Behind the Present Wave of Unrest in the Auto Sector

We reproduce below an article by Research Unit for Political Economy (RUPE) that appeared in the Aspects of Indian Economy (No.52, June 2012).

“Motown braces for wage revisions after three years”, reads a headline in the Business Standard on April 6, referring to wage negotiations in the Gurgaon-Manesar auto belt. “Haridwar factories brew Manesar-like labour situation” warns another headline in the same paper, reporting strikes at two major auto parts suppliers. The Reserve Bank of India, in its latest “Monetary and Macroeconomic Developments”, warns of the “pressure on generalised inflation from sustained increase in wage costs”.

What is happening to industrial wage levels? Is the prosperity of which the ruling establishment speaks now ‘trickling down’ to workers? Do workers now have the upper hand, and are they grabbing a bigger share of value added?

The last few years have indeed seen a rise in labour unrest, particularly in the auto and auto parts sector. Among the prominent instances are: Mahindra (Nashik), May 2009 and March 2011; Sunbeam Auto (Gurgaon), May 2009; Bosch Chassis (Pune), July 2009; Honda Motorcycle (Manesar), August 2009; Rico Auto (Gurgaon), August 2009, including a one-day strike of the entire auto industry in Gurgaon; Pricol (Coimbatore), September 2009; Volvo (Hoskote, Karnataka), August 2010; MRF Tyres (Chennai), October 2010 and June 2011; General Motors (Halol, Gujarat), March 2011; Maruti Suzuki (Manesar), June-October 2011; Bosch (Bangalore), September 2011; Dunlop (Hooghly), October 2011; Caparo (Sriperumbudur, Tamil Nadu), December 2011; Dunlop (Ambattur, Tamil Nadu), February 2012; Hyundai (Chennai) April and December 2011-January 2012; and so on.

Unrest is not limited to the auto industry, but it has been centered there. The auto industry has grown very rapidly in the last few years: From 8.5 million vehicles (including two wheelers, three wheelers, passenger vehicles and commercial vehicles) in 2004-05, production has risen to 20.4 million in 2011-12. Passenger car production has risen from 1.2 million vehicles in 2004-05 to 3 million in 2010-11 (and probably further in 2011-12). The auto industry is a well-known ‘success story’ of the rapid growth of the last decade, and the Government is set on making India a global manufacturing ‘hub’ for automobiles, with the help of large State subsidies.[1]

On the other hand, it is a well-kept secret that real wages in the auto sector – i.e., after discounting for inflation – actually fell continuously in the period 2000-01 to 2009-10. (The latest data available from the Annual Survey of Industries [ASI] are for 2009-10.) True, annual wages in the motor vehicles industry rose in nominal terms from Rs 79,446 in 2000-01 to Rs 88,671 in 2004-05 to Rs 109,575 in 2009-10. However, the Consumer Price Index for Industrial Workers (CPI-IW) consistently rose more steeply than wages. So real wages in the auto industry fell 18.9 per cent between 2000-01 and 2009-10. (See Chart 1.)

On the other hand, net value added[2]per auto worker has been rising, barring a dip in the years of the slowdown in the economy. Each worker added value of Rs 2.9 lakh in 2000-01; this figure rose by 2009-10 to Rs 7.9 lakh (see Chart 2).

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Naturally, wages as a share of value added have been falling, as can be seen in Chart 3. In 2000-01 workers’ wages were 27.4 per cent of value added. By 2009-10, the ratio had fallen to 15.4 per cent.

To put this in Marxist terms, let us think of the working day as made up of two parts. In one part the worker works to generate his/her subsistence (and that of his/her family, thereby ensuring there will be workers in future as well). In that time, the value the worker adds to the inputs is equivalent to the wage he/she gets.[3] But the worker can’t stop working at that point, because the capitalist has bought his/her capacity to work (labour power) for the full working day. (And the worker, owning no means of production, has no choice but to sell that labour power in order to survive.) He/she continues to labour for the rest of the working day, whether it be a day of 8, 10, 12, or 16 hours. The additional hours are surplus labour time, which we can also express in money terms. This goes to the capitalist. Of course, the capitalist also may pay, out of the surplus, interest to banks, rent to the owner of the land, wages to management personnel, and so on, but all these others take a share of the surplus through the capitalist.

In these terms, we can say that in 2000-01, an auto worker spent 2 hours 12 minutes of an 8-hour shift working for his[4] own subsistence and that of his family. He spent most of the remaining 5 hours and 48 minutes generating surplus for the capitalist (and the banks, landowners, management personnel, and so on).

By 2009-10, the ratio had deteriorated: The auto worker now spent just 1 hour 12 minutes working for his own subsistence and that of his family, and the remaining 6 hours 48 minutes working largely for the capitalist.[5]

How did this deterioration take place? It was not merely a story of growing worker productivity, the ability to produce more per hour with new technology. As we saw above, workers’ wages actually fell in real terms by almost one-fifth. Active class struggle was being waged – by the employers against the workers.

One major front of this class struggle is the unwritten law against the formation of independent unions in the auto sector. Perhaps the single most important demand of the workers in recent agitations has been the right to form their own union; in most cases workers have still not been successful in doing so. Methods employed by the employers include sacking, foisting of criminal cases, beating, and even killing. The German auto parts manufacturer Bosch successfully resisted three attempts at formation of a union. The story is the same everywhere – Hyundai, Hero Honda, Wonjin, Maruti Suzuki, Graziano, Rico Auto. When 1,800 casual workers of the Dharuvera plant of Hero Honda sought to join the union of their choice, cases under the Arms Act and Section 307 of the Indian Penal Code (attempt to murder) were filed against the leaders.[6] In Rico Auto, Gurgaon, workers were attacked by thugs in 2009, leading to the death of one worker. In the Maruti agitation of 2011, the Haryana labour department, indeed the entire Haryana government, operated like a wing of the management. Auto firms are shifting their operations to Gujarat, quite blatantly stating that they are doing so in order to “union-proof” their production (i.e., they hope Mr Modi will take care of such troublemakers).

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An equally important, and complementary, method of wage-depression is the hiring of contract, ‘trainee’, and ‘apprentice’ workers, at a fraction of the wages of the permanent workers. According to news reports, in the Gurgaon-Manesar-Bawal zone outside Delhi, which accounts for about 60 per cent of auto production in India, 80 per cent of the estimated one million workers are hired on contract.[7] In Maruti Suzuki’s Manesar plant, there were 970 permanent workers, 400-500 ‘trainees’, 1,100 contract workers, and 200-300 ‘apprentices’.[8]The situation is no different elsewhere in India. An Institute of Economic Growth survey of workers in West Bengal and Gujarat found that 60-70 per cent of workers in manufacturing were contract labour – a figure three three times that in the Annual Survey of Industries for those states (ASI data are drawn from returns submitted by companies themselves).[9] The last two decades have witnessed a massive growth in the share of contract labour in the industrial workforce, even as the total workforce has grown at a paltry rate.

Contract workers have been worst hit by price rise, since their wages are not indexed. They have seen a steep fall in real wages. They have reached the limit of their tolerance, and are now fighting back.

It is the attempt of workers to make up a part of their real wage losses over the last decade, and particularly the last few years, or at least to prevent a further slide, that accounts for their current increased militancy.

Of course, auto workers are merely an outstanding instance of a general trend. As can be seen from Charts 4 and 5, real wages in 2009-10 in the factory sector as a whole were lower than in 2000-01, though the decline was not as steep as in the auto sector. And wages as a proportion of value added in the factory sector saw a steady decline over the period.

This is the background to the rising incidence of what the media refer to as violence – i.e., not the routine violence of the management, but the resistance of the workers. Two recent examples: At Yanam (a pocket near Kakinada, A.P., which belongs to Puducherry), 800 contract workers of Regency Ceramics were on strike in January 2012 demanding permanency and wage revision. The police attacked their picket lines on January 27, killing their union president and injuring some others. The enraged workers retaliated by attacking the president of the company, resulting in his later death, and ransacking and burning various properties of the owners. In Gurgaon, on March 19, 2012, contract workers of Orient Craft (a garment exporter that supplies international chains such as Tommy Hilfiger, DKNY and the Gap) protested being docked two days’ pay for taking leave on Sunday. In response, a contractor attacked a worker with a pair of scissors. The thousand-strong workforce retaliated by burning down company vehicles and a police car. The court released the contractor on bail and sent the arrested workers to custody.

According to Labour Bureau data, the fall in real wages is not restricted to industrial labour. Remarkably, despite the National Rural Employment Guarantee Scheme (NREGS), real wages in the rural areas too fell during the period 2004-05 to 2008-9,. (See Yoshifumi Usami, “A Note on Recent Trends in Wage Rates”, Review of Agrarian Studies, Vol. I, no. 1, January-June 2011, http://ras.org.in /a_note_on_recent_trends_in_wage_rates_in_rural_india. Usami writes: “nominal wage rates grew fast, but the deflator, i.e. Consumer Price Index for Agricultural Labour and Consumer Price Index for Rural Labour, rose much faster.” For some data of 2009-10, see http://www.business-standard.com/india/news/the-truth-behind-rural-wages-in-india/452453/.) This might be bad news for industries producing cheap mass consumption goods, but they make up less and less of the corporate sector. Low rural wages, and low rural incomes overall, are good news for the corporate sector in another sense: they help depress industrial wages, because the alternative in the villages is so bleak.

[1] See Aspects of India’s Economy no. 45, http://www.rupe-india.org/44/private.html

[2] The difference between the value of the physical inputs and the value of the output, minus depreciation.

[3] To simplify this example, we ignore the need to replace worn-out machinery and other conditions of production.

[4] Auto workers are almost all male.

[5] These are the shares between one worker and the capitalist; but of course the capitalist gets the surplus generated by all the workers in his factory. So in a factory of 1,000 workers, the capitalist gets 6,800 hours of surplus labour per day.

[6] “MNCs can’t wish unions away”, Heena Khan, Hindu Business Line (22/9/2011).

[7] “Maruti workers-management talks to resume today”, Business Standard (6/6/2011).

[8] “Workers’ struggle in Maruti-Suzuki”, Prasenjit Bose and Sourindra Ghosh, Hindu (28/9/2011).

[9] “60-70 per cent of industrial workers in Bengal, Gujarat are contract labour”, Hindu Business Line (22/7/2009).

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