Samsung’s Approach To Labour Union Problems Are Rooted In South Korea’s History

Markets have continued their rise since the US Fed rate cut last Thursday, brushing aside suspicion about regulatory integrity in the face of continuing allegations against the Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch. A campaign to cut India’s own interest rates is taking off, with inflation staying moderate, and economic activity gathering momentum only slowly.

The Adani Group has entered into an agreement with Canada's aviation player, Bombardier, to develop aircraft maintenance, repair and overhaul (MRO) capability in India. The chief constraint on the growth of an MRO industry in India has been government policy. Aircraft parts, complex pieces of machinery and technical personnel have to come into the country at short notice, and move out, once their requirement in India is over. Questions relating to levy of visa restrictions/import duty on such short term entry and how to ease their exit, without locking up capital or using up lots of administrative time and energy have remained unanswered, despite repeated attempts to liberalise the norms.

With the entry into the sector of a group reported to have reasonable clout with the government, it is to be hoped that the government would find it easier to streamline the policy ecosystem for MRO. MRO generates considerable income and skill-intensive jobs.

With the Adani-Bombardier tie-up coming up seven months after Brazilian Embraer joined hands with the Mahindra group to produce medium transport aircraft for the Indian Air Force, the world’s aircraft design and production business gets some much-needed diversified capacity. The progress of these two joint ventures would be keenly watched by the entire world, particularly given Boeing’s ongoing woes and China’s early success in developing, with Russian help, a mid-range, single-aisle passenger aircraft in the same class as the Boeing 737 and the Airbus A320.

Another development grabbing public and government attention has been the ongoing strike at Samsung’s appliance manufacturing plant in Sriperumbudur, the industrial hub near Chennai. The strike has entered its 17th day and India’s labour minister Mansukh Mandaviya, has written to Tamil Nadu chief minister MK Stalin to find an amicable solution to the industrial dispute.

The workers have many demands, of which the one on wage increase appears close to resolution. The sticking point would appear to be recognition of their union. The leader of the union is not a Samsung employee, and the company management does not want to recognise a union that has outsiders as office bearers, especially when the office bearers have allegiance to political parties.

The problem has multiple strands. In South Korea, unions came up in the teeth of state opposition, unlike in Japan, where the American overlord of post-war reconstruction, Gen Douglas MacArthur, gave trade unions pride of place in the post-war society, to serve as a bulwark against revival of the old militarist culture that had driven imperial expansion. Gen MacArthur left Japan with 57% of the workforce already unionised. At its peak, unionised labour in South Korea accounted for not more than 20% of the workforce.

Given the ever-present, belligerent reality of Communist North Korea, and the tendency for trade unions to have Left wing proclivities, unions in South Korea were always viewed with suspicion and subjected to state control. The main union in South Korea, FKTU, was controlled by the state and company bosses, and the rival union, agglomerating independent unions that grew alongside, KCTU, was more effective in working towards democracy than in changing work conditions. The work culture was intense — the working week used to be 68 hours until 2018 — and the suicide rate is one of the highest in the world. Korea’s total fertility rate, at 0.72, is the lowest in the world.

It would not be surprising if the Korean managers of Samsung India approach trade unions in India with the perspective derived from Korea’s own history and culture. Indian trade unions have a different lineage and culture. Trade unions in India came up during the freedom movement, and were its integral part. The umbrella organisation of the freedom movement, the Congress, tried to incorporate workers and their unions into the anti-colonial movement, and gave them due recognition.

India’s trade unions were part of the founding of the International Labour Organisation, and drew upon, as well as contributed to, the normative regime for work. While work, in actual practice, fell far short of the prescribed norms for wage levels, work conditions and gender parity, the workers tried to secure them wherever they had unionised strength. Nationalist leaders often served as union leaders, at individual enterprise level and at federated and confederated levels.

The Samsung management’s opposition to an ‘outsider’ functioning as a union leader falls foul of this long-established union practice in India. Whether managements of individual enterprises like to see their workers unionised or not, unions perform three useful functions.

One, they give voice and agency to workers, strengthening democracy at the workplace and in society at large. In the process, they also tend to countervail, even if not thoroughly, baneful influences emanating from tradition, such as caste, and hostility to a faith other than one’s own, and the notion that women are helpless and undeserving of autonomy (na stree swatantryamarhati, says the Manusmriti).

Two, they tend to enlarge the market for goods and services, providing a boost to aggregate demand and growth. From the rationality of an individual enterprise, the smaller the outgo on labour, the greater the profits and profitability of the venture, incentivising greater investment and expansion. However, the smaller, in the aggregate, the share of the income accruing to labour, the smaller the demand for consumption. The well-off tend to save more and consume less. Workers tend to spend most of their income on goods and services. The greater the income workers have at their disposal, the greater the demand for goods and services, and vice versa.

To put it differently, labour is a cost for an individual enterprise. It naturally wants to reduce that cost. However, for the rest of the economy, that cost represents demand, the market for its goods and services. If every enterprise succeeded in shrinking its cost, the economy would face a shortage of demand. If every enterprise succeeded in making the workweek long, there would be fewer takers for movies, sports, hospitality, tourism and other activities that depend on people having leisure as well as spending power.

A third service unions perform is rarely realised in practice. Unions can mobilise the creative energies of an enterprise’s workforce to streamline workflow and increase efficiency. Japanese managements excel in tapping their workers’ understanding of the work to make it more efficient.

Samsung would do well to shift focus from whether an outsider should lead their factory union to how the union can be roped into improving productivity.