Did Karnataka govt shoot itself in the leg by clearing the IT union?


Just when the dust was settling in the rattled information technology (IT) space Karnataka government has decided to stir up the sector. It became the first state to recognise trade union in the IT sector.

Reports say that the state has recognised the Karnataka State IT/ITeS Employees Union (KITU) as a workers’ body to protect their interests.

Attempts have been made by IT professionals over the years to unionise their workforce but companies have managed to scuttle it.

IT professionals are the envy of workforce in other sectors as they are considered to be a pampered lot who enjoy various frills and facilities apart from a fat pay package.

However, a slowdown in their customer countries and structural technological changes have led to the sacking of employees, especially at the middle level. The high priced middle-level employees were replaced by cheaper fresh candidates. Though it made business sense to replace high-cost employees with lower cost ones, especially if there was not much difference in their skill sets, questions were been raised in the manner in which they were sacked.

Recorded conversations and videos between a sacked candidate and the Human Resource manager went viral recently. Many cases have been registered by sacked employees in labour courts in Chennai, Hyderabad, Pune, and Bengaluru.

This resulted in various trade bodies such as the IT Employees Wing of the New Democratic Labour Front in Chennai, and the Federation of IT Employees raising their collective voices.

There is no question that the unfair manner in which employees have been sacked needs to be corrected, but will unionization help?

One of the reasons why IT sector employees are treated better than those in other sectors is because employees and their knowledge base is the key raw material in the sector. Regular skill upgrades are encouraged so that both the employee and the company can grow. Improved skill sets with competence in new technologies are showcased by the companies in order to get more high-end work.

An employee union will only result in spoiling their relationship with management. There is any case a very thin line between employees and management in the IT sector. Further, the development comes at the worst possible time for the Indian IT sector which is still struggling to find their mojo.

One of the main reasons that India has become an IT hub is that of access to low-cost skilled manpower. It is a labour arbitrage game. Any increase in labour costs, in a scenario where the market is shrinking, will only result in the company shifting its base to some other state or country.

Various countries led by the USA have now encouraged local hiring. Indian companies had to take a hit on their margins and accept the diktat of the governments since these were where their customers resided. They have no such binding restrictions for the companies in Karnataka.

It would take very little provocation for the companies to move out of Karnataka, which it seems has been provided by the state government. The state government would have done so as a political move just ahead of the state elections, but the move has given a big blow to the IT sector in the state and with it perhaps the development of the entire state.