Roles That Governments Play In Industrial Relations Economics Essay
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China is the largest country in East Asia and has the largest population in the world which is 1.3 billion taken up one fifth of the total world population. After the year 1978, the country becomes one of the world's fastest growing economies when Chinese economy changed from planned economy to transition economy. China owns a labor force of 778.1 million which covered 58 per cent of entire population including 50 per cent of the Chinese labor forces is in agriculture, 22 per cent in industry and 28 per cent work in service field. The share of GDP in these sectors are not equal to the percentage of people employed, agriculture contributes 14 per cent, industry 52.9 per cent and services 32.3 per cent. China has an inflation rate of 1.2 per cent and an unemployment rate of 10.1 per cent (Chen, 2001). The poverty rate in china declined from 53 per cent in 1981 to 8 per cent in 2001 due to the fast growing of industrialization. Chinese industrial relations characterize were favor of single, centralized trade union federation which dominated by the Chinese communist party (Cooney, 2007).
During the Chinese economic reform, industrial relations become very complicated; lots of labor dispute and industrial instability come out. The Chinese state plays a major role in regulating, controlling and intervene the industrial relations.
First, the Chinese government is the labor law and regulations maker such as establish the working hour, make sure the minimum wage standard, determine the working conditions, labor protection, social insurance and welfare system. In addition, the state engage into the labor market mainly to create conditons under the law to take measure to promote employment to help unemployed people, abolish the outdated polices and intervenes into the large scale of layoffs. Moreover, the state use the direct involvement and indirect involvement, active intervention and passive intervention, the intervention before the dispute and the intervention after dispute ways to coordinate and promote the employers and employees to reach agreement.
Second, the state plays the role as protector of the labor rights. Compare to the strong employers or employers in a weak position, workers legitimate interests are always under protection. As the protector in the industrial relations and social justice, the Chinese government takes the responsibility to settle the relations based on the respect of fundamental human rights and basis of labor rights, so that the majority of employees are able to share the social progress and economic development outcomes to achieve the industrial balance. As the premier, Wen Jiabao protect Chinese farmers rights as head of government, has been praised and recognized by society and also promote the formation of governance throughout the whole country wage issues. With the scientific development concept growth, the government will strengthen their method to protect labor rights.
Thirdly, the state can be considered as balance maker. In the industrial relations, the real conflict happened between employers and employees. At the beginning, the employees stand at the weak side, but with the growth of the Chinese trade unions power especially after established the collective consultation and collective contract system, the unions status has been further strengthened and employers are no longer facing the individuals but a group of worker, that is, group of workers which represented by union. Therefore, the balance of power between employers and employees has a big change. When employers and employees have a split on an issue in a particular period; one side is significantly powerful than the other, the industrial relations and the negotiations will be hard, the results of the consultation will not good for cooperation too. This could have a negative impact on the economic development and social stability. The state role in here, is to adopt a forcible adjust measure, to maintain the balance of power between both sides. Especially when the labor movement threatened the economic growth and employers' benefits, the government often uses the power to put pressure on the union side to make sure the balance relations.
India is the second most populous country in the world with the seventh largest geographical area. The population in this country is more than 1 billion with the population growth rate of 1.4 per cent and literacy rate of 60 per cent. India has a large and multi-party democracy with a highly different kind of population based on the language, religion and ethnicity. Ethnically the country is dominated by Indo-Aryan race which occupied 72 per cent of the total population. Moreover, the country is consisted of 28 states and 7 union territories with a parliamentary system of democracy. According to the CIA world factbook collection in 2009, the India labor force is 523.5 million including 60 per cent in agriculture, 17 per cent in industry and 23 per cent in services. Majority of the workforce is from rural areas and in the informal sector of the economy such as 60 per cent for the total workforce are depended on the agriculture which provides less than one-fifth of GDP (Kuruvila, 2002). In addition, the country also one of the world's largest economies at market exchange rates and the fourth largest purchasing power. Economic reforms since 1991 have transformed it into one of the world's fastest growing economies, but it still suffers from high levels of poverty, illiteracy, and malnutrition (India-Wikipedia).
The role of the state in India can be analyzed into four periods, that is, colonial period, post colonial period, emergency era from the year 1975 to 1977, and post liberalization era. In the colonial period, the country controlled by the British and the industrial relations were only means to maintain the colonies, the role of the state in that time was used to keep the peaceful industrial relations so as to have continued production. In the post colonial period, the state started to build its industrial relations structure on the pre-existing colonial law. The main purpose of doing that was again to achieve industrial peace. Meanwhile, the India unions were supported by policies that labors rights were be protected by laws too. However, the main reason of this activity did not changed as above. The Indian state was tolerant of unions and recognized the value of labor management cooperation in the context of planned economic development (Ali,M, 2005). The employers take more pressure but the protectionist policies in favor of them. Under the emergency era, the power of the unions has been restricted, but because this period was very short, it did not have a long term influence on the industrial relations. In the last era of globalization and liberalization, the state recognized that the policies should be flexible in the workplace practices to keep the industry competitive. Today the India employers facing the stress of fierce competition which come from the globalization and they wish to maintain the competitiveness.
The role of the India state runs through the whole industrial relations. There have always been detailed laws on collective bargaining, dispute resolution, employee participation and employment security (Ali,M, 2005). Three important pieces of legislation have played a very important role in shaping Indian industrial relation, they are: Trade Unions Act, 1926 (TUA), The Industrial Employment Act, 1946(IEA) and the Industrial Disputes Act, 1947(IDA). These three legislations influence each other to produce the clear Indian system ( Ramaswamy, 1984). As the situation in china, the India government plays a major role in regulating the industrial relations. After the year 1947, the country become independent and many trade union leaders have the important positions in the government too. In the IDA sector, the state owned the full power to intervene in the industrial dispute in anytime they want. The state has the power to refuse to send a dispute for adjudication, forbid strikes and do not permit lay-off, and all court can not take cognizance of an offence under the industrial dispute act except the strike is identified as a illegal movement by government. Generally, the India state plays a vital role in shaping the industrial relations.
Compare to china state, both of the state in two countries are powerful and play an very important role in the industrial relations. It is prefer to use the single and centered power to keep the industrial peace in china state and India was influenced by the British laws to handle the strikes in the industry. In addition, there is only one trade union in china that allowed by the china government but there are many trade unions in India and easy to establish new autonomous union. Moreover, compare to china union, the unions in India are financially independent.
3. What factors have influenced the growth and decline of trade unions? Compare the experience of two different countries in this regard and the likely future scenarios.
Japan is the second largest economy in the world which had 127 million of people, $4765 billion GDP, 68 million labor force and a labor force participation rate of 73per cent in 2000(Bamber, Lansbury and Wailes, 2004). Since the beginning of the 21st century, the Japanese trade union membership density has been around 22 per cent (Bamber, Lansbury and Wailes, 2004). The 90 per cent of the unions are organized by enterprise or establishment instead of occupation or job (Jeong & Aguilera, 2008). Japanese employees are prefer to stay in the same company for long term except when they reach their retirement age or laid off by the company or leave voluntarily. In an enterprise union, the employees are all have the right to be the union member and their promotions occurred in the union as well. Most of there unions within the same industry join an industrial federation of unions which belongs to national centres (Bamber, Lansbury and Wailes, 2004). However, most of the union activities exist at enterprise level because the enterprise unions owned more resources and more power than national confederations. The Japanese industrial federations and the national centres are mainly affiliated institutions of some large enterprise unions. This kind of company is a 'community of shared fate' or a model of 'employee-managed firms' in which employees participate in decision making (Bamber, Lansbury and Wailes, 2004). The Japanese enterprise unions are also engaged in the policy decision making process such as they could send their requirements which have the relation with policies and systems to governmental committee meetings. Some large enterprise unions have the autonomous authorities to manage the unions' activities.
As we can see from table 1, the Japanese trade union density was obviously decline from33.8 per cent to 22.18 per cent from the year 1974 to 1999. The reasons for the decrease of union density are very complicated. There are several major factors.
1. The Japanese trade unions were traditionally based on the manufacturing industry especially large enterprises. The unions membership were grew sharply with the enterprise growing as the number of workers increase after most labor unions had coved by a union-shop clause policy. During the 1960s, the Japanese enterprises were expanded rapidly along with the high speed development of the Japanese economic growth. Therefore, the union members were increased along with this trend too. As industrialization grew, Japanese unions developed very well which reached a high per cent as 35 density during the 1970s.
2. After the 1970s, the trend goes down steady in union density, the develop trend changed from industry to services. In 1960, 23.6 per cent of the work-force was employed in industry, while 27.5 per cent was employed in the service sector; in 1980 the figures were 34.6 and 54.4 per cent respectively, and by 1990 the figures were 33 per cent and 62 per cent respectively(Kuruvilla,S, 2002). The service economy such as wholesale, retail and other private service businesses play the more and more important role in the country, so compare to the service economy, the union density must go down. In addition, the development in these areas were trend to be smaller, this small scale establishments also have the negative effect on the union density.
3. The change of the Japanese industrial relations system. The main aspects of the Japanese industrial relations system include the enterprise unions, lifetime employment systems, seniority based wages and broad based training. Therefore, the basic industrial logic can be reflected by the bargaining structures and the internal labor markets. The stability of wage negotiations at the state level and the cooperation of labor management relations which managed by the enterprise unions at the firm level can reflect the logic of industrial peace. The special lifetime employment process can reflect the employees' income guarantee. So the main achievement the trade union owned were due to the stability and the flexibility, these different logics was almost balanced as well. However, at the late 1990s, all these parts of the Japanese system were changed due to the long term financial recession. Many large companies were run down in their businesses while the lifetime employment mode and the hiring practices had been jeopardized as well as the organizational structure. There have been changes in corporate governance, performance is increasingly a bigger determinant of pay than seniority, and there is increased wage variation and reduction in pay (Kuruvilla,S, 2002). So these changes lead the trade unions much weaker than before.
Generally speaking, the main reason of the decline of the trade union is the long term economic recession and internationalization which result in the fierce competition, company shrinking their hiring cost, and employment liquidity. In addition, the Japanese government did not establish policies to reduce this trend and social security system became weaker.
In the future, I think the Japanese trade unions will continue to reduce their influence in the industrial relations and employment structures as we can see from the decreasing number of organized members. Moreover, the fierce competition among enterprises could lead the industrial relations at the enterprise level more individual and isolated. The way to change the current situation and strengthen the trade unions influence might be to widen their operational policies, improve working conditions which not only for the union members but also for unorganized employees, participate in management.
The Republic of Korea or South Korea has a population of just fewer than 49 million which 80 per cent of the people are living in city. The country has the 22 million people as the labor force which the participation rate is 64 per cent including 77 per cent male and 52 per cent female, and the trade union participation is 11.6 per cent. The employers and their associations, employees and their organizations, the state and private agencies are the main elements of the Korea's employment relations. Additionally, this relationship also influenced by some large industrial organizations such as the Korea Labor Institute(KLI), the economics and business faculties from universities of Korea. Korean industrial relations have its uniqueness because of its internal and external reasons especially historical reasons. The chaebol is an obviously character that draw a distinction between south Korea and any other countries. The chaebol aimed to control the unions directly, and suppressed the activities of union which is also a main cause limited union (Bamber, Lansbury and Wailes, 2004). South Korea was colonized by Japan from 1910 to 1945, so Korea industrial relations have the feature form the Japanese colonial period and have some similarities with Japan such as in both of the two countries, the unions included three levels: national, regional and local level and most functions concentrate on the enterprise level. Compare with Japan, the Korea industrial relations is very instable. In Korea, firms are reluctant to make the long-term commitments to their workforce as many large Japanese companies do (Chang & Chae, 2004). This means, compare with lifetime employment norm, employees are prefer to choose the short term one but agree it as an adaptation to union power.
After the year 1987, democratic rights have been gradually restored and this has led to a significant change in the relations between the chaebol and the state as the latter has moved away from interventionism towards a less regulated market economy (Leggett,C, 1997). Independent trade unions played a more and more important role in the industrial relations. Union density increased from 12 per cent to almost 18 per cent by 1990. Alternative union federations were formed, the scope of bargaining expanded substantially, and trade unions, confronted with a management unused to collective bargaining, were able to use their economic power to win substantial nominal wage increases (Kuruvilla, S, 2002). However, the employers expedited the restructuring process that the low cost competitive norm was no not suitable any longer. This is a factor which threatened employment and union density and reflect the rising competition.
Secondly, the financial crisis also has weakened unions. The 1997 Asian financial crisis also resulted in a wave of bankruptcies, restructuring efforts and declining employment. The employment in the industrial sector in Korea has started shrinking significantly post -1997 as Korea moved away from low costs as a source of competitive advantage, and also because Korean companies have relocated to lower cost areas which could lead to more union decline(Kuruvilla, S, 2002). In terms of the service sector, it has a stable increasing share of the employment from 28 per cent in 1960 to 54 per cent in 2002. Moreover, the decline in manufacturing unions is partly illustrated by the fact that job security was the primary bargaining issue in 1998 in Korea. (Kuruvilla& Erickson, 2002).
In the future, I think the decline trend will gradually continue. To change this decline need the Korea trade unions to changes their underlying logics and establish some new strategies.
Note: Union densities for all the countries excepting the Philippines have been calculated
as percentages of union members in the total wage/salaried work-force. In the case of the
Philippines, union density has been calculated as the percentage of union members in the total
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