The role of labour unions in emerging sectors

The rate of formation of unions and the union activities in this industry do not instill confidence in the minds of employees

Updated - February 09, 2023 01:23 am IST

Published - February 09, 2023 12:15 am IST

There have been many reports of lay-offs in the last few months, especially in emerging sectors. Lay-offs have been taking place not only in India, but in major economies like the U.S. too. Large, medium and small enterprises as well as start-ups have let go of dozens or even thousands of workers. In 2022, start-ups including Byju’s, Ola, Unacademy, Vedantu, Chargebee, WhiteHat Jr, Udaan and CityMall announced lay-offs. Their reasons included restructuring, cost-cutting, automation, financial constraints, performance rating, adverse economic conditions and changes in the business model. At the global level, Alphabet, Amazon, Meta, Microsoft, Twitter and Apple, among others, have let go of employees. Amazon cited an uncertain economy and rapid hires in the past as reasons for retrenchment.

The Amazon story

At the same time, unionisation attempts in these giant companies have caught our imagination. Amazon workers at the warehouse at Staten Island called JFK8 succeeded in forming the Amazon Labour Union under the leadership of Chris Smalls, who had been fired from the company. Amazon reacted by filing numerous objections with the National Labour Relations Board, the federal body that protects the rights of private sector employees to join together. On the other hand, employees at the warehouse near Albany voted overwhelmingly against unionisation in October 2022 as many of them were sceptical of the bargaining power of a union vis-à-vis a giant like Amazon.

In India, Amazon shut down Amazon Food and Amazon Academy. It retrenched workers in the Indian facility in a gradual manner. The Nascent Information Technology Employees Senate, which works for the welfare, rights, justice and empowerment of IT (Information Technology), BPO (business process outsourcing) and KPO (knowledge process outsourcing) professionals in India, has alleged that Amazon violated labour laws. It also complained to the Union Labour Minister, seeking his Ministry’s intervention. The Deputy Chief Labour Commissioner in Bengaluru served a notice seeking information from the company. But it is well-known how seriously employers, especially multi-national corporations (MNCs), take labour departments; they ignore conciliation meetings more often than trade unions. NITES President Harpreet Singh Saluja vows to fight Amazon, but this will not be easy.

The Hirschman model

The question we can then ask is whether collective action can be taken in emerging enterprises. Start-ups hardly have trade unions in their facilities and so retrenchments in these companies go uncontested.

Compared to conventional industries such as manufacturing, public utilities, and conventional financial sectors such as traditional banking and insurance, forming unions in modern and emerging sectors is much more difficult. Long ago, Freeman and Medoff examined the effect of trade unionism on the exit behaviour of workers in the context of the ‘exit-voice-loyalty’ model of Albert Hirschman. I use this with some modifications to explain my point.

On the demand side, the IT and IT-enabled Services employees felt no need for trade unions as unions are typically associated with manual labour, while IT employees are associated with “elitism” and “professionalism”. It is believed that IT employees do not need trade unions as they have competitive compensation pay packages, supposedly good conditions of work and a mechanism to address grievances. And so, they stay on and are loyal to the company and the industry. If these conditions are violated, they switch to other organisations as they have the required skill sets (exit); hence, labour turnover in this sector has been rather high. They do not collectively bargain or strike or resort to legal action as middle-class employees who go to court would be stigmatised (voice). And many survive by simply keeping quiet (loyalty).

Despite this, announcements of massive lay-offs, such as by Tata Consultancy Services in 2015, have led to the birth of labour unions in this sector in India. Bad human resource policies and practices, too, have provoked or prompted workers to unionise. But the rate of formation of unions and the union activities in this industry (on the supply side) do not instill confidence in the minds of employees.

A huge ask

Unions in the IT sector have to deal with both Indian and Western behemoths, which is a huge ask. The state obviously needs MNCs to stay on in India. Start-ups don’t have the ideal conditions for unionisation. Employees would rather accept low-paying jobs than unionise. Further, trade unions are fighting on multiple fronts. They are struggling to retain historical labour rights, secure social security for the millions of informal workers and fight the adversities created during and after COVID-19. Industrial accidents, too, are frequent. Many garment and electronics industries, for instance, which have wide supply chains, violate labour rights. Unions have sometimes succeeded in securing marginal rights. But there is only so much that they can do. The Amazon story is going viral in the 500 million labour market in India where hardly 10% of the total workforce is unionised.

However, this is not to brush aside the fact that unions need to be encompassing of all workers and be the vanguard of workers’ mobilisation. After all, they are the only historically tested collective labour institutions.

K.R. Shyam Sundar is Professor, XLRI, Xavier School of Management, Jamshedpur

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