aaya kal ? (Why didn't you come yesterday ?)

Consider the following employee employer relationship. The post is set in an Indian context, but it could be true of virtually any developing country.

There is no written contract of employment. The worker is paid below that statutory minimum wage. There is no Provident Fund or Employee State Insurance, both of which are statutorily mandated in India. There is no paid leave. Most often, there is no weekly off. Child labour is acceptable. Physical abuse is not unknown. Sexual abuse is ,alas, not rare. Verbal abuse is often. There is no training for the job. There are no rest breaks. The job is monotonous, repetitive, and physically taxing. There is hardly a word of praise or feedback. Biting criticism from the employer is a daily affair.

The workers absent themselves at the drop of a hat. Attrition is enormous; the worker often just absconds or runs away. Coming on time is an alien concept. The worker tries her best to finish faster and with as less effort as possible - quality be damned. 

The employer is usually a lady - ninety percent of the time. She fervently believes that she is the fairest employer of all and all this unsavoury labour practices, which she incidentally tch tches at,  are done by other amazons , not her. And look at how ungrateful her employee is - she bunked today. The beauty is that the employer cannot do without the employee. And yet, such is the treatment.

The employee is also usually a lady - ninety nine percent of the time.  In her opinion, she is the very epitome of decency and hard work and her employer is the perfect example of a Rakshasi (demon).

This is a gigantic industry. There are an estimated 50 m workers in this category globally - some 10m in India and probably an equal number in China. They are to be found all over the developing world. Minus this industry, half the countries in the world would come to a grinding halt.

You would have thought that in such a situation, there would be huge improvements and advancements. Lots of innovation, technology, good practices, corporotisation, etc etc. Not so. The industry is stuck in a time warp. The only change that has happened in the last decade or two is that the worker now carries a mobile phone, instead of being completely non contactable.

Welcome to the world of the maid.

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Salary of $ 25 million and on strike

Just imagine this. You earn a salary of $ 25m a year. And then you go on strike demanding improved wages. Believable ?? You better believe it. Kobe Bryant (arguably the best basketball player in the world, for those readers not familiar with sport), earns that salary, but is on strike from tonight. Actually not just Kobe. Every basketball player who plays in the NBA ( unsporting types - that's the National Basketball Association, which runs the League in the US of A.)

The NBA is a private league. Players have formed a union and there is a collective bargaining agreement every few years. The last agreement expires today. Negotiations with owners of the teams has broken down. No deal; so there is a lock out.

The team owners are losing money. The players claim they aren't getting enough money. Despite the wild popularity of the game. Unlike other American sports such as Football (the American variety) and Baseball, which have limited appeal outside the country, basketball  is wildly popular in Europe, and most important of all, in China. Yet the League loses money. As always, money is at the heart of the dispute.

The issues under negotiations are technical, perhaps only of interest to a die hard NBA fan like myself. Both the owners and the players are driven by absurd greed. The trouble is that there are a lot of others, who depend on the NBA for a living, but who don't have a say in this matter. You would think the players should be the last group that needs a union, but that's the way it is. With the lockout, what's going to happen to the cheerleaders. The ushers and ticket sellers in  the stadiums. The guys who clean the locker rooms. The pretzel sellers. All out of a job and on the dole.

And what about the fan. He's the one who pays all of them - owners and players included. If the millions like me stop following the game, there is no $25m for Mr Bryant. Of all the people the owners and the players are taking for granted, its the fan. The poor little (or big !) Joe Public who is passionate about the game. Who relives every great moment in the sport. Who remembers the famous dunk of Shaq against Portland. Or Jordan's 20 footer in Game 6 against the Jazz with 5.2 seconds to go. Or his 38 points against the unfortunate Jazz, battling flu, dehydration , sick as hell. Even Derek Fisher, the current head of the Players Union winning against the Spurs with a shot taken  0.4 seconds before time expired.

You lot - owners and players alike -  need a bollocking. Pampered rich kids who need to stop throwing tantrums. Don't quibble over small change when you guys are very well off. Get an agreement, lift the lockout.

And may the great game keep flowing.

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Ramamritham goes to the US

Guess which country is this ? The decision on where a company should locate a new factory is made by the unions and the government. The company, which thought it could decide for itself,  is rapped on the knuckles for presuming this right. Where could this be in this day and age - North Korea ? Zimbabwe ? Libya ? Alas, none of these. It is actually the US of A.

The company in question is Boeing. For long it has had factories in the Pacific NorthWest - in the states of Washington and Oregon. It now needs additional manufacturing capacity for making the Dreamliner - the new 787  series that is being launched worldwide.  It set up an additional factory in South Carolina. The unions representing the Washington and Oregon plant workers filed a complaint with the National Labour Relations Board (NLRB). The NLRB upheld the complaint - Boeing was wrong to open a factory in South Carolina !!

The case boggles the mind. Boeing did not shut down any factory or lay off any workers. On the contrary it actually increased its workers at the Northwest factories to run it to full capacity. But instead of building a new factory there, it built it in South Carolina. It could have very well built it in the Northwest. But its problem was that every three years or so the workers there were going on strike and this was severely impacting the company.  The unions complained, and the NLRB upheld this complaint, that "Boeing's actions were motivated by a desire to retailiate for past strikes and chill future strike activity" !

Underneath it all is the big fight between organised labour and business in America. The case of the autoworkers in Detroit is well known. The undercurrent is also the competition between "union shop" states and the "right to work" states. In some states in the US, company workers are forced to join the established unions and pay membership fees by law. Washington and Oregon fall in this category. In other states, workers cannot be forced by unions to become members. South Carolina falls in this group. No prizes for why Boeing, or for that matter, any company, wants to site factories in states like South Carolina.

This being America, Boeing is going to the courts. Lawyers on both sides are rubbing their hands in glee.

A larger trend in America (and more so in Europe) is the rapid expansion of the license raj. Governments and petty bureaucrats are increasingly coming in the way of business, in a manner reminiscent of Ramamritham of India. The Economist in two recent articles has actually used the term "license raj" - you can read them here and here and they make wonderful reading if you are interested in the antics of Ramamritham's ilk.

Ramamritham's counterpart in the UK is called Sir Humphrey Appleby. I now have to invent a name for his American cousin !!

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Water Water everywhere ......

........ Nor any drop to drink, goes The Rime of the Ancient Mariner by Coleridge. He could very well be describing the labour situation in India. It seems to be one of perennial shortage. How can this be ?

After all, India is a land of 1.2 billion people. The unemployment rate is officially at 9.4 %, but we all know that the real number is much higher. This is because of seasonal employment in agriculture and unemployment outside the seasons. Underemployment is even higher - getting some job just to exist, but capable of doing much more. While India's growth is impressive in recent years, it has created nowhere near the number of new jobs required to cater to the number of people entering the job market every year. And India is a young country, not an ageing one. More and more people join the workforce each year.  The unemployment situation is so acute that the government runs a hugely expensive National Rural Employment Guarantee Scheme. And yet, ask any company what their biggest problem is - finding people to work for them and then staying.

At the more skilled levels, this talent shortage is easy to understand. The education system, despite all the improvements in recent years, is woefully inadequate. So talent is in real shortage. That's why you see the scarcity of talent to fill skilled jobs. At any level of skills (I am not talking just of IT here, but plumbers, fitters, draughtsmen, etc) you can command multiple jobs. Employers chase you rather than the other way around.  That is, at least, somewhat understandable.

But what about unskilled jobs - jobs that require no skill at all. Jobs like a security guard who is now ubiquitous in every building. Cleaners, maids, etc. There is a huge shortage of people even here and attrition rates are the highest in this sector (some 10-15% a month !). This foxes me.

There are some reasons for this phenomenon. The obvious one is that  jobs are in urban India while most of the labour is in rural India. While there are a lot of migrant workers, it becomes increasingly a very costly option for the worker due to one simple fact - the cost of housing is simply unaffordable. Even a place in an awful slum living in appalling conditions costs a lifetime of earnings. But another more important reason in my view is the increasing unwillingness to work hard. That's why a Railway clerk position attracts a stampede of applicants, but a field salesman's job in a private company is not so attractive.

There are really only two solutions to balance the demand supply equation. The first is education. On a massive scale. About 10 times the level at which it is today. This is a job for both government and private industry. And secondly to take jobs away from urban into rural areas. The only sector that can do this on scale is manufacturing. A huge lobby, fueled by misguided NGOs, is blocking this by resisting every land transfer from agriculture to industry.

Meanwhile, in this land of 1.2 billion people, we still can't find enough workers to man our jobs.

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Jobs for Life

Jobs for life ?  A quaint and obsolete concept ? Not even dinosaurs would think of such an idea ; Right? Don't snigger. No less a company than Siemens has done just that in Germany.

My first reaction was, of course, what on earth has Siemens done. Has it simply bowed to the pressure of the mighty German trade unions ? The power of trade unions in Germany is well known. The country has adopted a model for a cosy relationship between workers and managements. Confrontations, when they come, are often less intense than might be seen in other parts of the world. Wages are high. Its not easy to lay off workers.And yet Germany remains a massive industrial success; it remains the largest exporter in the world neck to neck with China. 

The arguments for flexibility with work force are well known. But why has Siemens opted for giving jobs for life - and that too in high cost Germany ? There must some arguments on the other side of the debate as well. There surely are.

 

If we turn around the people question to say that employees are "customers" and the employer must give the customer what she wants, then we start  from a different point of view. In the India and China  of today, the employee does not want lifetime employment because of the opportunities that abound. Its a moot point that 30 years ago, in both these societies, lifetime employment would have been a very attractive proposition.  But there are many societies today where lifetime employment would be a very desirable proposition. Worth taking a smaller salaray for the promise of a lifetime employment.

 

The workforce is not a homogeneous mass. Just like we segment customers in marketing, we must segment the workforce population too. There is a segment that will trade off higher wages for stability. If attracting that segment is interesting for the employer, then why not ?? Take a combination of lifetime employment, lower wages, long notice period for employees quitting, employer ability to lay off on grounds of non performance or indiscipline, and you have package not to be sneered at. It will also force employers to take long term views on manufacturing - all too often these days companies set up factories knowing fully well that they will shut them down in 5 years. World supply chains are not all that dynamic - witness the continued manufacturing might of Germany for the last 60 years.

Human motivation is not driven solely by fear. Its not just the threat of losing one's job that makes you work harder. Life gives you a perfect example of this. Its called parenthood. Every parent (alas, bar a few exceptions) would make seemingly irrational sacrifices for his child. Commitment and permanency are not dirty words in life. Neither should they be in business.

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Datta Samantism in China ?

Readers of this blog may be forgiven for not being familiar with the late Dr Datta Samant. He was a fiery trade unionist in Bombay in the 1980s who changed the industrial relations scene in India. His style was extremely confrontational ; he specialized in making demands of 700% wage increases, going on strikes invariably and was prepared for an agreement only upwards of a 100% wage hike. The textile industry in Mumbai was virtually destroyed by him . A few workers benefited when managements caved in to his demands ; but on the whole most, and especially Bombay, lost.

Not as dramatic, but something on those lines is happening in China. There has been a coordinated strike in Honda’s manufacturing plants in southern China demanding wage hikes. Honda increased wages by 24%. Foxconn, the company at the heart of the unfortunate suicides in its plant in Shenzhen , has increased wages by upwards of 30% to reportedly 100% for some. Guangdong Province, the factory to the world, increased its minimum wages by 20%. Industrial disputes have risen manifold in the eastern coastal belt where much of China’s industry is located.

Industrial relations in China is very different to the rest of the world. There is no real organized trade union , unlike in most other countries. Worker rights are usually non existent or trampled upon. Strikes usually cannot happen without “approval”. The average worker has little say ; he can be sacked easily and replaced a dozen times over.

Yet a collective swell of worker activism is happening. This is also the result of demographic changes happening in China at breathtaking pace. The early boom had been fuelled by dirt poor migrant labour fleeing misery in the interior and coming to the coast for what appeared to be the Promised Land. Rapid upliftment from poverty occurred. Now that the escape from poverty has happened, the working community is looking for more. Minimum wages which appeared at first to be a fortune, now appears to be a pittance. Costs have started to rise. China is no longer a “cheap country” – pound for pound, India is now significantly cheaper, leave alone even cheaper places like Vietnam.

Tectonic changes will happen in China I believe. Industry is starting to drift westward as the coast will start to look more and more like a Japan. Some will start to drift out of China altogether. There is no country in the world with the ability to take on the scale of China, so an exodus will not happen, but a drift surely will. The interior of China is still a low cost region, but even that is rapidly changing. China’s manufacturing might is built on low costs, wafer thin margins and huge scale. It can least afford cost escalations of any significance.

For longer term sustainability, wages have to rise, but slowly. Not the Datta Samant variety , but a steady increase each year. This enables aspirations of labour to be met, without destroying the economic model that created the industry in the first place. It also enables productivity and innovation in cost management to kick in to offset wage increase.

Datta Samant is a very bad example for workers to emulate. Wage increases, yes; but sudden massive increase ? NO ! Its not in anybody’s interest.

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Factory Working

The press coverage of the worker suicides at Foxconn is throwing open the debate on China’s challenges as it seeks to continue its economic miracle. If you have not followed the events, last week was the eleventh time this year that one of its workers , at its factory in Shenzhen, committed suicide by jumping from his dormitory. Li Hai was only 19 years old and had worked only 42 days in the factory before he died.

Foxconn is a giant electronics assembling company. Taiwanese owned, its largest factory is in Shenzhen in China. The Shenzhen plant assembles phones for Apple, Nokia, etc etc. It is typical of the industrial might of China – the factory employs some 400,000 workers at its site in Shenzhen and they all live in the factory premises in large dormitories.Its a virtual city by itself. This is the model in China. Migrant workers come from the west to the coastal cities to work and factory complexes are in effect self contained townships. Foxconn is not typical – its huge. Most other factories in the Shenzhen belt are smaller, but the model is essentially the same.

The knee jerk reaction in the press was that the suicides were symptomatic of labour abuse in Chinese factories. But its not as pat as that, I believe. The situation is far more complex.

In the early days of China’s industrial boom, the situation at factories was appalling. Conditions were unsafe, often fatally unsafe, working conditions were horrible, physical abuse was rampant – every horror of modern industrial life, and more, was widely prevalent. But things have changed. Safety is much better. Handling poisons or being forced to inhale toxic fumes is rarer. Wages have risen. Of course there are abuses, but they are not as vicious as they were before,

But it’s a tough tough life for a factory worker. Foxconn was actually one of the better employers. Conditions were not unsafe. But it was boring monotonous work and the pressure was always high. Wages are dependent on productivity and the typical worker mindset is to make the maximum money possible. Even though official working hours are long, employees actually seek out employers who would allow them to earn overtime by working seven days a week.

Wages are low, sure, but have risen from what they used to be. The whole economic model is based on low wages. If wages rise, factories like Foxconn won’t exist. And compared to the alternative of farming in the fields, the earning potential is manifold higher – that’s why 200 million people have left the villages and come to the city for work.

It’s a profound social problem that China faces as the first sheen of economic development wears off for the migrant worker. The migrant worker is the unsung hero of China. She (most factories prefer women) has left her family and lives alone in a strange place where she can’t even speak the local dialect. She works incredibly hard. If she’s married and has a kid, she’s left the kid back with her parents and might see the child only once a year or so. The work is boring, tough, and totally insecure – there’s no such thing as permanency and attrition rates are usually 50% in the factories. At first, the allure of wealth, which could not even be dreamt of in the village, masked everything else. But then, as time goes by, the thorns come out. Its not all that rosy.

Something exactly like this happened just after the Industrial revolution in Britain. Its happening again in China.

I strongly recommend a superb book – Factory Girls, by Leslie Chang. It opens your eyes to the good, the bad and the ugly of the factory world of China. There’s both the good and the bad – in real life the answers are not so simple. It’s a complex and tough world out there.

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Is the right to strike unfettered ?

The right to strike work is one the basic rights of workers and is recognised in law in most countries. But should this right be unfettered – and is the right to strike as valid now as it was when the principle was first enshrined ?

The right to strike was first recognised when the balance of power between employers and employees was heavily tilted towards the employer. The company could basically exploit workers as they pleased – a situation which is, alas, all too common even in present day China. Make people work in unsafe conditions, handle poisons, face serious risk of injury, withhold wages, employ children, take away passports / ID cards – these are the conditions that labour often found itself in the past, and still finds itself in , in some parts of the world. The only weapon that workers have to defend themselves is to organise themselves into a union and threaten strikes.

But in many other parts of the world, the situation is very different now. Power is much more balanced with legislation protecting such basic rights of workers. Disputes now are mainly in the area of pay and job losses. In both these areas, the balance of power is much more even. Workers have reasonable protection, including redundancy payments in case of job losses. The reasons for tensions on both issues are less to do with employers exploiting workers and more to do with competition forcing the employers’ hands.

Under such circumstances, is the right to strike absolute and unfettered ? Take the case of British Airways where the cabin crew are going on strike yet again today. Nobody can claim that British Airways cabin crew are exploited. Compared to BA’s competitors like Ryanair, BA crew are handsomely paid. This year has been a horrible year for BA – they just announced record losses. In addition to the earlier cabin crew strikes, the Icelandic volcano also contributed to their misery. Now the cabin crew are striking again. The very survival of BA is at stake. What about other workers of BA who are not striking – if BA sinks, everybody sinks with them. The current demand on which a last minute settlement has broken down is cabin crew demanding restoration of free travel perks which were withdrawn when they first went on strike. Hardly seems to justify a strike in the current atmosphere. No wonder there is very little public sympathy for BA’s cabin crew.

In today’s competitive world, strikes are simply unaffordable by any company. Customers will simply shift elsewhere and not come back. However, at the same time workers need to have some protection as well. Given half a chance, employers will exploit workers. So why not have arbitration by independent bodies to settle grievances and disputes. Sort it out mutually. If you can’t, somebody will arbitrate and the ruling will be binding on both parties.

Maybe its time to remove the right to strike other than for safety and health considerations. I would like to think that human beings have evolved something a little superior to bashing each other up as a way of settling disputes.

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Bye Bye Bengal, Hello France

The capital of militant and inflexible labour is France. The title that Bengal held in the 70s and 80s seems to have been taken over by France.

These are bad times everywhere in the world. France is not immune to the ill winds. Factory closures and job losses, are alas, everywhere. French workers have reacted to it, by contributing to a new word in the English language – "bossnapping”. Holding bosses hostage until their demands are met. What in India, is called ghereao.

Now there is a report of the workers at a failed auto supplier threatening to blow up the factory unless the supplier’s customers – Peugeot and Renault – pay € 30,000 to each worker. This is a rather unique demand. They aren’t asking their own employer, for they know that their employer does not have the money. They are asking their employer’s customers !

Losing jobs is one of the most demeaning things that can happen to anyone. The anger is understandable. But the reaction will harm France for a generation to come. That’s what happened to Bengal. Bengal has become associated with “difficult labour” because of what happened in the 70s and 80s. Its no longer true of course – the Bengali worker of today is as hardworking, committed, and non militant as any other , if not more. In the service industry today, Calcutta is a very attractive destination – wage levels are a tad lower, commitment is high and attrition rates are amongst the lowest. And yet the image of “difficult labour” has stayed, however unfair it may be. And it won’t go away that easily for a generation or more. Bengal, the pride of India, now lags behind economically.

This is the problem for France. However huge a country it may be, it cannot stand in isolation. It needs the rest of the world to come, invest, create jobs, etc etc. But that won’t happen if the French worker is considered synonymous with laziness and militancy. This is absolutely untrue. But the image is becoming one of that. And images, unfortunately, matter.

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