Unions and competition

I completely fail to see why workers’ unions are against competition in the sector. The latest round in this comes from the National Federation for Indian Railwaymen (NFIR), which represents most of the workers in the Indian Railways, which has slammed the Bibek Debroy report on railway restructuring claiming that the report seeks to bring in privatisation into the sector.

Business Standard reports (emphasis mine),

While Debroy has sought to define liberalisation separately from privatisation in the report, he has also said the entry of private players into the system is already provided by extant policy. fear any effort at bringing in private players into railway operations would jeopardise the workers’ jobs and negatively impact railways’ financial health

That private players coming in to railway operations could jeopardise jobs simply defies logic. Currently, the sector has a monopoly employer, namely Indian Railways, and this limits the bargaining power of any worker. With the coming of more (private) players, the demand for skilled workmen is only going to increase, and any new players would be much better off recruiting existing employees of the railways who are experienced in this business than recruiting from elsewhere.

So the coming of private players can only be a good thing from the point of view of workers.

 

However, what is good for the workers is not necessarily good for workers’ unions. The NFIR is a powerful union, representing 80% of the Railways’ 1.3 million employees (source: Business Standard report quoted above), or about a million employees. With the coming of private players, this number is surely going to go down (thanks to workers leaving, etc.) and this surely cannot be good news for the unions.

In other words, what is good for workers is not necessarily good for unions, and vice versa. And it is important to take this into account while making policy. In popular discourse, workers’ welfare and workers’ unions’ welfare get conflated, leading to policies that are pro unions but (they have higher bargaining powers) but not necessarily pro workers.

Recognition of this distinction can lead to much superior public policy.

4 thoughts on “Unions and competition”

  1. With privatization comes ‘accountability’ (having some pre-set deliverables and the associated risk of getting fired for not meeting those) – after all, a private company is less likely to tolerate non/under performance. Not to mention the usual perks of guaranteed promotions, salary hikes etc.

    So, even within workers, I can see how a (moderately large?) section of them might oppose privatization and support the unions on this.

    1. That’s true. So if you’re a “good” employee privatisation is likely to work out for you. And if you’re a bad one, who just swipes in and out and collects paycheck, this effect is not there.

  2. “With the coming of more (private) players, the demand for skilled workmen is only going to increase, and any new players would be much better off recruiting existing employees of the railways who are experienced in this business than recruiting from elsewhere.”

    While this is true, private players will try and automate a lot of processes rendering jobs for only 75% of the current workforce (say). So, I’m not sure if privatization is good for the employees.

    1. This is a case of new private players being added ON TOP OF existing public sector players, not sale of public sector companies to private parties.

      the current workforce will drop to 75% for sure, since the best 25% will get poached away by the new private players!

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