Global supply risks

The Union Strikes: The Good, the Bad and the Ugly

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“Nearly 40,000 Verizon workers go on strike”… This headline flashed across the US and the Philippines between April and June 2016.

The reason:  Workers, mostly installers, electricians, and call center resources protested against a number of issues including low wages, hiring non-union contractors and outsourcing jobs to low-cost locations including Mexico, the Philippines and the Dominican Republic. The strike was the largest that the US had seen since 2011 according to the U.S. Bureau of Labor Statistics.

The result: Verizon conceded to several of the workers’ demands including hiring union workers, protection against outsourcing of call-center jobs, and employee benefits such as salary hikes and higher pension contributions, among others and thus bringing an end to the strike in June.

The repercussion: The strike witnessed several instances of social disorder, violence and clashes, ultimately calling for third party intervention (Secretary of Labor – Thomas Perez) to initiate negotiations between the parties. Also, as a result of the strike, Verizon reported lower than expected revenues in the second quarter of 2016.

Trade unions/ labor unions aren’t just this millennia’s product and has been in vogue since times immemorial. Unions, to ensure fairness to the working class, have gone on strike for better working conditions and employee benefits since the industrial revolution and are as strong today as they were last century. With the advent of technology and advancement in artificial intelligence, machines are grabbing the jobs which were once the bastion of the humans. So, questions that arise here are, what relevance do unions have in today’s work scenario? And, are the strikes organized by them avoidable?

As long as the concept of labor exists and employees feel that they are not receiving their fair share of dues, unions will exist and thrive. Union protests in most cases cause work stoppages, and in certain cases, disruption of law and order. Like in March 2016, public servants at Federal Government departments across Australia went on a series of strikes over failed pay negotiations, disrupting operations of many government departments for a few days.  Besides such direct effects, there are many indirect effects as well such as strained employee relations, slower work processes, lesser productivity and unnecessary legal hassles.

Also, union strikes can never be taken too lightly as they have prompted major overturn of decisions, on a few occasions. Besides the Verizon incident that was a crucial example of this, nationwide strikes were witnessed in India in March and April this year when the national government introduced reforms related to the withdrawal regulations and interest rate of employee provident fund, terming it as ‘anti-working class’. This compelled the government to withhold the reform for further review. In France, strike against labor law reforms in May turned violent, resulting in riots and significant damage to property. The incident prompted the government to consider modifications to the proposed reforms.

However, aside from employee concerns, such incidents are also determined by a number of other factors such as the country’s political scenario, economy, size of the overall workforce and the unions, history of unionization, labor laws, and culture. For example, it is a popular saying that the French are always on strike as per tradition (although recent statistics indicate a decline in frequency). In a communist government like China, strikes have steadily risen in number. In 2015, China Labor Bulletin (CLB), a Hong Kong-based workers’ rights group recorded 2,700 incidents of strikes and protests, compared to 1,300 incidents in 2014. Most of them have stemmed out of failure by the government to respect the basic rights of employees and address labor concerns.

Interestingly, unions have not been able to gain a strong foothold in the IT-BPO industry. While many countries do have a separate union to represent workers from the sector, incidents of strikes like Verizon have been relatively low.  However, workplace regulations, in addition to other factors mentioned could be a trigger for such incidents, even if on a smaller scale. For example, a recent survey that interviewed several BPO employees in India revealed that while forming a union in the BPO sector was difficult, irksome workplace regulations such as constant surveillance, irregular timings and incentives have prompted employees to express their resentment in smaller ways such as corruption of internal servers and so on.  Such risks are further enhanced in a city like Kolkata, which carries a strong trade union culture.

What can companies do?

Before setting up operations in a location, assessing the labor laws in the country, their effectiveness, regulations to be adhered to and the union culture of the place can be of help. In some countries, strikes are often the last resort as workers stand the chance of losing pay as a result of them, owing to the strict implementation of labor laws.

However, in other countries, union strikes are common and can be violent. A general assessment of the location can help firms come up with preemptive action against unforeseen circumstances. Companies also need to have clear regulations in place and improve transparency, leaving little room for speculation.

However, prioritizing employee satisfaction is a key requirement to help companies avoid major confrontations. Employee engagement, recreational management and satisfaction are of utmost significance in this strategy and this helps not only keep them happy but also retain talent. In many cases, companies have suggested making unions part of the solution rather than the problem, by forming partnerships with bigger trade unions and improve workplace collaboration.

Supply WisdomSM regularly helps businesses by providing such valuable insights and developing preemptive risk management methodologies. Contact us for more information or to get started with a free trial.