Role of Trade Unions in the Establishment

(Research Paper towards partial fulfilment of the assessment in the subject of Labour Law – I)

Submitted by: Submitted to:

Greetika Francis – 493 Mr. Parveen Kumar
Ritika Singhal – 512 Faculty
Labour Law
Seventh Semester

Date of Submission: 31st August, 2010

National Law University, Jodhpur

Winter Session
(January-May 2010)
 INTRODUCTION

A trade union is an association of workers grouped together in one organisation to represent

members in their dealings with employers. The primary purpose of a union is to arrange relations
between employers and employees through negotiation, usually in the form of collective
agreements between themselves and the other members of bargaining councils and statutory
councils. The concept of trade unionism stemmed from the growth of industrialisation and
capitalism. The establishment of the International Labour Organisation in 1919 largely initialised
the growth of trade unions in India. The Trade Unions Act, 1926, facilitates the legislative
recognition to the workers' right to organise trade unions. Trade unions can be basically
categorized into three types which are unregistered, registered and recognized trade unions.
While an unregistered trade union is one which is not registered under the Trade Union Act,
1926, a registered trade union is one which is registered under section 8 of the Act. Between the
two the latter enjoys various rights such as right to sue and be sued, entering into a contract in its
own name, purchasing the property in its name, immunities from civil & criminal liability, etc. A
recognized union must be a registered trade union; an unregistered trade union cannot be
recognised. A trade union is ‘recognised’ by an employer when it negotiates agreements with
employers on pay and other terms and conditions of employment on behalf of a group of
workers, defined as the ‘bargaining unit’. This process is known as ‘collective bargaining’. The
unions accomplishes equitable distribution of the fruits of economic growth through strategies
aimed at enhancing the content of ‘substantive rights’ – wages, hours of work and working
conditions – and at minimizing income inequalities between the incumbents and new entrants to
the industry.

ROLE OF TRADE UNIONS IN ESTABLISHMENTS

Traditionally, trade unions role has been to protect jobs and real earnings, secure better
conditions of work and life and fight against exploitation and arbitrariness to ensure fairness and
equity in employment contexts. There is a considerable debate on the purposes and role of trade
unions. The predominant view, however, is that the concerns of trade unions extend beyond
'bread and butter' issues. Trade unions through industrial action (such as protests and strikes) and
political action (influencing Government policy) establish minimum economic and legal
conditions and restrain abuse of labour wherever the labour is organised. Trade unions are also
seen as moral institutions, which uplift the weak and downtrodden and render them the place,
dignity and justice they deserve.

TRADE UNIONS IN INDIA:

ROLE OF UNIONS:
Trade unions have assumed two principal roles in their relations with individual employers,
business associations, the state, and the public at large; an economic role in facilitating
production and ensuring an equitable distribution of the income generated through bargaining
and negotiations at enterprise level, industry/sector level or national level; and a representative
role in providing voice and identity to labour at the workplace, and in society. The balance of
these two functions has been influenced by the pace and spread of industrialisation over recent
decades.1
Two broad indicators of the growing strength and influence of trade unions in industrial societies
were mobilising capacity and union density. The latter expresses union membership as a
percentage of the total labour force which rose steadily throughout the period of industrialisation
until the third quarter of the 20th century, bringing nearly two-thirds of the labour force into their
fold.2
MOBILISING CAPACITY: An important concept is mobilising capacity, which refers to the ability of
unions to influence public policy in industrial countries. A good indicator of the mobilising
capacity of unions is the proportion of workers covered by collective bargaining decisions, which
also shows the extent to which collective bargaining has been sanctioned and institutionally
recognised in a country. There is a good deal of evidence that, irrespective of the trends in union
density, more than three-quarters of the paid workforce in India remains under the institutional
umbrella of centralised collective bargaining.
Literature on trends indicates that, with the spread of industrialisation, unions emerged as major
partners influencing the allocation, stabilisation and redistribution functions of modern
governments. This was especially true of countries where high-density centralised unions grew
in strength. What followed was a significant expansion of employment in public sector
enterprises, in both manufacturing and service activities. Unions grew stronger within their

1
http://www.epw.org.in/showArticles.php?root=2004&leaf=10&filename=7753&filetype=html
2
http://www.businessstandard.com/common/storypage.php?storyflag=y&leftnm=lmnu5&leftindx=5&lselect=2&chk
login=N&autono=186808
citadels of the public sector.3
UNION DENSITY: Union capacity to deliver successful outcomes became evident when the benefits
they gained for workers were incorporated in statutes governing the labour market of many
industrialised countries. Unions influenced the design and development of the industrial relations
which was based on a strong political commitment to full employment and worker welfare.
Some salient features of the system were: full-time employment, governed by an open-ended
contract; collectively negotiated wage structures with minimal dispersion across skill categories;
social benefits to workers and their dependents distributed through the main income earner;
control over working time and safety standards; and job security for individual workers.
The new migrants’ physical labour was crucial to the smooth functioning of numerous
manufacturing industries which derived economies of scale based on size and location.4 These
emerged as countervailing forces within the power structure of industrial society. They derived
identity and legitimacy from a sense of solidarity among the workers, whose skills were
practically identical. The main focus was to build on substantive rights that included better
wages, regulated working hours and improved working conditions. As workers acquired these
substantive rights, they set a firm material foundation for the unions to develop labour standards
that gave legitimacy to the rights and entitlements of workers, and also provided a moral
framework for governing the workplace.5
The acquisition of substantive rights has had two distinct features. Firstly, unions went beyond
their traditional role of defending special interest groups in order to become major partners in the
development of markets. As large numbers of workers were drawn into this partnership, the
unions matured into a powerful engine driving economic growth in industrial economies.
Secondly, unions converted their organisational space into a political space and thereby
contributed to the development of democratic institutions.6

3
Webster, E and G Adler (1998): Towards a Class Compromise in South Africa’s Double Transition: Bargained
Liberalisation and Consolidation of Democracy, Paper presented at 14th World Congress of Sociology, Montreal,
July 26-August 1
4
ILO (1997): World Labour Report 1997-98: Industrial Relations, Democracy and Social Stability, International
Labour Office, Geneva
5
Wallerstein, M and B Western (1999): ‘Unions in Decline: What Has Changed and Why?’ Prepared for
publication in the Annual Review of Political Science (from the website of Cornell University, School of Industrial
Relations)
6
(1999): The Future of the Labour Movement: Some Observations on Developing Countries, Discussion Paper No
112, Labour and Society Programme, International Institute for Labour Studies, ILO, Geneva
ROLE OF UNIONS AS PARTNERS IN DEVELOPMENT:
Growth and accumulation in industrial economies made it possible for workers to secure higher
wages, better living standards and more opportunities for wealth creation. Workers were
simultaneously mass producers and mass consumers, thus contributing to a continuous expansion
of the industrial economies. They developed structures embodying partnership between workers
which were crucially important to the development of markets. This partnership has had three
main components which are participating directly in the production of goods and services;
strengthening markets through raising or sustaining the general level of consumption; and
promoting worker mobility.
Participation in production often came through initiatives organised by cooperatives set up by
trade unions. These ventures mobilised the capital and skills of numerous small-scale producers
as well as workers, and provided technical services that helped them organise production and
distribution. The goods and services they produced had a moderating influence on prices; they
helped consumers stretch their income and derive greater benefits from limited resources.
Besides, the enterprises offered income-earning opportunities for labour market entrants in urban
areas and facilitated their long-term movement into secure jobs.
Organised labour also contributed to the establishment of institutions that strengthened markets.
The institutions for wage determination, in particular minimum wages and solidarity wage
structures, ensured a solid and rising wage floor for workers, boosted their purchasing power and
raised aggregate demand. A second group of institutions aimed at reducing workers’
vulnerability to cyclical fluctuations in the market and other contingencies that were beyond their
control. Numerous insurance-based schemes have been organised to guard against contingencies
such as unemployment, morbidity and disability. They are seen as an important element in the
stability of market economies.7
A third area for partnership has been in promoting worker mobility in terms of income, skills and
employment status. This involved the design and development of training opportunities, and
ways of making skill acquisition affordable for workers. Unions have led numerous initiatives, in
collaboration with governments and employers, aimed at enhancing workers’ skills, of both
incumbents and new entrants to the labour force.
The partnership in development was an important adjunct to the unions’ traditional role of

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defending workers’ interests. This involved them in the design of institutions that minimised
income disparities, and guaranteed a secure income with improved living standards for all in
industrial societies. More importantly, they adopted an inclusive approach to workers outside the
union, providing income-earning opportunities and services, which made them non-competing
groups in the world of work.

ROLE OF UNIONS IN THE DEVELOPMENT OF DEMOCRATIC INSTITUTIONS:

The presence of an activist state involved in the allocation, stabilisation and redistribution
functions of modern governments encouraged the unions to consolidate their position and
contribute to social policy-making in the framework of democratic institutions.
Historically, the most important contribution of unions is that they broadened the base of
workers entering into industrial market economies and gave them access to civil and political
liberties through democratic institutions. As a result, western industrial societies have become
near synonyms for democratic societies. During the post-war decades, these democratic societies
managed to institutionalise a regime for the governance of labour markets based on procedural
rights accessible to all workers. The civil and political liberties which workers and citizens in
general had acquired by this time were invoked to ensure equal opportunities and, implicitly,
equitable outcomes in the world of work.8
In relation to the above-mentioned development, an important distinction between the content of
substantive and procedural rights can be drawn. Substantive rights are those which determine the
actual conditions of labour, such as minimum wages, maximum working time and the right to
equal treatment. Procedural rights are those which shape the procedures by which substantive
rights are determined, such as the right to collective bargaining, the rights of workers’
representatives and the right to equal opportunities. Industrial societies tacitly recognised that
equitable outcomes by way of substantive rights automatically follow the establishment of
institutions which guarantee procedural rights.9
A point for emphasis here is that workers’ rights and incomes are two sides of the same coin.
Workers must have the wherewithal to exercise their rights. Rights have two components:

8
International Labour Review (2003): ‘Perspective: The Minimum Wage as a Tool to Combat Discrimination and
Promote Equality’, Vol 142, No 4, International Labour Office, Geneva
9
Jenks, C W (1968): ‘Work, Leisure and Social Security as Human Rights in the World Community’ in Journal of
the International Commission of Jurists, June, Vol ix, No 1
negative immunities and positive entitlements. These two components reinforce each other.
Fundamental rights are the immunities enjoyed by citizens, which guarantee citizens’ equitable
access to a growing basket of entitlements resulting from economic growth. These rights are also
necessary to prevent any aggravation of inequalities in societies undergoing modernisation and
development.10 The chain of causation leading to the accretion of rights and entitlements
assumes special significance in societies which are on the threshold of developing appropriate
structures for workplace governance. Wilfred Jenks, eminent jurist and former director-general
of the ILO, has described the transformation of workers’ interests into rights as a continuous
process that goes hand-in-hand with economic growth. Interests in material advancement mature
into entitlements; then gain legitimacy as rights though legal instruments and sanctions.
In is important to note that, in India, industrial workers are the pioneers of an economically
powerful middle class, who are in a position to claim benefits including higher wages, better
working conditions, civic amenities and social security schemes. They are politically important
allies of the state, and are represented by unions that are active in regulated industries and public
sector enterprises. The benefits they derive from employment are embedded in a ‘social pact’
which sets the terms of compromise between capital, organised labour and the state in sharing
the national product.

CHANGING WORK ENVIRONMENT AND CHALLENGES FOR TRADE UNIONS

Towards the end of the 20th century, globalisation turned into a powerful force generating
intense competitive pressure in product markets across the world. Some related factors that have
contributed to the pace of change may be listed as follows:
a) technological progress and the changing composition of the workforce;
b) the increased supply of new labour market entrants, particularly women; and
c) the practice of flexible labour market policies.
Technological progress has made it possible to reshape the production process through new
forms of industrial organisation and relocation to new production platforms. The disintegration
of large workplaces and the rise of smaller, geographically dispersed units of production are
visible signs of this change. Behind the disintegration of large workplaces is an ongoing process

10
Béteille, A (2002): Work Practices and Norms: A Comparative and Historical Perspective, Discussion paper No
142, Education and Outreach Programme, International Institute for Labour Studies, ILO, Geneva
of separating work into different units of operations, related either to production, processing or
the provision of services. The production-centred operations, which accounted for a very large
share of total employment in industrial societies, are being divided into components depending
on the intensity of effort involved. The less effort-intensive and the more standardised
components are then outsourced to countries or regions offering cheap labour. The effort-
intensive components are automated and technologically upgraded to more skill-intensive
operations. A similar process of differentiation is underway in service-related jobs too, but the
outsourcing of less skilled jobs is often directed to lower-paid workers in the same country or
region.
Most of the new jobs generated through reconstituting manufacturing operations have been
gender neutral in character, which has made it possible to absorb large numbers of women into
the paid labour force.
The reshaping of production processes currently underway has set in motion a polarisation of the
workforce into two distinct categories: the better educated, career minded, and individualistic
workers at one end and those with fewer skills, marginalised, scattered and prone to exploitation
at the other. In addition, there are demographic changes leading to an increase in the supply of
workers in all countries. Influx of women and migrant new entrants into insecure and poorly paid
jobs on the export platforms and production chains adds to competition. Furthermore,
competitive pressures have resulted in the adoption of flexible labour market policies, and
practices such as subcontracting, outsourcing and the hiring of temporary and part-time workers
are very common, especially at the lower end of labour markets. The inevitable outcome of these
developments is worsening inequality among the labour force.

IMPACT ON TRADE UNIONS:

These developments have had a discernible impact on union structures and modes of functioning
all over the world. Two observations stand out. Firstly, the closing decades of the 20th century
saw a conspicuous decline in union density in India. Secondly, there has been a pronounced shift
in emphasis from centralised bargaining towards wage setting within the framework of
decentralised and geographically dispersed bargaining units. The gradual shift of industrial
employment to small and scattered units of production, using more skilled workers, led to the
rise of enterprise-based company unions, akin to business unionism. The new unions represent
workers at the higher end of the skill spectrum, but insulate them from a sense of identity or
solidarity with larger collectives of workers.

CHALLENGES FOR UNIONS:

Two major challenges emerge for Unions. One is the rise of income inequalities between
workers, especially in the developing countries. The second is its the entry of numerous people
into flexible employment relations that are outside the reach of institutional safeguards. Large
numbers who enter the labour markets do not possess the right skills, and so they tend to be
excluded from any productive partnerships within markets. They are prone to be victims of
exploitation and indignities in the world of work. The problem is compounded by the fact that
potentially useful structures for the governance of labour markets are generally at very
rudimentary stages of formation in India.

CONCLUSION
Trade unions are a legitimate system for organising workers and to voice their rights and
grievances. Responsible unions help create a middle path in the relationship between
management and labour while maintaining responsibilities of the former and the dignity of the
latter. In today’s scenario, workers have become better informed and aware of the economic
forces that impact their industry and managements too have become more sensitive and skilled in
handling relationships with employees.
As the skill levels and educational qualifications of employees advance, the role and significance
of trade unions diminishes. This is because (a) employees are able to represent their own case
and (b) managements are more sensitive to the needs of individual employees, whose intellectual
skills become almost uniquely valuable.
Another phenomenon in these modern industries is that employees have greater opportunity and
tendency to move from one company to another, not only because of better terms of employment
but also because of their yearning to learn new skills.
As strategies of the Unions, there is an urgent need to eliminate competition between workers at
the lower end of markets, both within and between countries. Three objectives require special
attention: raising the level of minimum social wages as a long-term solution to low-wage
strategies; creating new institutional safeguards for people working under flexible market
relations; and facilitating equal opportunities for access to and mobility within labour markets.
The three goals together correspond to an absolute floor in terms of social wages, safety nets and
opportunities for all in the global economy. The essence of such a strategy lies in empowering
people, especially the poor, to live a dignified life in their world of work. Amartya Sen (1999)
has forcefully argued that such amenities – primary education, healthcare, clean drinking water
and a sanitary environment – together can enhance the capabilities of people and make them
more productive in the functioning of markets.

SOME AREAS FOR TRADE UNION INVOLVEMENT:

The trade unions can help the workers in a big way by ensuring proper social wages, training,
and institutions to safeguard long term interests. A minimum social wage can serve as a powerful
instrument for taking wages out of competition in overcrowded labour markets. The social
spending is used to calculate the level of minimum wages. These transfers would in turn
determine a minimum ‘reserve price’ below which labour would not be sold on account of
supply-side pressures.
Institutions to safeguard the long-term interests of low-skilled workers would help with benefits
such as healthcare, insurance cover and old age pensions.
Suitable and affordable training opportunities to help workers at the lower end of the market
overcome the barriers of gender, ethnicity and race that hamper their mobility. Training can raise
the supply price of labour, equip workers to respond to expanding economic opportunities and
help them emerge as equal partners in the development of markets.

BIBLIOGRAPHY::
BOOK:
1. K.D. Srivastava, Law Realting to trade Unions and unfair Labour practices in India,
(Eastern Book Company:Lucknow, edn., 4th ed., 2003)

ARTICLES:

1. ILO (1997): World Labour Report 1997-98: Industrial Relations, Democracy and Social
Stability, International Labour Office, Geneva.
 2. Béteille, A (2002): Work Practices and Norms: A Comparative and Historical
Perspective, Discussion paper No 142, Education and Outreach Programme, International
Institute for Labour Studies, ILO, Geneva.
3. International Labour Review (2003): ‘Perspective: The Minimum Wage as a Tool to
Combat Discrimination and Promote Equality’, Vol 142, No 4, International Labour
Office, Geneva.
4. Jenks, C W (1968): ‘Work, Leisure and Social Security as Human Rights in the World
Community’ in Journal of the International Commission of Jurists, June, Vol ix, No 1.
5. (1999): The Future of the Labour Movement: Some Observations on Developing
Countries, Discussion Paper No 112, Labour and Society Programme, International
Institute for Labour Studies, ILO, Geneva.
6. Wallerstein, M and B Western (1999): ‘Unions in Decline: What Has Changed and
Why?’ Prepared for publication in the Annual Review of Political Science (from the
website of Cornell University, School of Industrial Relations).
7. Webster, E and G Adler (1998): Towards a Class Compromise in South Africa’s Double
Transition: Bargained Liberalisation and Consolidation of Democracy, Paper presented
at 14th World Congress of Sociology, Montreal, July 26-August 1.

WEBSITES:
1. http://www.bms.org.in/htm/trade_unions.htm
2. http://www.lawstudent.in/cl_lawdemystified2.htm
3. http://www.epw.org.in/showArticles.php?root=2004&leaf=10&filename=7753&filetype
=html
4. http://www.businessstandard.com/common/storypage.php?storyflag=y&leftnm=lmnu5&l
eftindx=5&lselect=2&chklogin=N&autono=186808