Wednesday, March 9, 2011

Nepali trade unions gone wild!

At a time when the country is suffering from at least 14 hours of load-shedding, increasing uncertainty about political and economic reforms, and high cost of finance, the UCPN (Maoist) is acting very irresponsibly. These factors have led to an increase in cost of production, eroded competitiveness both domestically and abroad, and a decrease in exports. Now, the UCPN (Maoist)-affiliated trade union, All Nepal Trade Union Federation (ANTUF), along with two other big trade unions (General Federation of Nepalese Trade Unions (GEFONT) and Nepal Trade Union Congress (NTUC)), has halted operations at Hetauda Industrial Estate. Their main grudge: doubling wage as inflation is high and cost of living is rising. They want a hike in minimum daily wage from existing Rs 190 to Rs 400.
Given the existing state of our industrial sector (whose contribution to GDP is just around 6 percent), the trade unions have to keep the following things in mind before they go on a strike:
  • Demanding pay hike during prosperous periods is reasonable. But, this is not the time to demand a pay hike that is beyond the capacity of the industries.
  • If strikes continue, then factories will close down. Who will lose jobs? The workers. This happened with so many garment and carpet factories. Remember that it has a boomerang effect.
  • Will the productivity of workers increase after the pay hike? Has there been this trend before?
  • If cost of production decreases, then profit rises. This is where the extra pay hike comes from. If a factory is in breakeven, then there is no way it will increase wage of workers. It will  mean going into loss. Due to a myriad of factors, including power shortages, cost of production is rising. So per item cost of production is rising when labor productivity is pretty much stagnant (or doing down). In such a situation, how can the factories increase wages?
  • Some of the strikes are politically-motivated. For instance, it is very likely that the ANTFU is intensifying strike to deflect scrutiny on financial irregularities, mainly by its president Salikram Jammakattel.
  • The already low investment (both domestic and foreign) will further shy away. It means less jobs for the workers.
  • Our economy is still in a deep mess. These activities will further worsen it.
  • Low appropriability of private returns to investment is taking its toll in investment and economic growth.
  • Here is a discussion about how YCL was responsible for the slow industrial activities. The trade unions should learn from the mistakes of YCL, which cost the nation growth, employment and industrial growth.