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Union‐Type Effects on Bargaining Outcomes in Indian

Manufacturing

Article in British Journal of Industrial Relations · January 2009

DOI: 10.1111/j.1467-8543.1987.tb00711.x

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British Journal of Industrial Relations
25:2 July 1987 0007-1080 $3.00

Union-Type Effects on Bargaining

Outcomes in Indian Manufacturing
Debashish Bhattacherjee *

INTRODUCTION

Earlier approaches to the study of unions in developing societies speculated

about the eventual trajectories of the union movements in these countries
(Dunlop, 1958; Kerr et al. 1960; Sturmthall, 1966). Specifically, researchers
asked whether the labour relations system of the developing countries would
converge to the ‘Anglo-Saxon’ model of collective bargaining and indepen-
dent trade unionism as their national economies developed, or would they,
as a result of specific institutional factors and unique historical circum-
stances, remain essentially a model of political unionism, with increasing
state intervention in the determination of industrial relations outcomes
(Galenson, 1959; Millen, 1963; Kilby, 1967).
These macro-institutional approaches have been criticised by Bates
(1970) for not being supported by the available historical evidence’, and by
Kassalow (1978A), who pointed out that what researchers ,missed in the
fifties and sixties was the rising strength of enterprise and/or plant-based
unionism that emerged in many developing countries in the early seventies.
These independent unions often arose as a result of the ineffectiveness of
bureaucratic trade unionism.
While industrial sociologists studied individual worker responses to
different types of unionism (see for example, Form, 1973) and institutional
labour economists estimated union wage effects (see for example, House
and Rempel, 1976), no study, as far as the author is aware, directly tested for
union-type effects on bargaining outcomes in LDC labour markets. A recent
exception is Ian Roxborough’s (1984) pioneering study of union-types in the
Mexican automobile industry. Dichotomising unions in the industry into
‘official’ unions (those tied to dominant political parties) and ‘independent’
unions (largely formed in the 1970s as breakaway movements from the
official union federations), Roxborough explicitly hypothesises, for various
reasons, that the independent unions will secure higher wage increases and
fringe benefits than the official unions.*

*Doctoral student at the Institute of Labor and Industrial Relations, University of Illinois at
Urbana-Champaign.
248 British Journal of Industrial Relations
The present study is in the tradition of Roxborough’s (1984) work as
applied to the Indian case. It represents an advance over the former, insofar
as it uses multiple regression techniques and generates results that include a
wide range of industries. Using a unique data set comprising of 119 recently
negotiated plant-level agreements from the relatively advanced manufac-
turing sector of Greater Bombay and Pune, this paper estimates union-type
effects on average monthly pay and on two measures of fringes for blue-
collar workers. The union-type construct is dichotomised into: (1) ‘external’
unions, i.e., those explicitly affiliated to an external trade union federation,
the latter typically affiliated to an established political party, and (2)
‘independent’ plant-based unions. Presently called employees’ unions in the
Greater Bombay area, these unions are typically run and managed by
workers internal to the plant.

HISTORICAL BACKGROUND

To identify the broad structural shifts that have occurred in the Indian
industrial relations system and in the Bombay trade union movement since
1947, I segment the evolution of urban labour relations in India into three
periods (or phases) of unionism.
The first period (1947 to the early 1960s) witnessed the rise and dominance
of state-sponsored unions typically having little direct control over the actual
bargaining process, but exerting an indirect influence on wages and working
conditions through their political links with ruling parties. This period saw
the growth of legalism, consultationism, and was a period when ‘respon-
sible’ trade unionism was promoted subject to the maintenance of industrial
peace (Johri, 1967). Although legislation designed to promote collective
bargaining was drafted and debated at length during this period, none were
enacted (Kennedy, 19.58). State intervention in the determination of wages
and working conditions was the effective norm during this period (Punekar,
1966; Jackson, 1972).
The first phase of unionism in Bombay is associated with the cotton textile
industry, a subject that received considerable academic attention in the west
(Morris, 195.5; 196.5; James, 19.58). To combat the growing communist
influence in the industry’s union movement, the ruling Congress Party
sponsored its own union and granted it de fucto exclusive bargaining rights
by imposing an industry-wide bargaining structure. In the newly emerging
engineering industries, the right to unionise had to be fought for, and the
communist All-India Trade Union Congress was largely responsible for
laying the foundations of trade union organisations in the city (Pendse,
1981). In the mid-19.50s, a period of relative economic growth, legalism and
consultationism enveloped the Bombay labour relations system. This era of
‘responsible’ unionism, and of recourse to the state’s conciliation machinery
was personified by the Engineering Mazdoor Sabhu, a union affiliated to the
Socialist Party. It acquired a substantial worker following, as it effectively
 Union- Type Effects on Bargaining Outcomes 249
represented the first significant capture of bargaining power by a non-
Congress union.3
The second period (roughly from the early 1960s to the early 1970s) was
characterised by the phenomenal rise of strikes and lockouts due to rivalries
between unions affiliated to different political parties (Johri, 1967). The
state-patronised unions began to lose their credibility, as unions affiliated to
other parties (namely, the Socialist and Communist Parties) began to pre-
empt state intervention in unilaterally determining bargaining structure in
an industry and/or region by negotiating collective agreements at the plant
and enterprise level. Industrial unrest that resulted from changing worker
preferences over union-types was dealt with severely by the state during this
period (Chatterjee, 1980). Finally, the end of the second phase witnessed
the virtual collapse of the Indian Labour Conference, a tripartite ad hoc
labour policy making body, due to disputes between government and labour
over the exact strength of various trade unions.
Although the mid-1960s is associated with overall industrial stagnation
in India (Nayyar, 1981), Greater Bombay witnessed a heterogenous and
complex period of economic development. The chemical/petro-chemical
industry was expanding, as were the pharmaceutical, electronics, and
electrical engineering industries (Pendse, 1981; Banaji, 1984). These
newer types of mass production and processing industries differed greatly
from textiles and older engineering industries established in the period of
‘national capitalism’ in terms of corporate strategy (levels of diversifica-
tion), business structure (lower levels of family control, a predominance
of foreign subsidiaries), and management organisation (Banaji, 1984).
The demographic structure of the industrial workforce in these modern
enterprises have been noted to be different from the older industries:
workers in the advanced sector are relatively younger, more educated,
and more skilled (Pendse, 1981). In addition, unlike the typical
working-life migrant in the Bombay textile industry, workers in the adv-
anced sector are typically ‘Bombayites’, i.e., second generation workers
(Panjwani, 1984).
Changes in Greater Bombay’s industrial structure, and consequent shifts
in the pattern of distribution of the labour force within the manufacturing
sector, impacted on the structure of Bombay unionism. Specifically, the
leading sector of the labour movement was no longer the textile industry
with its state-regulated industry-wide bargaining, but plants and enterprises
in the modern industries whereplunt-level bargaining rapidly emerged as the
dominant form of collective negotiations (Banaji, 1984). Inter-union
rivalries at the shopfloor acquired a new political dimension, as collective
bargaining outcomes were now functionally related to union militancy at the
plant.
From Table 1, we observe that the average size of registered trade unions
in the advanced manufacturing sector, although growing over time, are still
considerably smaller than the average size of unions in the cotton textile
industry.
250 British Journal of Industrial Relations
TABLE1
Average Size of Registered Trade Unions in Selected Industries
(all-India level data)

1961162 1971 1978

Cotton Textiles 913 836 1185
Basic Industrial
Chemicals 258 327 400
Pharmaceuticals 139 256 255
Manufacture of
Machinery (except
electricals) 402 428 501
Electrical Machinery 302 566 763

Source: Computed from various annual issues of the Handbook of Labour Statistics,
Employers' Federation of India, Bombay.

The search for, and experimentation with, various politically affiliated

unions resulted in a vacuum in the Bombay union movement. The vacuum
was filled by the Shiv Sena, a regionally-based communal party:
. . . . 1967 to 1972 were years of a greatly deviationist and disastrous wave, that of
the Shiv Sena. The thrust of the Shiv Sena was anti-communist. Its aim was the
destruction of communist-led unions. With the aid of militant chauvinism,
financed by industrialists and secretly blessed by the government, this semi-fascist
organisation mounted attacks on communists and indulged in violent strike
breaking (Pendse, 1981, p. 696).
The third period (roughly from the early 1970s to 1984) was characterised
by a total rejection of all forms of corporatism in trade unionism. Strikes
were based on issues emanating at the point of production, over wages,
fringes, and working conditions, rather than on choices over affiliation to
different political parties (Pendse, 1981). This period was also characterised
by fractionalisation of capital, as employers in the advanced manufacturing
sector began to realise both the efficacy and efficiency of bargaining
bilaterally with unions that (at least) represented median shopfloor interests
rather than the electoral objectives of political parties. Differences between
the state-created unions and those affiliated to radical political parties that
were apparent in the first two periods seemed to diminish during the third
phase of unionism. For example, in February 1972, the communist and
socialist trade union federations collaborated with the Indian National
Trade Union Congress to cooperate with the Congress government, and
more importantly announced that they no longer stood by the principle of
secret ballot to determine a union's popularity (Hiro, 1976). Even the
Centre of Indian Trade Unions, considered to be the most militant trade
union federation, showed signs of weakness, and began to lose its militancy
at the point of production (Panjwani, 1984).
The growth of these non-Congress trade union federations critically
depended, it seemed, on the political manoeuvres and fortunes of the parties
to which they were affiliated. State intervention in the industrial relations
system suited the established trade union movement:
 Union.-Type Effects on Bargaining Outcomes 251
. . because although politically vocal and legislatively influential, it lacks strength
on the shopfloor, and most trade union leaders prefer to rely on the legal
framework for dispute settlement (Jackson, 1972, p. 187).

The confusion in the union movement culminated in the May 1974 all-
India railwaymen strike in which a large majority of the railways’ 1.7 million
workers were involved. Over 30,000workers were arrested and predictably,
the Indian National Trade Union Congress was the only trade union centre
to actively oppose the strike (Hiro, 1976). The strike was effectively crushed
by the state, and the opposition unions lost considerable credibility among
the working class. In mid-1975, the (then) Prime Minister, Mrs Indira
Gandhi declared a National Emergency; the right to unionise was curtailed
and the right to strike suspended. Political constraints that tied conventional
unionism to party politics prevented effective union intervention in factory
politics, as industrial workers were left searching for new forms of unionism
during the post-Emergency period.
In the Bombay union movement, the third phase is associated with the
decline of the politically-affiliated unions, especially those of the left. The
communist All-India Trade Union Congress generally did not recover from
the attacks launched upon it by the Shiv Sena (Pendse, 1981). In addition,
the left unions lost credibility among workers due to their general opposition
to decentralised bargaining. Rigid organisational links with political parties,
and formalised channels of communication between rank and file and
leadership, prevented the left-wing unions from changing their strategies in
response to changes taking place at the point of production. Ironically, in
many firms, the left unions were now considered by management to be more
‘responsible’ (Pendse, 1981).
The rise of the independent plant-level unions in Greater Bombay in the
early 1970s is associated with the name of Datta Samant. Well known and
respected for his organising work among stone quarry workers in northeast
Bombay, Samant was essentially a medical practioner engaged in social
work. His rise to fame is associated with the famous ‘Godrej incident’ of
1972, where his supporters ousted the communalist Shiv Sena union through
militant and direct action (Pendse, 1981). Arrested and later released, he
became a trade union hero overnight. Workers from different plants in
diverse industries, battling the limitations of conventional trade unionism,
were attracted to his quick and decisive militancy that by-passed the state-
regulated industrial relations system and forced negotiations at the level of
individual capital.
Even during this early period, observers on Bombay’s union affairs noted
that Samant represented ‘a spearhead of an upsurge’, as he did not organise
workers but only mobilised them (Pendse, 1981). As Javed (cited in
Holmstrom, 1984, p. 293) pointed out:

The years of Samant’s rise to prominence are also the years,which saw the
emergence of independent plant-level unions in the more modern precision
252 British Journal of Industrial Relations
engineering, chemicals, petrochemical plants, within which the status of the union
president is more of an “advisor”, “consultant”, “expert”, rather than a leader in
the formal sense of the word. For a fee the workers are prepared to buy a service,
and no nonsense here. It is not accidental that within such plants, with a relatively
stabler industrial relations climate, Samant is neither necessary, nor adequate,
nor present in any significant way . . . The work of Samant’s unions represent
widespread pressure on management to rationalise their industrial relations
practices. The extent to which he succeeds in this task, is the extent to which he
makes himself redundant.

The above describes the birth of the new unionism - plant-level unions
articulating with one another under the banner of Samant. The growth of
‘Samantism’ waned during the Emergency (1974-75), as Samant himself was
arrested, and the opposition unions formed joint action committees to resist
the industrial discipline imposed during this period.
The post-Emergency period (1977-80) witnessed the rise of shopfloor
militancy, and the proliferation of employees’ unions. The new feature of
inter-union rivalry was that it originated at the point of production; plant-
level issues fuelled the rivalries, the political factor of party affiliation was
‘subsidiary, almost casual and incidental’ (Pendse, 1981, p. 745). According
to Pendse’s (1981) estimates, Samant led more than fifty per cent of the total
140 strikes in Greater Bombay’s industrial belt between March and
December 1977. The number of collective agreements concluded at the
plant-level (i.e., settlements under the Industrial Disputes Act, but not
including awards following adjudicationhrbitration, or bonus settlements)
moved from an earlier peak or 1144 in 1977-78 to a new peak of 1670 in
1980-82 in the Greater Bombay region (Banaji, 1984).
The demonstration effect of the economic and political successes of these
internal unions in the advanced manufacturing sector spilled over into
Bombay’s sprawling cotton textile industry, and worker resentment against
state control over the direction of the union movement and over the
bargaining structure in the industry resulted in the 1982 strike, the longest in
Indian urban labour h i ~ t o r y . ~

THEORETICAL ARGUMENTS

The hypothesis of this paper is that the independent internal unions are
more militant, and hence, more effective in securing higher pay and fringe
benefits than the externally-affiliated unions. The differences between the
composition of the leadership across the two union-types are of crucial
importance. The leadership of the internal unions consists of workers, who
are themselves engaged in the negotiation process. The negotiators for the
affiliated unions are typically ‘political outsiders’, who more often than not,
view their trade union involvement as a stepping-stone to future careers in
their respective political parties. Whereas leaders from the internal unions
 Union-Type Effects on Bargaining Outcomes 253
are elected or nominated by workers internal to the plant, the union
‘officers’ of the affiliated unions are typically nominated by higher officials
from their respective trade union bureaucracies. This ‘political outsider’
theme has consistently dominated earlier discussions of conventional Indian
trade unionism (see among others, Johri, 1967; Form, 1973; Form and
Pampel, 1978; Holmstrom, 1984).
The above differences in leadership have implications on the intensity of
bargaining at the plant-level. Worker negotiators from the internal indepen-
dent unions, being more aware of shopfloor issues and grievances, are
probably more likely to engage in more militant bargaining simply because
they have everything to gain by doing so, unlike the typical leader of the
affiliated union whose salary is determined and administered by forces
outside the enterprise.
The lack of militancy in bargaining on the part of negotiators from the
external unions may, in part, be due to the fact that these unions are
constrained, in the sense that they represent only one segment of the
coalition that constitutes the political party. Specifically, it could be that
attaining higher wages for urban industrial workers weakens the party’s
following among the capitalists in the case of the Congress Party, or the
peasantry and the urban lower middle classes in the case of the commu-
nist unions. Such a constraining phenomenon has been observed in other
countries where politically-affiliated unions are engaged in negotiating
collective bargaining agreements, €or example in Turkey (Jackson, 1971).
Unlike the affiliated unions, the internal independent unions have
organisational autonomy as the leadership is directly responsible to its rank
and file, and not to any external organisation. Consequently, the leader-
ship is under more pressure to ‘deliver the goods’ to its membership. In
addition:
. . . within the ambit of the system of labour courts, the official unions are more
likely to be involved in conflicts with their own members than are the independent
unions; conversely, the independent unions are more likely to support members’
grievances against employers than are the official unions (Roxborough, 1984,
p. 37).

Although these arguments may be viewed by some as a rationalisation of

‘economism’ or ‘workerism’ in contemporary tendencies in Indian trade
unionism, given the preceeding historical discussion where it was stressed
that the independent unions primarily arose as a response to the ineffective-
ness of the affiliated unions, I point to the work of Henley (1979), who in the
context of Kenya and Malaysia, states that the economism of trade union
leaders reflects both the real interests of the rank and file membership as well
as the ‘exigencies of survival in a hostile political environment’. The latter
accurately describes the contemporary trade union situation in Greater
Bombay.
254 British Journal of Industrial Relations

THE DATA

The data consists of 119 plant-level agreements, with the earliest contract
negotiated in 1978 and the latest one negotiated in 1984. Nearly all the
contracts were negotiated before or during the Bombay textile strike, which
began in early-1982 and effectively ended in mid-1983. The average duration
of a typical contract in this sample is three years. Table 2 presents the names
of the firms by industry groups in Greater Bombay and Pune from which
these plant-level agreements were collected. Since typically each of these
firms have only one plant in the Western Indian region, in a local and
geographical interpretation, these contracts may thus be considered as firm
or enterprise-wide.’

TABLE 2
Names of Firms by Industry Groups in Greater Bombay*
A Pharmaceuticals B Chemicals &Allied

Abbot Laboratories BASF

Boots Bayer
Burroughs- Wellcome CAFI
Ciba-Geigy Ceat Tyres
E. Merck Colour-Chem
Elpro International Herdillia
Franco-Indian Hindustan Petroleum
Geoffrey Manners Crescent Dyes
German Remedies Indian Organic Chemicals
Glaxo Indian Oxygen
Griffon Ion Exchange
Hindustan Antibiotics (Pune) National Peroxide
Hoechst Nirlon
Indo-Pharma Nocil
Johnson &Johnson Polyolefins
May and Baker PIL Rubber Chemicals
MSD Roche Fine Chemicals
Nicholas Standard Alkali
Oehringer-Knoll SKF
Parke-Davis Union Carbide
Pfizer
Rallis
Richardson Hindustan
Roche
Roussel
Sandoz
Sarabhai Chemicals
Searle
Traub
Unichem
Wyeth Laboratories

C Electrical Engineering D General Engineering

ASEA Atlas Copco (Pune)

Blue Star Bajaj Auto (Pune)
 Union-Type Effects on Bargaining Outcomes 255
C continued D continued
Cable Corporation Buckau-Wolf (Pune)
Crompton Greaves C.P. Tool
Crompton (Ahmednagar) Automobile Products of India
Genelec Forbes Campbell
Hindustan Brown Boveri Gabriel
Indian Aluminium GKW Fasteners
Larsen and Toubro GKW
Nelco Godrej
Otis Greaves Cotton
Permanent Magnets Hindustan Ferado
Phillips Indian Oil
Phillips (Pune) Kamani Engineering
Rallifan Killick Nixon
Ralliwolf Macneil and Magor
Siemens Mahindra Auto
Tata Electric Mahindra Tractor Division
Voltas Mahindra Spicer
Voltas Switchgear Mahindra Ugine Steel
Metal Box
E Miscellaneous Mukand Iron
Needle Roller Bearing
Asbestos Cement Poysha
Asian Paints Premier Automobile Limited
Britannia Industries Richardson and Cruddas
Cadbury Sandvik Asia (Pune)
Camlin Special Steels
Colgate-Palmolive TELCO (Pune)
Formica (Pune) Vickers Sperry
Garware Paints Vulcan Lava1 (Pune)
Godfery Phillips W.G. Forge
Goodlass Nerolac XLO
Hindustan Lever
J. K. Helene Curtis
Parle Products
Snowchem
Tata Oil
*Unless otherwise specified
Source: Union Research Group (198444; 1984B)

The data were obtained from the Bulletin of Trade Union Research and
Znformation, Number 4 (February 1984) and Number 5 (September 1984).
These bulletins are published by the Union Research Group (henceforth
referred to as the URG), an independent research collective in Bombay.
Data from the agreements were directly obtained by the U R G from union
and management officials.
From Eulletin 4, I first obtained data on the average monthly pay of a
blue-collar worker, the year in which the contract was negotiated and
became effective, and the union-type that negotiated the contract. Second, I
matched the above three variables with a few additional variables from the
identical contracts published in Bulletin 5. These additional variables were:
average monthly house rent allowance, average monthly leave travel
assistance, average monthly educational allowance, average annual bonus
and ‘ex-gratia’ payments, the industry classification, and the geographical
location of the various plants.
256 British Jourriul of industrial Relations
The union-type variable is dichotomised into: the independent internal or
employees’ unions, and the unions that are externally affiliated to
federations that are trade union wings of established political parties. The
URG data does not specify the names of the particular trade union
federations to which the external plant-level unions are affiliated. Thus, I am
forced to assume that there are no significant differences between unions
within the externally-affiliated category in terms of their bargaining
effectiveness at the plant-level, a realistic assumption in the light of the
earlier historical discussion.
The URG data in its present published form leaves a lot to be desired.
Plant-specific information on such crucial variables, such as size of
workforce, labour costs as a proportion of total costs, concentration and
profitability ratios, proportion of skilled workers, the extent of multina-
tional participation, etc., are not available. The only differentiating
criterion between the various plants is the broad industry classification.
Inspite of these limitations, the URG data does offer an unique opportunity
to test for union-type effects on pay and fringes in India’s advanced
manufacturing sector.

EMPIRICAL PROCEDURES

There are sixty-five internal unions versus fifty-four externally-affiliated

unions in the URG data. To test whether the two union-types are attracted
to specific industries in any systematic manner, a Chi Square test was
performed. Table 3 indicates that there is no significant relationship as the
null hypothesis cannot be rejected by even the most liberal standards.

TABLE 3
Distribution of Union-Types by Industry

Internal & Externully-

Employees’ Unions AfJiliated Unions

Pharmaceuticals 19 12
Chemicals & Allied 11 9
Electrical Engineering I1 9
General Engineering 18 15
Miscellaneous 6 9
Total 65 54

Raw Chi-Square = 1.85, p = ,763 (4 degrees of freedom)

Source: Union Research Group (1984A; 1984B)

The Model
The wage and fringe equations are estimated by the following linear models:
 Union-Type Effects on Bargaining Outcomes 257
Log(PAY)
or a + b YEAR+c UNION-TYPE+
TBEN = d IND l + e IND 2+f IND 3
or +gIND4+hBOMB+e
BONEX
where,
Log(PAY) = the log of average monthly pay in rupees;
TBEN = total benefits = average monthly house rent allowance +
average monthly leave travel assistance + average
monthly educational allowance (in rupees);
BONEX = average annual bonus and ‘ex-gratia’ payments during
the year 1982 or 1983 (in rupees);
YEAR = year in which the contract was negotiated and became
effective;
UNION-TYPE = 1if internal or employees’ union, = 0 if union affiliated to
an external trade union federation;
IND 1 = 1 if plant is in the pharmaceutical industry, 0 otherwise;
IND 2 = 1 if plant is in the chemical and allied industry, 0
otherwise;
IND 3 = 1 if plant is in the electrical engineering industry, 0
otherwise ;
IND 4 = 1 if plant is in the general engineering industry, 0
otherwise;
BOMB = 1 if plant is located in the Greater Bombay region, = 0 if
located in Pune or Ahmednagar;
Finally, when IND 1 = IND 2 = IND 3 = IND 4 = 0, the plant is in the
Miscellaneous category. Also, e is the error term which I assume is normally
distributed.

The Dependent Variables

Since Indian manufacturing workers generally do not receive a consolidated
wage (Jackson, 1972, p. 187), the average monthly pay refers to gross pay,
which consists of a basic wage, a ‘dearness allowance’, an annual profit sharing
bonus, and other assorted allowances. Unions and management bargain
separately or go to adjudication over each of these items (Jackson, 1972). The
‘dearness allowance’ system is a cost-of-living adjustment, which varies not
only by state and region (Jackson, 1972), but also varies widely across and
within industries (Punekar, 1966, p. 39). In our model, average monthly pay
includes basic wages, the ‘dearness allowance’ component, and other
allowances, but does not include the annual bonus payments.6 The average
refers to a weighted average, with the weights reflecting the distributionof the
plant’s workforce into various individual occupational grades.
The annual bonus and ‘ex-gratia’ payments, although originally conceived
as a form of profit-sharing ‘to keep labour contented’ (Van den Bogaert,
1968), is now assumed by workers to be a ‘deferred wage’ or a ‘necessary
258 British Journal of Industrial Relations
adjunct to wages’ (Holmstrom, 1984). Although the exact amount vanes
between four to twenty per cent of annual wages, with the precise formula
being determined by a firm’s profitability in a given year, in practice,
especially in the contemporary Bombay labour relations system, depends on
intense union-management negotiations (Holmstrom, 1984). Thus in the
URG sample, nearly fifty per cent of the settlements paid a bonus and ‘ex-
gratia’ (in 1982) that exceeded the limits imposed by the Payment of Bonus
Act (Union Research Group, 19848). The determination of bonus has also
been subject to political forces: during the years of the Emergency (1975-
1977), the statutory bonus was reduced from 8.33 to 4.6 per cent of total
annual wages by the Congress government under Mrs Gandhi (Panjwani,
1984).
Finally, total benefits is the second fringe measure, each component of
which is a bargainable issue. Since in the proposed model I examine only
wage and fringe outcomes, I assume that bargaining over structure is
exogenous to the bargaining process. The model thus represents a long-run
scenario, where both worker and employer preferences for decentralised
bargaining structures have been revealed and realised.

The Determinants
The main focus is on the UNION-TYPE variable. The U R G data
distinguishes between ‘purely’ internal unions, and those that call them-
selves employees’ unions (Union Research Group, 1984A). It is highly
probable that both these union-types are associated with Datta Samant.
Since my purpose is to test for differences between the internal and
externally-affiliated unions, the model does not consider the above distinc-
tion within the internal unions made by the URG data. Given the prior
theoretical arguments about union-type and bargaining strength, I expect
the coefficient on UNION-TYPE to be positive.
In a macroeconomic context, money wages of Indian factory workers are
significantly determined by the Consumer Price Index for Industrial Workers
(Fonseca, 1964; Johri, 1967). The variable BOMB controls for local labaur
market effects. Since wages negotiated in year t is probably less than those
negotiated in year t+ 1, the variable YEAR controls for such a phenomenon.
The importance of bargaining structure in determining bargaining outcomes
have been noted in the context of both U.S. and U.K. manufacturing
(Hendricks, 1975; Cappelli, 1984). This study controls for the effects of
bargaining structure as all contracts were concluded at the plant-level.
In the literature on inter-industry wage differentials in India and in other
LDC labour markets, the ‘ability to pay’ criteria (such as firm size, capital
intensity, labour productivity, profitability, etc.) on the industry side are
found to be significant determinants (Dholakia, 1976; House and Rempel,
1976). Within firms in an industry, bargaining outcomes are related to
whether the firm is a multinational subsidiary or owned by national capital
(Standing and Taira, 1973; Henley and House, 1978). Given the lack of
 Union-Type Effects on Bargaining Outcomes 259
disaggregated plant-level data and information relating to the above, the
industry controls will have to serve as proxies. The IND variables are good
proxies for determinants of bargaining outcomes that vary by industry, such
as the level of technology, skill mix, and the labour process in general. For
example, from Table 2 we observe that the majority of plants in the
Miscellaneous category are engaged in the production of paints (Asian
Paints, Goodlass Nerolac), cosmetics (Helene Curtis), biscuits (Britannia),
chocolates (Cadbury), and processed foods (Hindustan Lever). To the
extent that these involve more labour intensive processes compared to the
plants in the other industry categories, positive coefficients on the industry
controls may reflect a capital-intensity effect on wages and fringes. On the
other hand, the industry controls fail to capture inter-plant variations in
profitability rates within industries, thereby weakening the explanatory
power of the BONEX function.
Differences between multinational subsidiaries and nationally-owned
firms are somewhat proxied by the industry controls, since the predominant
number of multinational subsidiaries appear in the pharmaceutical category
(see Table 2). Thus, a positive coefficient on IND 1 may reflect a
multinational effect on wages and fringes. In addition, unlike in most other
developing countries, differences in labour-management practices between
multinational subsidiaries and domestically-owned firms in the advanced
manufacturing sector in India may not be very significant. Thus, Kassalow
(1978B) refers to ‘Indian exceptionalism’ in the context of the labour aspects
of multinational corporations.

EMPIRICAL RESULTS

Table 4 presents the Ordinary Least Squares regression estimates for the
three bargaining outcome equations. In all three equations, the coefficient
on UNION-TYPE is positive and larger than its standard error. The
important finding is that, ceteris paribus , the independent internal and
employees’ unions negotiate a fifteen per cent significantly higher average
monthly pay than do the externally-affiliated unions. Similarly, the internal
unions secured significantly higher mean annual bonus and ‘ex-gratia’
payments. The insignificant effect on total benefits may be due in part to the
fact that unions in Greater Bombay negotiate on total increases, and are
rather less concerned with how the increases they finally secure are
distributed under various components (Banaji, 1984). Since total benefits
are included in the average monthly pay measure, the internal unions
probably have a greater effect on basic wages and ‘dearness allowance’ than
the estimated fifteen per cent.
As expected, YEAR has a positive effect on pay and total benefits.
Positive signs on nearly all the industry controls possibly reflects a
capital-intensity effect. The significant positive coefficient on IND 1 (i.e.,
pharmaceuticals versus miscellaneous) in the Log(PAY) equation may
260 British Journal of Industrial Relations
TABLE
4
Union-Type Effects on Bargaining Outcomes
(unstandardised coefficients, standard errors in parentheses).

Dry endeni Variables Log(PA Y ) TBEN BONEX

Determinants
YEAR .015* 10.57* -3.50
(.011) (7.43) (76.64)
UNION-TYPE .1 so**** 26.88 300.46*
(.O32) (21.35) (224.66)
IND 1 .160* * * * 55.71* - 124.36
(.052) (35.06) (369.56)
IND 2 .162** * * 68.25** 122.42
(.056) (38.01) (407.10)
IND 3 .019 17.65 461.35
(.056) (37.85) (402.45)
IND 4 ,042 -6.88 - 18.43
(452) (34.71) (367.94)
BOMB .245** * * 34.05 324.48
(.057) (38.63) (439.73)
constant 5.63 -770.2 2080.91
(399) (605.7) (6239.47)
n 119 119 113
R’ ,3757 ,1112 .0542

****significantat .01 level (two-tailed test)

***significantat .05 level (two-tailed test)
**significant at . I 0 level (two-tailed test)
*significant at .10 level (upper-tailed test)

reflect a multinational effect.’ The higher cost of living in Greater Bombay

as reflected in higher wages and benefits to its industrial workers (as
compared to those mainly in Pune) is evidenced by the coefficient on BOMB
in the Log(PAY) equation.
The industry controls may also be serving as proxies for the degree of
product diversity. Although the URG data does not include data on the
diversity of product range produced in the various 119 plants, it is my strong
conjecture that plants in both the pharmaceutical and chemical industries
are engaged in the production of multiple products, whereas plants in the
other three industries produce a single product. Indeed, Banaji’s (1984)
analysis of a sub-sample of fifty contracts from the identical URG data
revealed a positive correlation between monthly pay and the level of
diversification of the firm’s productive activity.
In sum, controlling for industry and local labour market effects, bargaining
structure, and the year in which the contract was negotiated, the independent
internal unions deliver a higher wage and fringe package than the externally-
affiliated unions in Greater Bombay, Pune, and Ahmednagar.x
Since the dependent variables in.this paper refer to bargaining outcomes,
the question arises as to what, if anything, employers gain by agreeing to
succumb to the greater bargaining strength of the internal unions. Do the
higher wages and fringes represent a ‘pay-off‘ to the internal unions €or
greater management autonomy and flexibility at the shopfloor? Are the
higher wages and fringes conditional on the internal unions being able to
 Union-Type Effects on Bargaining Outcomes 261
deliver a more productive workforce? From a strictly labour cost point of
view one would clearly expect employers to prefer to negotiate with the
externally-affiliated unions. As pointed out earlier, the latter are considered
by management to be more ‘responsible’ (Pendse, 1981). This preference by
employers is reflected in the fact that in a large number of settlements in the
URG data, management secured the right to legally disregard, or terminate,
contract provisions, if the majority of workers decide to switch their union
allegiance during the currency of the settlement (Union Research Group,
1984A). However, there is no way to empirically test whether the above
clause occurs more frequently in contracts negotiated with the external as
opposed to the internal unions.
Although the internal plant-level unions have been accused of signing
productivity clauses in their contracts, there is no evidence to suggest that
they are engaged in it any more than the external unions. An examination of
a sub-sample of the URG data revealed that both types of unions were
equally pressured to sign productivity clauses by management (Banaji,
1984).
The internal plant-level unions, far from granting employers managerial
flexibility and autonomy, have instead expanded the issues over which
bargaining takes place. These issues have included among other things,
bargaining over work loads, the hiring of temporary workers, intra-plant
deployment of the labour force, promotions, worker participation, matern-
ity leave, intra-plant distribution of workers into various job categories, and
in sum, have forced managements to modernise their enterprise-level
industrial relations systems. The rise of the new independent plant-level
unions since the mid-1970s in the Western Indian region has significantly
curtailed managerial autonomy and flexibility.

CONCLUSION

Although distinctions between union-types dominated the earlier compara-

tive industrial relations literature, and union wage effects were estimated in
the institutional labour economics discourse, no systematic studies were
carried out regarding the differential effects on wages and fringes of
different union-types. The theoretical model and the empirical evidence
presented in this paper represents the first attempt, to the author’s
knowledge, to test for union-type effects on bargaining outcomes covering a
wide range of industries from two large urban labour markets of a
developing economy.
The demonstration effects of the economic and political advantages of
militant plant-level bargaining directly by workers, spilled over into the
Bombay cotton textile industry and triggered the 1982 strike (Patankar,
1981; Bhattacherjee, forthcoming). This paper provides concrete empirical
evidence about what the majority of Greater Bombay’s industrial workers
learnt or had heard about in their working class neighbourhoods.
262 British Journal of Industrial Relations
Although the material and structural conditions of the textile mills
differed from the plants in this study, and the new form of independent
unionism failed to capture the monolithic and state-regulated industry-wide
bargaining structure in the textile industry (Bhattacherjee, forthcoming),
certain forces operate in the heterogenous urban labour markets of many
developing countries that tend to unify the different labour markets (see for
example, Marshall, 1980). The unification in Western India took a political
form: in November 1984, Datta Samant, the man who led the textile strike
and earlier articulated the interests of the independent internal unions in the
advanced manufacturing sector, won a parliamentary seat in New Delhi
from a Bombay working class constituency as a candidate from the newly
formed Kamgar Aghadi Party (approximately, Workers’ Party). The
essential objective of this study has been to point to the economic bases from
which the new urban workers’ movement in Western India emerged.

ACKNOWLEDGEMENTS

The author is grateful to Annapurna Shaw for critical comments on the

manuscript. The author also thanks Jairus Banaji and his colleagues at the
Union Research Group for making the raw data available to me during my
stay in Bombay in the spring and summer of 1985. This paper forms a
chapter from my dissertation entitled ‘Union-type, Labour Market
Structure, and Bargaining Outcomes in Indian Manufacturing: An Analysis
of the New Unionism in Greater Bombay’. I am grateful to the American
Institute of Indian Studies and to the Graduate School of the University of
Illinois for research funding.

NOTES

1. Bates (1970) critiques the three major interpretations regarding the role of labour
in developing countries: the labour and industrialisation theme, the political
unionism hypothesis, and the role of labour in the process of economic
development theme.
2. Roxborough’s (1984) empirical findings however suggested to him a more
complex causality: union militancy and internal union democracy were better
predictors of wage increases than union affiliation.
3. It was around this time that the Congress union in Premier Automobile Limited
lost out to the socialist union (Form, 1976, p. 154).
4. For a detailed discussion regarding the determinants of the 1982 strike see
Bhattacherjee (forthcoming).
5. In the case of a few firms that do have more than one plant in the regional labour
market, such as Premier Automobile Limited, the agreement is typically multi-
plant. The URG data does not specify how many of these 119 contracts cover
more than a single plant. Consequently, a theoretical and empirical distinction
between single and multiple-plant coverage cannot be made.
 Union-Type Effects on Bargaining Outcomes 263
6 . The ‘dearness allowance’ component forms a substantial proportion of monthly
wages (Punekar, 1966). Since the URG data does not separate the basic wages
from the ‘dearness allowance’ component, union-type- effects on these two
components cannot be separately estimated.
T tests were carried out to examine whether plants in the pharmaceutical industry
were associated with higher pay and benefits than plants in the chemical,
electrical, and general engineering groups. The following were the results: (1)
there were no significant differences in either pay or benefits between plants in
the pharmaceutical and chemical industries (the two t values were -.03 and
- .39 respectively), (2) although plants in the pharmaceutical industry paid
significantly higher pay than those in the electrical engineering category, there
were no significant differences in total benefits (the two t values were 3 and 1.19
respectively), and (3) plants in the pharmaceutical industry paid significantly
higher pay as well as higher total benefits than those in the general engineering
group (the two t values were 2.68 and 2.22 respectively). The specific t statistic
used in these tests was the following:

6, - 6
tn-(k+l) =

where, b, and b2 are two estimated regression coefficients in the same equation,
Var(bi), i=1,2 are the variances of the hi's, Cov(blb2) is the covariance, n is the
number of observations (=119), and k is the number of independent variables in
the regression equation.
Two extensions of the model were also estimated: (1) I ran the same functions
with two union-type dummy variables so as to test for differences between the
two types of internal unions as distinguished by the URG data. Both the ‘purely’
internal as well as the employees’ unions delivered significantly higher pay and
fringe outcomes than the externally-affiliated unions. But there were no
significant differences between the two types of internal unions in terms of their
effects on pay and fringes. The t statistic in this test is identical to the one in
footnote 7 above; (2) the results in Table 4 pertain to a linear version of the
model that abstracts from the possibility that an interaction effect between
union-type and industry may affect pay outcomes. For example, to the extent
multinational subsidiaries (proxied by IND 1)have a higher ‘ability to pay’, and
to the extent the internal unions have a greater bargaining strength, an
interaction effect between IND 1 and UNION-TYPE may affect pay outcomes.
Thus, a reduced form of the model with the interaction terms was estimated. The
‘pure’ union-type effect declined to 13.7 per cent, but was still significantly
different from zero (two-tailed test). When an F test was carried out to examine
whether the inclusion of the interaction terms added significant additional
information, the null hypothesis, that the coefficients on the interaction terms
are all simultaneously equal to zero, could not be rejected at any respectable
significance level. The appropriate F statistic is the following:

SSEl- SSE2Ik-g
F“,,”,=
SSE2 / n - ( k + l )

where, SSEl = sum of squares of deviations for model without the interaction
264 British Journal of Industrial Relations
terms, SSE2 = sum of squares of deviations for model with the interaction terms,
v,=k-g, v,=n-(k+l) with k greater than g, where k = number ofindependent
variables in the model with the interaction terms and g= number of independent
variables in the model without the interaction terms. Both these sets of results
are available on request from the author.

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