Race to the bottom: Sacrifice of workers in the altar of investors


In July 2015, Foxconn CEO Terry Gou said his company is planning to invest up to 5 billion dollars in India, adding, “Which state will make India most friendly for manufacturing – that’s where we will start. There will be at least 1 million jobs created by 2020.” One recalls that the very same company was forced to close its plant in Sriperumbudur (stopping operations on December 24th, 2014) because its primary client Nokia had also closed its plant. Foxconn, which sees such potential in India, was not able to keep the Sriperumbudur plant running although it had only 1300 permanent employees.

Another corporation, General Motors (GM), decided to shut down its production in Halol, Gujarat, and move production to Talegaon, Maharashtra. GM plans to invest one billion dollars in India by 2020. One of the reasons for this move is that the percentage of permanent workers is high in the Halol plant, and the company will keep this number low in Talegaon. Economic Times describes the story as ‘Gujarat’s loss is Maharashtra’s gain’.

This makes one wonder if there is a race between various states of India, a competition to attract investment at any cost, where the winner provides the most ‘ease of doing business’. In fact, the World Bank (at the behest of Department Of Industrial Policy & Promotion of the Government of India) published a ranking of various Indian states on the basis of ease of doing business. In this environment, it is easier for companies to shut down operations and shop for better deals and better locations across states, than to function steadily in an existing location.

An important factor in ease of doing business is amending labour laws. As a result, states are now in a race to weaken labour protections.

A ‘Make in India’ ad by the Central Government lists various state-specific initiatives in this direction. Two of these ‘achievements’ by the Rajasthan government are amendments to the Industrial Dispute Act, Contract labour Act and Apperentices Act to facilitate investment and  cutting down the number of labour inspections restricted to one a year. Some of the amendments to the labour laws in Rajasthan are
1. Government approval no longer required to lay off workers or shut down units for companies employing less than 300 workers (earlier number:100).
2. 30% membership required to for a union (earlier:15%).
3. Minimum number of workers in a company for Factories Act to be applicable has been doubled.
4. Complaints against an employer about violation of Factories Act would not receive cognisance by a court without prior written permission from the state govt.

Another success story in this competition is Andhra Pradesh that has a shiny web portal to attract investors. The website boasts that AP was the first state to amend the Contract Labour Act. Another achievement is that the rules regarding government registration of contract labour have been relaxed from minimum 5 to minimum 50′, and that “go slow” has been defined to be an illegal activity. It promises to give the most  possible ‘flexibility in employment conditions including working hours for women and shorter or longer shift timings and hiring of contract workers.’ Further, it says, ‘The automobile industry will
be declared to be a ‘Public Utility’ under the Industrial Disputes Act, 1947 in order to prevent flash strikes’.

Tamil Nadu’s industrial policy document also eagerly invites corporates, promising a list of fiscal and other subsidies. Foxconn is one of the companies the TN government is trying to attract. Reportedly, the TN government was talking to Foxconn to make them take over the Nokia SEZ in Sriperumbudur. According to reports, Foxconn is negotiating to pay Rs 4 lakh per acre for the land (the market price is Rs 2 crore per acre) and to not re-hire its ex-employees. In addition, it seems they also seek more assurances from the state government for labour control. A senior Tamil Nadu government official said “Foxconn is
in talks with us. But they are worried about the labour unrest here as they had to face the heat in 2010…We have explained to them that the industrial climate is not bad in Tamil
Nadu..These minor issues are bothering them but we are assuring them that it was a one odd issue.”

It is indeed disturbing that Foxconn has to be given such assurances, when labour discontent seems to follow Foxconn wherever they go. The company operates very large factories in China, for example the plant in Shenzen had 93,000 employees in 2010. Taiyuan has 79000 employees. Foxconn is known to run these plants with a ‘military style management’. Workers have to work for 11 hours in order to earn enough to afford basic necessities, and there are endless accidents and injuries on the production line. There was a spate of suicides in the Shenzen plant in 2010, which gained international attention. But in addition, there have also been massive protests involving thousands of workers. Ahead of the launch of iPhone 5 in 2012, there were protests in Foxconn plants in Zhenzhou, Taiyuan and Pulihua in Foshan city.

While states are thus being egged on to attract investors, is there an effort to ensure some basic minimum protection for workers? Consider the fact that India does not have a National floor minimum wage, and there are different minimum wages in different states. Should states not be co-operating in achieving decent working conditions for the workers of the state? For example, as GM moves its production to Talegaon, would the Maharashtra government consider asking GM to provide the same quality of jobs that it provided in Halol?

We live in a world where movement of capital and corporations across national borders is facilitated, but differential labour protection standards in different countries are allowed to prevail, so that businesses can take advantage of them. For example, as Nokia closed its handset manufacturing unit, Microsoft (the new owner of Nokia) was setting up a handset plant in Hanoi, Vietnam where the wages are lower. This dichotomy is now being reproduced within India as states compete with one another in a race to the bottom.

This entry was posted in Analysis & Opinions, Electronics Industry, Factory Workers, Featured, labour reforms and tagged , , , , , , , , . Bookmark the permalink.