It is rather unusual for the State Bank to highlight the importance of labour unions. But it is surely refreshing to see it bring up the subject of labour unions in its latest State of Pakistan’s Economy report; specifically, their potential role in Technical and Vocational Education and Training (TVET).
Citing examples from Germany and Turkey, the central bank states that involvement of labour unions in training programmes can lead to what is called a “productivity coalition” among management, unions and the workforce.
“Germany, for example, is cited as a success story in this regard. Labour unions in Germany are involved in a tripartite vocational education ecosystem with the government and employers and actively establish occupational groupings, revise training curriculums, and set recruitment targets based on future skill needs at a firm and even plant level basis,” the central bank said.
“Turkey has a similar system, whereby unions and employer groups mutually oversee the quality and delivery of apprenticeship programs, while the Vocational Training Councils serve as a platform where all the TVET stakeholders can get together and provide policy recommendations to the government,” it added.
The central bank maintains that Pakistan can surely learn from these practices. While the strength of labour unions in terms of number of members has increased in Pakistan over the last few decades, the total number of unions has remained flat since the 80s. Yet, as the central bank notes, the proportion of union membership in non-agriculture workforce remains low at 6 percent whereas “their focus on employee learning and development has been negligible”.
The central bank is right in its observation that “both legal restrictions and the anti-union bias among employers are the reasons behind this trend”. One of main reasons why no more than one percent of the total labour force in Pakistan is currently organised, arguably the lowest level of unionisation in the world, as PILER’s Karamat Ali once told BR Research, the state itself doesn’t allow labour unions.
“Normally, the state leads by example by giving government workers the right to organise themselves under the International Labour Organisation conventions ratified by the state. However, the Pakistani state has not given any legal rights to its workers to organise themselves. Before Ayub Khan repealed the 1926 Act, almost 60 percent of unions were from the public sector. Now there are none,” Karamat told BR Research in an interview in 2016. (For details, read his interview in this paper’s Brief Recording section Oct 7, 2016)
It so happens that because of various sorts of exclusionary rules and limitations, the law in its current form is applicable to only 10 percent of the labour force. The legal framework is restrictive to the degree that it only allows unions at enterprise level; there can be no sectoral or industry-wide unions, addressing which should be the order of the day to tap the potential gains of sector-level training of workers and reverse Pakistan’s falling productivity.
Unlike India, where labour ministry closely liaises with the unions, and maintains a strong database for ranking of, and coordination with various unions in various affairs where labour union representation is required, labour departments in Pakistan reportedly don’t even have updated number of unions in the country. Even the publication of the quarterly ‘Pakistan Labour Gazette,’ – once a flagship report on labour unions and their affairs - has also been stopped long before the devolution in 2010, and provincial labour departments have not managed to fix this wrong, nor other related wrongs for that matter.
Be that as it may, while provincial governments have to improve their labour unions laws, the subject which the central bank points to – a kind of “productivity coalition” among management, unions and the workforce for training of workers – also requires a change in corporate governance framework.
What the central bank refers to are examples of coordinated market economies (CMEs) – the likes of Germany, Italy, France, Belgium and so forth – whereas Pakistan’s corporate governance framework takes its inspiration from the liberal market economies (LMEs), of which the UK, US, Canada and Australia are some examples.
The two are entirely different in their disposition and require different softwares of corporate governance, a subject which has been previously discussed in detail in this space but to little avail. Indeed, the search for the right corporate governance framework is a debate worth having. One hopes the central bank will take the discussion forward for the interest of relevant stakeholders. (For more on CMEs and LMEs, read BR Research’s ‘Finding the right corporate framework’, May,19, 2019)