Should there be Unions in the IT/BPO Sector and in the Freelance Economy?

Who are Blue Collar and White Collar Workers?

Traditionally, it was thought that unions were allowed and recognized in the manufacturing sector for those workers who worked on the shop floor or in other non-managerial and non- executive functions. These jobs were called Blue Collar jobs as it was the norm for many manufacturing units and other factories and plants to require the workers to wear Blue Uniforms to work.

On the other hand, managers and other employees came to work in their usual or White Shirts and hence, were called White Collar workers. Though this is a historical classification that was not followed for quite some time now, the terms stuck and indeed, is useful even now to conceptualize what it means to be a worker and a manager or executive.

In this context, it was believed that Blue Collar workers could be part of unions whereas White Collar employees who typically were better paid and had graduate and other degrees were thought to belong to the elite and hence, need not be unionized. This practice continues to this day wherein the rank and file employees in many sectors are unionized whereas the managerial and executive elite is not part of any unions.

Is Unionization Necessary in the IT/BPO Sector and the Freelance Economy?

This brings us to the point where we have to talk about the Services Sector comprising the Information Technology, Software, Business Process Outsourcers, and Financial Services among others that do not have any unions at all, including for the rank and file employees.

The rationale for this was the understanding that even the junior most employees in these firms performed Knowledge Work or for that matter, was better paid in comparison to manufacturing firms as well as were White Collared meaning that there was no need for these employees to be part of unions.

Since collective bargaining was unheard of in the IT/BPO/Fin services sector as almost all positions in the hierarchy were well compensated as well as protections offered to them in terms of healthcare benefits, social security contributions, as well as bonuses based on performance, it was felt that unionization would not result in any tangible gains in these firms.

Further, the fact that unionization was incompatible with these firms was accepted as all the employees in these firms were part of the New Digital Economy that was heralded to usher in a new era in the way work was performed.

Continuing in the same vein, the emerging Freelance Economy or the Gig Economy comprising firms such as Uber, Lyft, Upwork, Task Rabbit, and other app-based as well as temp jobs aggregating firms was again heralded as a “revolution” in the way work was done.

Thus, it was also felt that there was no need for unions to represent the freelancers since they could set their own hours and choose their employers in addition to being dispersed which meant that it was not feasible neither from the point of view of organizing them nor in the practical aspects of them not being workers in the first place.

In other words, the reasoning was that the freelancers did not enjoy the protections that were offered to the workers in other sectors since to start with, they did not fit the description of workers.

Some Recent Developments

While these rationalizations might work in some contexts, two recent decisions by the courts in the US, UK, and India have set the ball rolling for the unionization of both the service economy and the gig economy.

First, Uber lost a case in the UK where the courts ordered it to start treating its drivers as workers thereby offering them the protections that are given to unionized workers.

Second, the formation of a union of the IT/BPO employees and its subsequent recognition as a legitimate union in the IT Hub of Bangalore means that for the first time, these employees would have the option of joining such unions.

The impetus for these developments was the specter of mass layoffs in case of the IT/BPO firms and the denial of basic protections that Uber and other Gig Economy firms were indulging in for their freelancers.

While these are still early days for us to conclude that unionization would become the norm, nonetheless, these are important developments of note to all stakeholders in these sectors to pay heed to the emerging problems of the rank and file employees and the freelancers who are being made to work without any benefits and are being treated worse than during the times of the Industrial Revolution that was the first instance of organized workers rising against what they perceived as unfair terms of work and subhuman working conditions.

Conclusion: Need for Definition and Further Discussions

It is also the case that these sectors do not lend themselves to unionization for various reasons.

As mentioned at the beginning of this article, the key point to note is that employees in the services economy and freelancers in the gig economy are not exactly Blue Collar workers.

Moreover, when there is no concept of organized labor in the services and gig economies, then unionization might yield only marginal returns.

To conclude, the fact that the concerns of the employees and the freelancers must be taken into account means that there is a need for the service sector and gig economy firms to negotiate with the regulators and the employees as well as with other stakeholders to first define the categorizations and classifications so that there is a starting point for further progress on how best the Social Contract in these firms between the employees and the employers can be made.

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Economics of Human Resources