Wistron violence: Lessons for Indian manufacturing
On December 12, workers turned violent at Wistron Corporation’s Apple iPhone plant in Karnataka’s Kolar district. Initial reports suggested planned violence by the workers and estimated losses to be as high as Rs 430 crore. As more details came in, the picture changed. Not only have the estimated losses been significantly lowered (to a range of Rs 20-50 crore), it has emerged that the workers had a genuine reason to be unhappy.
On December 18, a report quoted government officials as saying that the violence was not planned and “it was a sudden outburst” driven by the fact that the five-six staffing firms were exploiting “the workers by not paying or defaulting on salary payments”. “While workers should not have indulged in vandalism, the manpower suppliers will face action for violating rules and holding back wage dues,” the official said, without naming the companies, according to the report .
The company has since fired one of its top executives in India. Events at the Taiwanese company’s factory should not be seen in isolation. They offer a peak into the precarious state of labour relations even in jobs that are extremely technologically sophisticated and high-value in nature. As India seeks to attract more high-value manufacturing and cement its place in the global value chain of sophisticated electronic goods such as mobile phones, these incidents only underline the need for a proactive policy to prevent growing conflicts between labour and capital. This policy will have to keep in mind both the international realities of GVCs and India’s own experience in manufacturing.
1. Factory workers’ wages are a miniscule part of iPhone’s price
Apple’s iPhones are among the most expensive in the world. However, the workers who make these phones get only a small fraction of its price. According to a 2012 blog post on the Washingtonbased non-profit Economic Policy Institute, manufacturing costs were just 2% of iPhone’s total price, whereas profits accounted for 51%. Wages are an even smaller fraction of manufacturing costs. These numbers capture the stark reality of global value chains, where the workers engaged in manufacturing might be earning disproportionately lower than suggested by the final price of product.
A ground report based on conversations with the factory’s workers by The News Minute, a news website, supports this view. The report says basic salaries of workers are as low as between .10,000 and .20,000 and workers forgo basic comforts such as two daily breaks on the job for as little as .300. To be sure, sophisticated electronic products take a lot of costly research and development efforts, which might not reflect in the manufacturing cost. However, the point remains that workers making these products might be living a hand-to-mouth existence.
2. Incomes have anyway been shifting away from workers in Indian factories
While India has not had much success in attracting high-end GVCs so far, incomes have been shifting away from factory workers for a long time. Data from the Annual Survey of Industry (ASI), which tracks organised manufacturing in the country, shows this. The share of wages to workers in net value-added (NVA) for all factories was greater than the share of profits in the 1980s. This started changing in the 1990s and the profit share -wage share gap peaked just before the 2008 financial crisis. While the gap has narrowed since, profit share in NVA was three times the wage share in 2017-18, the latest period for which data is available.
To be sure, capital is not the only factor that has put a squeeze on earnings in Indian factories. A March 2020 Economic and Political Weekly (EPW) paper by Amit Basole and Amay Narayan shows workers on the shop-floor have lost out to managerial and supervisory staff as well. Basole and Nayaran analyse ASI data to show that the gap between wages per worker and emoluments per employee has been rising steadily in India since the late 1900s.
ASI defines workers as “all persons employed directly or through any agency whether for wages or not and engaged in any manufacturing process or in cleaning any part of the machinery or premises used for manufacturing process or in any other kind of work incidental to or connected with the manufacturing process or the subject of the manufacturing process”. “Labour engaged in the repair & maintenance, or for production of fixed assets for factory’s own use, or employed for generating electricity, or producing coal, gas, etc.” are included among workers. Employees include “all workers defined above and persons receiving wages and holding clerical or supervisory or managerial positions engaged in administrative office, store keeping section and welfare section, sales department as also those engaged in purchase of raw materials etc. or purchase of fixed assets for the factory as well as watch and ward staff”. Basole and Narayan attribute this growing gap to two factors: a rise in the share of contract workers or workers employed via contractors, who are paid a fraction of permanent worker wages for the same work and the possibility that “production-line wages have increased far more slowly than salaries and bonuses of the supervisory and managerial staff”. Payment to the labour contractors who will likely face action for defaulting on workers’ wages at the Wistron facility would come under emoluments. “While the staffing firms may be black-listed, this episode highlights the serious problem with third-party contracts which divide responsibility between principal employers and contractors. The key question is why do firms continue to use contract workers for core work when the labour code now allows fixed term employment, the introduction of which was driven by the need to discourage use of contract workers,” said Radhicka Kapoor, a fellow at the Indian Council for Research on International Economic Relations. “But if firms have the option of hiring cheaper contract workers, why would they hire fixed-term workers who are entitled to the same statutory benefits as permanent workers? The use of contract workers should be restricted to non-core or peripheral tasks. Oddly, the Occupational Safety and Hazard Code allows use of contract workers in core tasks under some conditions, undermining the move to introduce fixed-term contracts,” she added.