Given how the automobile sector’s worker compensation has been rising faster than that of the overall manufacturing sector—CMIE data show auto sector employee costs rose 3.3 times over the decade versus 3.1 times for the overall manufacturing sector—it is odd that labour unrest is rising the way it is in the sector. Indeed, as Bajaj Auto’s management has been pointing out since the labour unions began demanding a revision in compensation some months ago, with the kind of downturn industry is facing, it is simply not possible to look at wage increases right now. In the case of the entire two-wheeler industry, while production grew at 27% in FY11, this collapsed to 15.6% in FY12 and to a mere 1.9% in FY13. In the case of Bajaj Auto, FY13 production actually contracted by around 3% for two-wheelers and by nearly 7% for three-wheelers.
While Bajaj Auto’s trade unions have raised the issue of being able to get discounted shares as a ploy since the actual wage dispute is already sub judice, the larger point that workers need to be aware of is that the trade unions are not really serving their cause since industry is responding to their demand for increased wages in a two-step manner: raise wages where you can’t help it, but get more aggressive in terms of automation over the long term and, if need be, in terms of relocation of facilities. In the case of passenger car leader Maruti, while production has risen 3.4 times over the last decade, the number of workers has risen just 2.5 times. In the case of Bajaj Auto, production rose 76% between FY08 and FY12 while the number of employees fell a tenth. Part of this, undoubtedly, is related to machinery getting more productive—but as unions get more difficult to handle, automation is the preferred option. Nor is this related to just automobiles. Crisil research shows that while the amount of employment generated by every million rupees of manufacturing GDP was 12 in FY05, this number is down to around seven today. A fall of over 40% in employment-intensity in less than a decade should make workers ask their union leaders some tough questions. And while it will not be easy for Bajaj to immediately relocate its Pulsar production from its Chakan plant where the strike is taking place to another plant at Aurangabad since this dislocates the vendor base, there is little doubt that were the strike to carry on too long, Bajaj’s management cannot afford to take a chance with not having enough stock as it begins to approach the festive season. While Maruti did not stop production at the Gurgaon unit even after the murder of a supervisor at its Manesar plant, this did expedite the automaker’s decision to expand facilities in Gujarat. And, in the case of Tata Motors, it took even less time to move from West Bengal to Gujarat when trouble escalated at Singur. When industrial production rises and gets back to its original trajectory, it is unlikely industry is going to be looking to fill vacancies in a hurry.