The state and employment relations

To what extent should the State leave employment relations to employers and their employees?

Laski (1935) answers the question "what ends or purposes should states serve?. He says the object of a state must be to fulfil at the maximum possible the desires of its citizens. To fulfil the desires of its citizens the state exercises power. This power is exercised through institutions such as the legislature, the bureaucracy and the judiciary. As groups of people live together, they evolve in terms of their desires and the functioning of the state also evolves to achieve its objective. Globalization and technology are two recent phenomena that have impacted the state and its functioning. Guiguo Wang (2004)

Greg J Bamber et al (2004) provide a wide canvas to the term 'Employment relations' and include Industrial relations and HRM within the ambit of the term. Historically Industrial relations referred to collective bargaining and arbitration. HRM referred to the set of practices that organizations engaged in to address the people dimension. To this already wide canvas, we need to of necessity add the social and cultural dimensions in which employer-employee relationships exist.

Giles Anthony (1989) suggests four principle theories in relation to state involvement in Industrial relations. These are Unitary, Plural, Elite and Class. In the Unitary theory, the image of society is that of an organic whole, the role of state in IR is one of a defender of public interest and the analytical focus is societal. In the Pluralist theory, the image of society is one of overlapping groups, the role of state in IR is that of an adjudicator of union management relations and the analytical focus is situational. In the Elite theory, the image of society is a stratified pyramid, the role of state in IR is one of defending the interests of the elite and the analytical focus is the organization. In the Class theory, the image of society is one of antagonistic classes, the role of state in IR is one of defending the interests of the dominant class and the analytical focus is societal.

In the rest of my essay, I propose to study the relationship between the state and employment relations in India and UK. The two countries were chosen for the following reasons: India's institutions (Judiciary, executive, bureaucracy, education system and legislature) draw heavily from UK's institutions, UK as a nation is in the developed nation segment, while India is in the developing nations segment. UK has a much longer experience with industrialization and this might have learning implications for India. India over the past decade has been growing at a rate faster than UK. This might shed some light to UK's employment relations scenario and role of the state. The approach I intend to take is to look at the state in India and UK and its evolution from the 4 theoretical perspectives of Unitary, Plural, Elite and Class. I propose to look at the evolution of employment relations in each of these countries covering the industrial and current day aspects.

Jones (1983) and Foster (1974) draw a compelling picture of the evolution of UK through the early industrialization era. The transition from a class to a pluralist stage is reflected in the movement from aristocracy to the rise of the working class superimposed on the democratic process. Since 1945, UK politics has been dominated by the Conservative and Labour parties. The Conservative party draws its support from the business and rural communities. The Labour party draws its support from the urban working class community. Mrs Thatcher who headed successive conservative governments during 1979 - '90 initiated a series of reforms addressing industrial relations law and labour market deregulations. The focus of this reform was to regenerate British economy which was on the decline Addison et al (2000) . One consequence of this focus was to bring much more decentralization and individualization of the employment relationship. There was a perception that labour unions in the 70s had disproportionate power as evidenced by the coal miners' strike and the many other strikes which crippled public services in the 70s Addison et al (2000).The net impact of this state intervention was to redress the balance of power between the employer and employee to make industry more competitive. This fits in well with the Unitary theory of role of state in IR as one of defender of public interest. The means used by Mrs. Thatcher probably fit in better with Pluralist theory. The labour governments that succeeded Mrs. Thatcher in a way continued the shift initiated by Mrs. Thatcher through initiatives such as disposal of public sector assets Sir Michael Lyons (2004). Kampfner (2008) goes on say that the mainstream left has accepted much of the Thatcher legacy. Currently, in UK the role of state in employment relations may be closer to a unitary theory perspective as indicated by the soft continuation of the change initiated in the '80s. I posit that this has also left the UK economy in a better state of preparedness to deal with the macro forces of globalization and technology. An indicator of this preparedness is the expansion in HR practices in UK in the areas of performance related pay, increasing employee involvement, the larger degree of outsourcing in UK compared to other states in EU, the increasing use of temporary and part time work (Cully et al 1999 cited in Bamber 2004 :37). The entire canvas of state and its involvement in employment relations in UK as drawn out in this paragraph is a post event analysis and seems to fit well with all the theories. However, the discomfort lies in the ability of such an analysis to predict in a normative manner the extent to which state involvement in employment relations is right. The other problem with this analysis is more fundamental. This is the perception of the state as monolithic/homogenous entity (in terms of the people and their objectives) that is implicit in the Unitary theory.

Early labour legislation in India was influenced by British colonialism with a slant of protecting the interests of the British. The Trade dispute Act 1929 was the first legislation regulating the employer workmen relationship. Post Independence, the state embarked on a socialist philosophy of economic growth through the public sector with a focus on manufacturing and agriculture. From an IR angle, a tripartite perspective involving the state, employers and employees represented by unions was taken up. The tripartite mechanism can be viewed as a manifestation of social dialogue. Labour policy was to a large extent implemented through labour laws and some rewriting of the colonial laws and new laws were created. The first tripartite conference in 1947 culminated in the replacement of the Trade dispute act with the Industrial Disputes act 1947 which addressed fair wages and working conditions and a climate of co-operation for uninterrupted production and higher productivity. It can be argued that the nationalist fervour and the unifying task of nation building helped create a conducive environment for the state to play a unitary role in the period immediately after independence. The state also took an active role as an employer and the public sector gained momentum. Number of unions and union membership increased rapidly in the 50s and 60s. This was driven by the socialist orientation of the state which may be viewed as part of the class movement (not so much in the Marxian model but in a modified larger public good model). The economic focus of state effort did not have much of a role for the private sector. The late 60s and 70s were characterised by labour militancy in the form of a prolonged railway strike and many other disputes which substantially weakened the overall economy. The slow build up of inefficiencies in all sectors of the economy and the lack of a mature multi party political system contributed towards a serious economic situation in India which became a crisis in the early 90s. The Congress party had a reasonably uninterrupted run for almost the entire first 3 decades since independence. In these 3 decades, a subtle ruling class was formed and the state intervention in IR was following more of an elitist theory of protecting the interests of the ruling class. The economic crisis of the 90s forced the state to take up economic reforms and the tilt in policy and legislation was aimed at reactivating the economic engine. The private sector was the largest beneficiary and this coupled with the fundamental forces of globalization and technology led to the resurrection of the Indian economy. During this period, while no overt action in the form of labour reform took place, there were a number of indirect interventions by the state which impacted the employment relations scenario. Some of these indirect interventions were supporting foreign investments, encouraging exports thru tax incentives, dismantling the bureaucratic procedures to aid employment generation. Service industry has grown the fastest in the last two decades. Much of the employment relations in the services industry is outside the purview of direct state intervention and the underlying cause for this is a matter of speculation. One view is that state intervention at this stage may hinder the growth of the services industry and the employers in the service industry are to some extent playing the role of state. In the shorter duration of India's evolution during the industrial era, the pluralist theory has not yet played a central role but for a brief period in the 1970s which was plagued by industrial unrest both in the public and private sectors. Today, there is much debate on the role of the state with one school of thought leaning towards a more direct form of legislative intervention particularly to spread the economic benefits of development and another school of thought which leans towards a more capitalist bent of increasing the economic benefit(Economic Bureau (2008), Working group (2006). Taken at a macro level, the role of state in economic activity and as a consequence in employment relations currently seems to be decreasing. Going forward, the warning clouds could be more in the form of social unrest, immature political systems (splinter political parties fostering regional interests). These might have a larger bearing on the role of state in the employment relations scenario. The manifestation of these is the sporadic demands for reserving jobs to people of the geography in which the job exists. The role of state in employment relations in India may move towards a more pluralist theory construct of being an adjudicator not between employers and employees but more between different segments of the population. This would form a class tilt in the form of 'haves' and have nots' at the societal level. The employment relations canvas in India even today is that of a developing state with the informal sector of employment being far larger than the formal sector. This reduces the extent to which state can intervene in employment relations with its existing set of institutions.

From a comparative perspective, there are some parallels in the context of UK and Indian societies. The growth of trade unionism, the subsequent decline in the economy, the resurgence of the economy. There are also differences. The absolute levels of economic activity, the work force distribution across sectors, the poverty, unemployment and underemployment levels, the education levels, migratory patterns etc are some of the differences. The role of the state in UK and India seems to be similar when viewed in the sequence of actions that the respective states took. First broad series of actions were to redress the balance in power (UK during the Thatcher era, India post economic liberalisation of the 90s), the second broad step is in terms of reducing the role of the state in a direct manner and increasing it in the indirect areas of skill building, education infrastructure, fostering an environment of bipartisan dialogue between employers and employees. This is being supported by a unitary perspective of focusing on driving economic growth and addressing the concerns of each other among the employees and employers.

One conclusion i draw is that the practice of state is imperfect. This is evidenced by the crisis that states run into. These crisis have at the root not external change but internal change. In my view, external change examples are globalization and technology. Pendulum shifts in stance and economic crisis endangering large segments of society are examples of internal shifts. My other conclusion is that in crisis situations, the extent of involvement of the state in employment relations ought to be higher. On the other hand, the extent to which state involvement in employment relations is a contributor to the crisis is a question I am left pondering over. In conclusion, I would state that the extent to which the state should leave employment relations to the employer and employee depends on the larger picture. If in crisis, the state should intervene more from a perspective of protecting the various interests. In normal times, state involvement in employment relations should be focused on the larger public good and probably ought to be minimal in a direct sense.


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  10. Economy Bureau (2008). Reforms sought in Industrial Disputes Act. The Financial Express 23rd September. (accessed on Jan 07, 2010)
  11. Guiguo Wang (2004). The impact of globalisation on state sovereignty. Chinese Journal of International Law 2004 3(2). Oxford University Press.

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