View: Will labour reform drive away investment?

May 26 marks the anniversary of the first ever factory strike in the United States, in 1824, at the Slater Mill in Rhode Island. Why should we in 21st Century India bother about a strike that took place long, long ago, in a place far, far away? Because, parts of the country are trying to replicate the very conditions that brought about the strike at Slater Mills.
The mill owner decided to extend the working day without any additional pay and cut wages in the weaving department, worked entirely by women, by 25%, on the ground that they had been, out of mistaken generosity, paying them wages that were extravagant for young women. The strike began with 124 young women turning out, as striking work used to be called back then in the US.

The Slater Mill management, truth to tell, had it better than what the government of Uttar Pradesh, Madhya Pradesh and Gujarat had proposed for its employers. Slater could employ children aged at least eight, and make them work 12-hour shifts, the ideal workday, it would appear for lots of politicians and employers. In India, however, a law says that children must be in school at that age — a law that stems from an amendment to the Constitution to create a right to education. So, that bit of benevolence towards employers is beyond any mere chief minister.

The Slater Mill strike saw the local community turn out in support of the striking workers. The strike stretched on, extended to other mills and ended when a mill was set on fire. After the fire, mill managements struck a compromise with the strikers.

With the benefit of perspective, it is easy to see the strike and arson as escalating bargaining tools deployed by the workers and the wage cuts, workday extension and initial refusal to back down as the bargaining tools deployed by mill owners. This is pretty primitive. Learning from such experiences, labour laws, an administrative machinery to ensure compliance with the laws and unions to give workers bargaining power evolved. The result was the greatest expansion of material prosperity in human history, not pauperisation of the employers.

When Henry Ford offered to pay his workers $5 a day in 1914, equivalent to $120 a day a century later, he was not trying to create a market for his cars, but seeking to ensure he had a stable workforce who would not absent themselves. Productivity shot up and Ford’s profits soared. But Ford’s action raised the bar for other factories, and industrial wages rose across the board and created a middle class before the service sector hived itself off into a separate and growing segment. The purchasing power of the middle class created the largest industrial power the world had seen.

The leaders of quality improvement in the world, the Japanese, have one of the most unionised workforces in the world. Japanese managements roped in the unions to tap into workers’ creativity in improving quality in every single production process.

Paying workers decent wages and keeping their working hours limited are key to the evolution of a mass market, one which creates demand for not just goods but also leisure time engagement, such as movies, television programming, books, newspapers, mass sports, travel, eating out.

The notion that keeping the wage bill low is the route to riches is the uninformed instinct of a self-centred industrialist. For all industrialists taken together, for each of whom, the purchasing power of the employees of the rest constitutes the market for his produce, it makes sense for workers to be paid better and to be given a decent period of leisure.

As if all this were not enough, industry has to contend with finicky consumers. Such consumers, mostly in the rich world, want not only quality and a good price when they buy something, but also salve for their conscience. They want their goods to be produced in decent conditions that are benign towards workers and to the environment.

Several fashion brands lost revenue and had to relocate production, in the wake of the infamous Rana Plaza fire in 2013 in Dhaka that killed more than a thousand workers in crammed textile units and injured more than double that number. The backlash from consumers made many brands, including Adidas, H&M, Marks & Spencer, Tesco, Top Shop and Uniqlo sign an accord on occupational safety. An unnamed multinational company paid more than $2 million to settle its liabilities and keep its name out of the accident.

Having laws that ensure decent working conditions, wages and occupational safety helps attract investment from large global chains. They cannot afford to be associated with sweatshops that treat workers like slaves. Labour norms and respect for them are part and parcel of the reality of globalised business, besides being good for expanding the home market. The sooner our politicians and businessmen understand this, the better for all of us.

Of course, if our industry curbs its ambitions to producing things that are shoddy, meant for consumers whose conscience is allowed only a limited outing during brief rituals of communion with the almighty, it can dispense with consumer concerns about labour norms. Of course, that means abandoning hopes of attracting some of the investment that will move out of China as industry rebuilds its global supply chains to replace ‘Just in Time’ with ‘Just in Case’, to incorporate the risks of spatially concentrated sourcing. Is that the ambition emerging India should aspire for?

Views are personal