The old grandpa saying“ I told you so”: The inevitable emergence of Trade unions in Indian IT industry

History is a fascinating science fiction filled with pockets of wisdom from thought provokers and academicians, which come true eventually. History, like an old grandfather has a pedantic nature to it. A grandfather, who is not taken seriously till calamity strikes and then he has the last laugh with “ I told you so”. Take for example, The Great depression, cycle of capitalism- socialism returns- capitalism with vengeance, the industrial revolution are all filled with wisdom. Industrial revolution led to large-scale labor reforms, which currently is the pillar of any industry (don’t ask the capitalist for they are sure to have different view points). Take the example of any industry recognizing unions, enforce management principles to ensure proper working environment and instill security and mandate employee’s behaviors. We have heard the quote far too often “ People are our assets”. The same rhyme is echoed when IT industry leaders speak out on different forums.

But in retrospect there is one industry that has been elusive of recognizing the fundamental right of employees to form unions. They even detest the practice and have become a strong cartel to fight against with superficial success to its credit. It is the famed “ IT Industry” in India. We ought to think being the beacon of an industry beating all the macro economic metrics such as “ GDP contribution, foreign currency contribution, and labor skilling & employment “etc. it is contributing beyond the realms of our imagination and spreading development. Partially true but thus arises a real cause of concern, that it might be a farce. I list three main reasons why IT industry cannot ignore emergence of trade unions.

Real wage inequality: A senior leader of Human Resource in one of the top IT companies in India proudly proclaimed to a group of International HR’s that “ For the past 8 years, we have not increased our campus salary offerings and people are still ready to join”. He is right. None of the companies have done any major alteration to the wages they offer to fresh engineering graduates. In economic sense this reads as “Fall in income”. Once we factor 8 years of inflation, the real wage has gone southwards. However the incentive scheme for the leadership tells a different tale. With more success on operational efficiencies (which are at best myopic) such as outsourcing, contracting etc. and most of the times, dependent on exchange rates, the incentives handed over to the top leadership of the IT companies are growing at an exorbitant rate. The difference in monthly salary (excluding stocks and perks) between a senior employee of a business unit vs that of a new comers was circa 40:1 in 2008. Today it hovers around 75:1. The same period coincides with high currency exchange rates. There is prevailing inequality that is expanding within an organization.

Automation and digitization: When the first spinning wheel machine was introduced it was the foundation stone for what would be a long lasting struggle towards labor reforms. The future of work will be disrupted with artificial intelligence and Internet of things. It is frequent to have tweet chats and discussions on social media by prominent HR’s to determine the impact of “Future of work” . The impact of automation has already showed significant damage to trust levels with schemes of layoffs and increasing work hours to name a few. The top IT companies have both “ in discreet and in public” held massive elimination of existing jobs without proper outplacement services. I have unfortunately been part of one such brutal exercise in 2008. The interconnected world for free movement of capital but not of people does no good to the industry labor in anyway either. The pressure to contain costs to compete at global level all adds to the impending chaos. Now add the anxiety and fear to the falling wage and you will see the birth of a complex metabolism.

Obsession on process over people: “People are our most important asset” & “ People costs are single most significant costs”. Other than being said by the same IT leader, those are in fact counter-intuitive. With increasing pressures to deliver returns to shareholders at unsustainable (net after enjoying tax breaks) margins of 20% above, the only innovative thing is to tingle with bottom lines. Layoffs, benefits withdrawal, performance management systems designed to fail, incentives scheme that is a race to the bottom and obsession placed to increase productivity trying to get more from less. Imagine, an employee getting an email for not maintaining enough hours at a work desk? Futuristic? No it’s a thing of past in the industry. There is no debate that people costs form over 55% of overall costs, but 100% of revenues are from the very same people in a service industry. Assets do come at certain costs that are inevitable.

I can understand the argument that the top management throws, because we are fed with brutal negative perceptions of trade unions. Strikes, lockdowns and constant fight to get better wages are some aspects what comes through when we mention “Union”. However, IT industry is far too smarter to fall into this trap of perceptions and is better off by providing their employees rights to form their unions. The talents that they employ are set of “Next generation” and have social media as their armor with which they can inflict damage beyond comparison at a push of a button.

Can government do something? Indeed we do have a government body in Nasscom, however its true identity is best explained by a quote by father of modern economics, Adam Smith“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary”.

The role of government must be a mediator to mobilize the formation of unions.. First is to fasten labor reforms. Our labor laws are at best archaic. IT industry falls under the ambit of “Shops and Establishments Act”. A statute that does not even have specification to provide seating arrangements for its employees needs no further clamor to reach for the refresh button. Government provides for massive tax breaks to the export dependent organizations that have been in place for a long time but the efficiencies are just getting accumulated at the top. Trade unions actually will help the IT industry by ensuring productivity improvements without the heavy investments in process driven systems designed to malfunction. It won’t be easy to mobilize any body and it certainly can’t be the trade unions that we have witnessed so far. It will be inherently radical due to its composition and skills of its members and built on foundations such as investment on people, their rights to fight layoffs and other arbitrary schemes of management and the basic job of ensuring employee safety and security. Government should also have better anti competitive practices to check for collusions amongst players. Haven’t we seen an announcement by a company “ There will be no hikes this year” and all other companies following suit?

To conclude, IT industry has been a backbone of our economy and has played a pivotal role in fulfilling our talent potential. It has changed the perception of the whole world towards India from an agricultural economy to knowledge one. It is thus imperative that to run the marathon, we need people with extraordinary skills and training to form the industry’s lungs. The only way to go about is giving them the freedom to fight for their own rights. Productivity gains will only increase with centralized organizations rather than investing on creative design for process that yield the same results. IT employees the second largest unorganized labor force after daily wage earners in the country. The shareholders and their pawns might have justified reasons for not recognizing unions and they might even win the battle. But is that enough to win the war? I doubt so. I will leave you with a thought of Karl Marx. “ History repeats itself, first as tragedy, second as farce”.


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