By Sumanasiri Liyanage –
Independent Trade Union Organization consisting 16 trade unions had a protest in front of the Colombo ILO office on October 26 against its support to the government to amend labor laws to make hiring and firing easier. I understand that in response to this protest, a seminar is planned by the Ministry of Labor to outline the planned labor market reforms. Former Supreme Court Judge, Ms Shiranee Tilakawardane is named in the agenda of the seminar as the key presenter and it shows she is the one who drafts new labor market reforms. It is a known fact that the previous government also tried to amend existing labor laws with regard to hiring and firing, wage determination and many other subjects claiming that new laws were required to face the new situation, globally as well as locally. It is also interesting to note that labor market reforms are one of the essential components of the neoliberal agenda that proposes all out marketization of the economy. To understand the real nature of the efforts to change labor relations, the reform agenda has to be situated in the global and local context. Finance Minister of the new ‘yaha palanaya’ government has emphasized recently that many sectors would be in the future opened for the private sector. Similarly, the present government seems to consider direct private investment as the main source of economic development in the country. Since, as we have witnessed, DFI and local private investment are slow to respond to government’s appeal to invest, it can be surmised that the government would ask for substantial loan from the World Bank and the International Monetary Fund to face dwindling foreign exchange reserves and to finance the fiscal deficit in 2016 budget. Private sector employers’ associations have repeatedly stressed that main obstacle for private sector investment is the existing labor laws that are, according to them, more favorable to employees. If I put it into simple language, the existing labor laws have made it difficult to fire workers when the employer needs to do so. As we all aware that Sri Lankan labor laws that were drafted and amended during the 1950s- 1970s were very much concerned over the security of the service of the employees. The famous verdict by three judges, Canekaratne, Schokman and Coomaraswamy, had reiterated this aspect of the labor regulations. (Ceylon Government Gazette –extraordinary– July 26, 1956)
The security of service and social contract in determination of wages and terms of work were accepted as basic norms in labor relations in many democratic countries during the period of late capitalism that adopted social democratic principles and policies. Social democratic policies promoted and was based on some kind of alliance between the state and the trade unions. It is interesting to note the following words of Franklin Roosevelt. He said: “It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By “business” I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level-I mean the wages of decent living.”
However, with the invent of neoliberalism in the late 1980s, the bourgeoisie openly expressed their desire that they should be allowed to exploit workers more and more. Hence workers should not be paid a living wage, but a wage that is equal to the product of the marginal worker. Roosevelt’s principle, “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little” was inverted.
Washington Consensus and Labor Market Reforms
In 1990, John Williamson listed ten principles to be followed by developing countries. These principles was later called “Washington Consensus”. Although WC in its original form called for deregulation of all markets it does not specifically proposed to deregulate the labor market. However, later in augmented Washington Consensus (AWC) flexible labor markets was included as one of the key elements of neoliberal development prescriptions. It is also interesting to note that it has been proposed that these 20 principles of WC and AWC should also be adopted by developed countries as well. Hence the World Bank, International Monetary Fund and other international financial agencies wants the aid-receiving countries to implement these principles as a conditionality for receiving financial assistance. When it comes to labor laws, it is expected that ILO should look after that aspect. ILO being a UN organization needs to add flavors to labor market reforms while keeping the basic norms of the WC and AWC.
So the fresh attempt of labor market reforms in Sri Lanka should be viewed and analyzed in this global context. This so called market fundamentalist views are based on several myths and simple relationships. It has been argued by the advocates of labor market reforms that the lower wages will increase employment, flexible labor laws would increase investments. Many studies have shown that the relationship between wages and employment and wages and investment are more complex than the arguments advanced by neoliberal fundamentalists. A famous 1990 study, by David Card and Alan Krueger, compared fast food employment in New Jersey and Pennsylvania after one state increased its minimum wage and the other didn’t. They didn’t find a significant effect on employment. If need arise, I may cite many more studies showing that the relationship between labor market condition and investment and employment are not that simple.
In Sri Lanka, in the past ten years or so we have seen the security of the labor force had been adversely affected because of the government policies. I mentioned some time back in this column the contagion of man power agencies. Through manpower agencies, the flexiblization of labor market is practiced with the cooperation of the government. Labor ministry is jokingly but correctly called employer ministry as it rarely comes for the benefit of workers. Today we do not find judges like Canekaratne, Schokman and Coomaraswamy. Some of the steps have already been taken without changing labor laws by the previous governments. Employers need more. It was revealed by the new program of recovery by the Ceylon Chamber of Commerce. All want workers to pay.
The present so-called “yaha palana’ government is now preparing to legalize everything that had happened so far adding some more draconian laws supporting and ensuring super exploitation of the working class in Sri Lanka. In this backdrop, the protest organized by the 16 trade unions should be welcome and we should expect more direct and active involvement of organized as well as yet to be organized workers of all grades to defeat the attempt to create ‘flexible labor markets”.
*The writer is the Dean/ Faculty of Management and Finance, SANASA Campus. e-mail: firstname.lastname@example.org