Is Asia ready to take on the unions?

18 September 2015

Author: Duncan Forgan


Hardening attitudes and growing inequality are taking workers onto the picket line across the region. But strong HR practices may be the best way to prevent serious unrest

With its gleaming skyscrapers, manicured green spaces and famously obedient citizens, Singapore has long been considered among the world’s most orderly places. Back in the tumultuous post-war years, however, life in the Lion City was significantly more volatile.
 
Much of the island’s infrastructure had been destroyed during the conflict and the decade following the reestablishment of British colonial rule in 1945 was characterised by high food prices, unemployment and discontent among workers, culminating in a series of strikes.
 
Into this maelstrom stepped a lawyer by the name of Lee Kuan Yew. The founding father of Singapore and the man widely credited with dragging the island state from third world to first during his long rule, the young Lee was sympathetic to the cause of organised labour, helping to negotiate settlements in various disputes.
 
Indeed, given his firebrand background, it is ironic that many view Lee, who passed away in March 2015, as a scourge of the unions. Today, some of the industrial relations flashpoints taking place across the region are every bit as volatile as the post-colonial era. Tensions between unions and employers in Asian countries, coupled with increasing pay pressures, mean the ability to negotiate with unions and employee representatives has never been more important. Yet many HR departments across the region have lost (or never had) the requisite skills.
 
On the face of it, Singapore seems to have the industrial relations landscape under firm control. Since it came to power in 1959, the People’s Action Party has enforced strict curbs on public assembly, scaled back union powers and rewritten labour laws to favour employers. Unions were decimated; those that survived were mostly subsumed under the National Trades Union Congress, a confederation that is often led by a cabinet minister.
 
Workers performing ‘essential services’ – including healthcare, firefighting and public transport – must give 14 days’ notice before going on strike. Employees of public utilities including water and electricity services have no right to strike at all. The result is what the PAP government calls “constructive and dynamic” industrial relations managed under a “tripartism” model linking workers, employers and the state, according to Singapore’s Ministry of Manpower (MoM), which regulates labour issues and workplace conditions.
 
While some might feel uneasy about this relatively intransigent approach, others view Singapore – and, by extension, Lee – as a shining example to the rest of Asia of how continual dialogue with unions can help overcome workplace challenges.
 
“Singapore’s record in industrial relations closely reflects everything else in its society,” says Chris Leggett, a professor at Australia’s James Cook University who has written extensively on industrial relations in the city-state. “It is orderly, well managed and generally non-confrontational. The MoM, employers and trade unions conduct their affairs on an equal footing and the tripartite system has generally worked very effectively.”
 
Tan Ern Ser, associate professor in the Department of Sociology at the National University of Singapore, adds: “Singapore has a strong government capable of carrying out what it thinks necessary quite swiftly and effectively. But the government also enjoys legitimacy as it has been able to deliver jobs and a higher standard of living.
 
“There is awareness that IR is about more than just a struggle over wages and benefits, but about working towards a win-win situation that protects the reputation of Singapore as a stable place for investment and, through it, employment and income security.”
 
In terms of overall prosperity and employment rates, this approach can be seen as a success. But the city-state is far from immune to workplace challenges. Income inequality is a hot political issue. Singapore has one of the world’s highest Gini coeffecients – a measure of the income distribution of a nation’s residents.
 
Other dark clouds include increasing reliance on migrant labour from countries such as China, Bangladesh, Indonesia and the Philippines to fuel economic growth. Discontent has been widely reported among migrant workers in sectors such as hospitality, transport, construction and cleaning, which boiled over in 2012 when Chinese bus drivers employed by state-run public transport operator SMRT went on strike over wages and working conditions. A year later, there was a large-scale riot by south Asian workers following the death of an Indian construction employee in a traffic accident. Other, more recent, protests have focused on the perception that senior expats are blocking career progression for younger Singaporeans.
 
Elsewhere in south east Asia, the employee voice has been an even more significant issue. In Hong Kong, representation is historically weak. During the 1960s, when full-time employment was expanding at a record rate, unions managed to keep pace but failed to strengthen their position significantly.
 
Over the ensuing decades, unions in Hong Kong have remained quiet. There are numerous factors in this, according to industrial relations experts, among them strong political tendencies within rival unions, mobility of the labour force and a culture of clamping down on activism. Union membership in the city remains low – recent Labour Department figures show that unions and staff associations claimed a total membership of just over 800,000, representing 23 per cent of the workforce.
 
Although a minimum wage law was passed in 2010 and the Mandatory Provident Fund, under which employers and employees contribute to support workers in later years, was created in 1995, labour rights have been slow to improve. Plans to introduce a collective bargaining law were scrapped, while Hong Kong employees work an average of 49 hours weekly – among the longest hours in the world. The Gini coefficient is also among the highest in Asia. Widespread union-led general strikes in 2014, in support of the wider political action around Hong Kong’s elections, show the potential for more organised dissent among the workforce.
 
Bill Taylor, associate professor in the Department of Public and Social Administration at City University of Hong Kong, takes a pessimistic view of the situation: “I believe the only good employer is one that recognises and jointly manages with the unions. This does not exist much now: not even the government or Cathay Pacific have genuinely positive relations with unions.”
 
Union representation, at least in the private sector, is also low in Malaysia and Thailand. In Malaysia, repressive laws have inhibited the influence of unions. Rules and provisions – such as only allowing regional unions, and only allowing workers from similar occupations to form a union – have helped fragment the workforce and weaken collective bargaining power. In Thailand, union representation in state-owned industries stands at around 50 per cent, but the International Labour Organization (ILO) estimates that only around one per cent of the workforce in the private sector is unionised.
 
That doesn’t mean that Asian employees are being ridden roughshod over. While strong human resource management (HRM) and union representation are not mutually exclusive, organisations with an empowered HR function, and a coherent strategy for engaging employees, tend to suffer fewer grievances and fewer formal disputes – which may, to an extent, reduce the requirement for a formal relationship with trade unions.
 
Multinational companies with reputations for progressive HRM such as Google, Marriott and Adobe have a strong presence in Asia. Regional entities such as Malaysian oil firm Petronas, Thai Airways, AirAsia, Marina Bay Sands and HSBC, meanwhile, are all known for their high rates of remuneration, vibrant corporate culture and provision for the well-being of employees and their families.
 
“We work hard to create an environment where people can learn, grow and do what turns them on,” says Tony Fernandes, CEO of Malaysia-based AirAsia. “Being encouraged to pursue their passions is one of the reasons our people are happy in their workplace.”
 
Applying progressive HRM policies is beneficial on several levels – not least in its wider economic benefits. The ILO says: “The only good workforce is a happy workforce. If wages are stagnant, conditions are bad and motivation and strong leadership is lacking, productivity is bound to suffer. With the economies in countries around Asia looking precarious, it is in the interest of both the companies and the nation as a whole to ensure that productivity is encouraged.”
 
HR is increasingly being called in to resolve the sort of situations that once would have been handled through an industrial relations route. The scandal involving outsourced Nike factories in Vietnam is one pertinent example: after local NGOs reported in the late 1990s that companies producing Nike goods had violated the minimum wage rate, failed to prevent sexual abuse at factories and overlooked unsafe working conditions, a PR nightmare and litigation ensued.
 
Nike responded by supporting the implementation of lean manufacturing in eight factories in Vietnam, as part of an HR-led programme aimed at improving conditions. Workers were surveyed, on-site training took place and follow-up activities measured progress. Factories participating in the training gave favourable testimonies and reported positive results, though it is notable that 90,000 workers at a footwear factory producing products for Nike and adidas still took part in a strike over pay in March 2015.
 
“Theoretically, effective HRM will eliminate employer-employee conflict, which drives down the need for IR,” says Rick Yvanovich, founder and CEO of TRG International, a professional services firm headquartered in Ho Chi Minh City, Vietnam. “In reality, this scarcely happens and the fact that direct communication with individuals is more difficult in large enterprises makes the possibility of HRM–IR coexistence more likely. Best practice would be for management to actively initiate the collective bargaining process and, as witnessed with Nike and other companies outsourcing work to cheaper labour markets, take a more hands-on role in implementing training programmes and improving conditions in affiliated factories.
 
“The most apparent positive impact of this approach to labour relations is reduced risks of deadlocks and wildcat strikes later on. The second impact is that it increases the strategic output of labour relations operations in the sense that it aids in the flexibility and competitiveness of the labour market.”
 
With the union movement globally having experienced a decline, in many ways it has been the responsibility of HR teams to step into the vacuum, hiring the right personnel, training workers, appraising performance, resolving conflict and improving compensation packages. The most optimistic view of the situation is that empowered HR professionals are best-placed to ensure employees have a voice inside organisations and that well-being and engagement are understood and prioritised at a senior level, while avoiding the potential for labour unrest. In this sense, the increasing importance of HR inside Asian businesses could prevent rising dissent among staff turning into an industrial relations issue.
 
“Negotiating a union contract often focuses on the quantitative: the size of pay and benefits,” says Rick Wartzman, executive director of the Drucker Institute at Claremont Graduate University. “And these issues are, of course, hugely important. There is ample evidence that the decline in unions over the past 30 years has helped lead to stagnating wages for most workers.
 
“But it’s also crucial not to lose sight of the qualitative conditions in which workers do their jobs. Are they being given opportunities to learn and to grow? Are they being put in a position to regularly use and develop their strengths? Does their job provide a sense of purpose and dignity? Do they have sufficient autonomy and accountability? Getting these things right can create an environment of trust that makes it a lot easier to work though the tough issues of wages.”