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Question

Consider the following statements in the light of the proposed Labour Code for Industrial Relations:

1. For the creation of a Labour Union 10% of the workers will be required to sign for its creation.

2. Now to protect the interests of the workers politicians have also been permitted to become union leaders.

3. The draft code on wages promises a mandatory national minimum wage under which unskilled workers in the developed states stand to earn a minimum of Rs. 25,000 a month.

Select the correct statement(s):


A

Only 1

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B

1 and 2

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C

Only 2 and 3

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D

None of these

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Solution

The correct option is D

None of these


The government has embarked on biggest labour law overhaul since Independence by merging 44 extant laws into four codes aimed at ensuring the ‘ease’ of doing business, where India ranks at 130 (out of 189 economies) in the World Bank report, and moving towards reality in its stated objective of making India the global manufacturing hub.

  • The labour ministry has drafted a Bill to integrate three laws—Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946; and Industrial Disputes Act, 1947—into a single Labour Code for Industrial Relations.
  • While the draft code on wages empowers the states to fix minimum wages and makes national minimum wages mandatory, under the proposed Industrial Relations Code Bill, 2015, the employers with up to 300 workers would not require government permission for retrenchment, lay-off and closure.
  • Creating a labour union will become more difficult as 30% of workers will be required to sign for its creation (earlier it was 10%). It also prohibits politicians from becoming union leaders in organised sector establishments. The proposed changes would make it tougher for employees to form unions or go on strike, but would make all employees eligible for minimum wages.
  • The changes in the Payment of Wages Act replace the power given to labour commissioners with new ‘authorities’; however, this may weaken inspection norms and remove the ability of law to deter offenders.
  • The most significant change is in the Contract Labour Act. Amendments here will exempt companies employing less than 50 workers from the ambit of the Act (from the earlier limit of 20). Without assured minimum wage, contract, health and pension benefits, overtime allowance, and safety and sanitation at workplace, economic progress cannot be achieved.
  • The amendments to the Factories Act (which is a social legislation aimed at ensuring occupational safety, health and welfare of workers at the workplace) propose to keep units employing less than 40 workers out of the purview of 14 labour laws, and the draft code on wages promises a mandatory national minimum wage under which skilled workers in developed states stand to earn a minimum of Rs.20,000 a month.

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The Taft-Hartley Act, passed by the United States Congress in 1947, gave states the power to enact “right-to-work” legislation that prohibits union shop agreements. According to such an agreement, a labour union negotiates wages and working conditions for all workers in a business, and all workers are required to belong to the union. Since 1947, 20 states have adopted right-to-work laws. Much of the literature concerning right-to-work laws implies that such legislation has not actually had a significant impact. This point of view, however, has not gone uncriticized. Thomas V. Carroll has proposed that the conclusions drawn by previous researchers are attributable to their myopic focus on the premise that, unless right-to-work laws significantly reduce union membership within a state, they have no effect. Carroll argues that the right-to-work laws “do matter” in that such laws generate differences in real wages across states. Specifically, Carroll indicates that while right-to-work laws may not “destroy” unions by reducing the absolute number of unionized workers, they do impede the spread of unions and thereby reduce wages within right-to-work states. Because the countervailing power of unions is weakened in right-to-work states, manufacturers and their suppliers can act cohesively in competitive labour markers, thus lowering wages in the affected industries.

Such a finding has important implications regarding the demographics of employment and wages in right-to-work states. Specifically, if right-to-work laws lower wages by weakening union power, minority workers can be expected to suffer a relatively greater economic disadvantage in right-to-work states than in union shop states. This is so because, contrary to what was once thought, unions tend to have a significant positive impact on the economic position of minority workers, especially Black workers, relative to White workers. Most studies concerned with the impact of unionism on the Black worker’s economic position relative to the White workers have concentrated on the changes in Black wages due to union membership. That is, they have concentrated on union versus non-union groups. In a pioneering study, however, Ashenfelter finds that these studies overlook an important fact: although craft unionism increase the differential between the wages of White workers and Black workers due to the traditional exclusion of minority workers from unions in the craft sectors of the labour market, strong positive wage gains are made by Black workers within industrial unions. In fact, Ashenfelter estimates that industrial unionism decreases the differential between the wages of Black workers and White workers by about 3 percent. If state right-to-work laws weaken the economic power of unions to raise wages, Black workers will experience a disproportionate decline in their relative wage positions. Black workers in right-to-work states would therefore experience a decline in their relative economic positions unless there is strong economic growth in right-to-work states, creating labor shortages and thereby driving up wages.

Which one of the following best describes the effect industrial unionism has had on the wages of Black workers relative to those of White workers, as that effect is presented in the passage?


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