SUN RISES IN THE WEST (PART II )

Synopsis: Communication For Productivity Letters written to some 7500 Workers / Managers / Union Leaders, following a period of strike / Go slow / Murders (1979 - 1987), at Mumbai factory of Larsen & Toubro Ltd. This direct / open / honest communication led to a remarkable atmosphere of trust between Workers and Management, which, in turn, increased productivity at 3% per year (ave).

28 Nov 1986

To:

Dear Friends

SUN RISES  IN THE WEST        

(PART II )

In  Part  I  of  this  circular,  I had  mentioned  that  the European-unions  used   their  muscle-power   (of  collective bargaining   -  or  blackmailing?)  to  obtain   annual  wage increases which were higher than the inflation rate.

                 

This means there was more than 100% neutralization.

Which means, in  real terms, the purchasing power of Pound  or DeutcheMark  or Franc  or Lira  (like  our "rupee"  these  are European currencies)  actually went up as  far as the  workers were concerned.

This Fact (No.1) can be easily seen from the following graph:

 

Since L&T  is an enlightened  company, it  has been "copying" Europe sincerely  in  this matter!   If you  are  not already aware, take a look at the following graph:

In fact this  is one item  in which we are  ahead of Europe  & America:

And this is  not all :  What about the  INDIRECT labour cost? - Such as

-    Provident Fund

-    Gratuity

-    Welfare -(Transport/Medical/Canteen, etc.)

-  Leave    ? ?

In  this case  let us  compare ourselves  with the  British I After-all they ruled  over India for 150 years and  made sure that we got some of their worst habits!

And all  this time Unions  kept pressing  the managements for higher  and  higher wages  -  especially  in  the "unskilled" category;  These  "school-kids" were twisting the tail of the Unions:

And to see "how", look at the following graph:

To understand let us take the example of  L&T.

		1975	1985
1. 2.	Highly-Skilled Wages Unskilled Wages	Rs. 690.00 Rs. 296.00	Rs. 2,307.00 Rs. 1,407.00
	1/2 Ratio HS/Us	2.33	1.64

This  means US  Wages rose  at a  much  faster rate,  but the wages  of  HS category  rose  comparatively  slower.   So the "gap" reduced.  Will this gap someday disappear altogether?

Anyway what happened ?

The "US" workers  priced themselves out of the  market .'  No one  wanted  them  and   more  and  more  became   "unemployed (Job-less)",   In my next  circular  I will show  to you,  how the employment  situation  got worse,  due  to rapidly  rising wages.

H.C. PAREKH