Shyamal Majumdar: China's powerless TUs

THE HUMAN FACTOR

to stop work.

One only hopes the chief minister's enthusiasm would have some rub-off effect on his party colleagues in Delhi, who chant the Chinese mantra for growth to justify their opposition to employment law changes.

Their bluff has been called finally in a well-documented white paper on labour reforms, which shows how China has adopted liberal labour laws to allow companies to hire and fire without excessive restrictions.

The white paper has been prepared by TeamLease, one of India's largest human resource outsourcing services companies in the area of employee leasing. The paper summarises the key differences in Indian and Chinese legal provisions on hire and fire. Check out some of them:

Termination for disciplinary reasons:

China: Section 25 of the Labour Law 1995, allows companies to sack workers on disciplinary grounds, without compensation.

India: It's virtually impossible, since the employer has to follow cumbersome procedures, and labour courts usually order reinstatement.

Termination when worker is sick or unqualified to perform the work:

China: Section 26 of the Labour Law allows companies to terminate employees with 30 days' notice and one month's pay.

India: Again, impossible to implement, since it can be treated as an "industrial dispute", and labour courts can order reinstatement.

Retrenchment due to sickness or economic viability:

China: Section 27 allows termination, provided workers are given 30 days notice and one month's pay.

India: Section 25 of the Industrial Disputes Act makes it impossible for a company with over 300 workers to retrench, even if it is sick or nonviable.

The TeamLease document is also a rude shock for those who thought trade unions enjoy unlimited powers in China. On paper, Chinese unions appear to be powerful.

For example, all unions are required to be affiliated to the All China Federation of Trade Unions (ACFTU), which is controlled by the government. The ACFTU is the apex body of 31 provincial-level unions and 9,00,000 grassroots unions, and has 103 million members.

However, in reality the unions in China are relatively powerless. Consider the following:

The right of workers to strike has been removed from the Chinese Constitution. Compare this with the huge outcry in India after the Supreme Court banned government employees' right to strike. Even the common minimum programme of the new government is categorical that workers' right to strike will not be taken away.

Unions in China are controlled by the Communist Party, and union officials are part of the government machinery. Workers have no option but to accept the government's decisions. They cannot agitate for their rights and benefits on their own, even when they face widespread layoffs, closure of state-owned enterprises, lack of social security and so on.

State-owned enterprises are controlled by the Communist Party. This gives rise to a peculiar situation: if there is a dispute between unions and managements, the Chinese government sits on both sides of the negotiating table. Therefore, unions have no power to confront managements.

Labour disputes are resolved through discussions between employers and labour ministry officials rather than negotiations with unions that have no real power to undertake collective bargaining.

In tune with China's strict controls on freedom of speech and association, unions face severe restrictions on free functioning. The government has suppressed "independent" unions that are not controlled by the party, and has often jailed union leaders.

For example, in May 2003 the government arrested two union leaders for organising demonstrations in the north-eastern city of Liaoyang, where millions have lost their jobs due to closure of state-owned enterprises, and charged them with "subversion of state power" and for having contract with "hostile elements and foreign media", crimes that carry death penalty.

Surely, this is not the kind of stuff the Left would like the Indian government to adopt, and an automatic hire-and-fire policy with adequate compensation is obviously a better option.

On social security schemes, India can draw valuable lessons from China. For example, China has a defined contribution scheme under which social security is privatised.

Workers pay premiums to private insurance companies and receive social security, pension and medical benefits from them. The government assumes no liability. In India, the "defined benefit" scheme is guaranteed by the government and workers get various benefits regardless of their contributions.

For unemployment benefits, too, workers in China pay insurance premiums and receive benefits based on their premiums. The government assumes no liability. Compare this with the practice in India where unemployment benefit is virtually absent, though some state governments offer nominal benefits like Rs 100 per month.

The TeamLease White Paper is an eye-opener. Will the Rip Van Winkle Left wake up at last?