Impact of flexibility on the labour regime

02 Aug 2015 - Commentary

Recent mainstream economic policy making in Sri Lanka has been promoting the idea of labour “flexibility”. The assumption is that labour laws are too restrictive with respect to matters such as firing employees or determining work hours. These laws are seen as imposing labour market “rigidity”. Both terms appeal to common sense. Flexibility in particular is viewed as creating more options for workers and employers.

This term can refer both to the ways in which firms restructure their enterprises, and to the general character of the labour force, including representation of non-traditional groups such as older women. Labour markets that are rigid supposedly exclude groups of people such as caretakers, who may have different lifestyle needs with regard to the work they perform. The idea of flexibility and the associated discourse promoted by mainstream think tanks has more dangerous implications, however, as part of the continuing attack on labour rights and the possibility of organising.

All around the world, there has been a concerted attack on unions since the 1970s, in an effort to make it easier for capital to ship jobs between different countries and pay lower wages, a process that is commonly referred to as neoliberal globalization. This has resulted in the dismantling of national systems of welfare and protections for workers. Sri Lanka has received jobs from abroad, but it also faces challenges to its welfare system. Furthermore, policy makers’ emphasis on flexibility promotes a view of society that undermines collective rights and entitlements. As a result the burden is shifted to workers who are responsible for their own individual fate, including developing “skills.” Depending on the next political regime that comes into power in Sri Lanka after the parliamentary elections, the renewed emphasis on labour flexibility could become the plank to further undermine workers’ rights and, accordingly, the ability of unions to respond to a rapidly changing global economy.

How do we define flexibility?

From the perspective of mainstream policy making, flexibility is seen in a positive light as a way of making it easier for businesses to operate. A World Bank report on “Flexibility in Sri Lanka’s Labour Market,”

written in 1994, for example, refers to the negative effects of the Termination of Employee Workmen’s Act on the ability of businesses to fire people, given prohibitively high rates of compensation. The report also distinguishes between flexibility in terms of wages and employment, with Sri Lanka having higher indicators in the former than the latter. While there are a set of laws and regulations that each refer to the process for terminating work contracts, however, the term flexibility is currently being used by employers and think tanks as a way to propose an overhaul of the entire labour regime. Rather than engaging with specific laws such as the Termination Act, reforms for which unions accepted in the early 2000s, flexibility has become a way to attack “obstructionist” unions and workers in general. Many scholars have taken a more critical view of flexibility.

Marxist theorist David Harvey argues that the shift to outsourcing jobs from Northern to Southern countries contributed to a new dynamic of “flexible accumulation.” This process depends on the infrastructural and technological changes that shape globalisation, in order to shift production around in ways that end up undermining the ability of workers to form unions and secure benefits. As a result, flexibility is not an innocent term referring to the possibility of creating more options for business. Rather, it also refers to a pervasive relationship of power in which workers lose control over basic decisions in the process of production. They can be moved around within enterprises, or work can even be subcontracted to smaller firms that lack legal protections for workers. This process is most evident in Sri Lanka with the noted increase in recruitment of workers through manpower agencies.

The attack on legal protections for workers has coincided with changes to the process of production. This is most apparent in the case of the Export Processing Zones, or “Free Trade Zones,” that were started in 1978 in order to attract foreign investment. The Free Trade Zones offer lax labour regulations and tax incentives. At the same time, the labour force is drawn predominantly from poor, rural women. Many think tanks and economists have argued that this is a positive step, insofar as more people are being included in the labour force, but they overlook intrinsic issues such as pressure on wages. Moreover, the Free Trade Zones themselves are being subjected to the increasing casualisation of labour, including the spread of characteristics similar to the informal sector such as emphasis on piece work. While more people including women might be working, they are not receiving the same benefits that traditional union jobs would provide.

According to the ILO’s report on “Emerging Trends in Employee Participation in Sri Lanka,” as of 2013, only one factory in the largest Free Trade Zone in Katunayake, for example, has a collective bargaining agreement.

Employers and think tanks claim that there is a shift to casual and informal employment because of legal restrictions imposed by the existing labour regime. The Pathfinder Foundation in its recent “blueprint” argues:

“The current rigidities in the labour market act as disincentives to the creation of more higher-value employment. It is important to adopt an approach which brings about a better balance between workers’ rights, rates of return to investors and employment creation. The current labour laws are leading to a casualization of employment in the formal sector with an increase in temporary and causal [sic] jobs.”

At the same time, these actors want to have a more “flexible” regime that incorporates the characteristics of casual and informal employment.

Accordingly, such a transformation of the labour regime will institutionalize the very changes employers and others describe, with the long-term effect of undermining workers and their unions.

Will there be an attack?

The question is why are employers and think tanks intensifying the demand for labour flexibility now? Sri Lanka’s labour movement is by no means in a sanguine state, with the ILO reporting a 15 per cent rate of unionisation among workers. Moreover, the movement suffered a blow after the crushing of the General Strike in July 1980 by the JR Jayewardene regime, which resulted in dismissal of over 40,000 workers under emergency regulations, from which it has yet to fully recover. Labour movements in other countries have faced similar setbacks. Even still, global capital seeks a more permanent victory, one which is impossible to achieve without greater inequality and social devastation.

Currently, the issue is not so much the economic demand for flexibility, which has been ubiquitous since the shift to outsourcing and other aspects of neoliberal globalization, but rather what it means for the political moment in Sri Lanka. Depending on which regime is consolidated after the elections, it may make a more explicit attack on workers and their unions.

Even if this does not end up happening, struggles against exploitation will persist. The renewed demand for flexibility is part of a larger ideological vision to change society. This includes promoting privatization under various guises, such as the subtle shift in the rhetoric away from universal education to emphasis on “skills re-training” in the event of layoffs.

Accordingly, further analysis must be done of the broader implications of workers’ struggles for other spheres.

(This article is based on a talk for a seminar on July 29 regarding “Attacks on the Labour Regime,” held at the Centre for Society and Religion, organised by the National Association for Trade Union Research and Education and the Collective for Economic Democratisation)

This piece was also published in The Sunday Times on 2 Aug 2015