Unions and competition

I completely fail to see why workers’ unions are against competition in the sector. The latest round in this comes from the National Federation for Indian Railwaymen (NFIR), which represents most of the workers in the Indian Railways, which has slammed the Bibek Debroy report on railway restructuring claiming that the report seeks to bring in privatisation into the sector.

Business Standard reports (emphasis mine),

While Debroy has sought to define liberalisation separately from privatisation in the report, he has also said the entry of private players into the system is already provided by extant policy. fear any effort at bringing in private players into railway operations would jeopardise the workers’ jobs and negatively impact railways’ financial health

That private players coming in to railway operations could jeopardise jobs simply defies logic. Currently, the sector has a monopoly employer, namely Indian Railways, and this limits the bargaining power of any worker. With the coming of more (private) players, the demand for skilled workmen is only going to increase, and any new players would be much better off recruiting existing employees of the railways who are experienced in this business than recruiting from elsewhere.

So the coming of private players can only be a good thing from the point of view of workers.

However, what is good for the workers is not necessarily good for workers’ unions. The NFIR is a powerful union, representing 80% of the Railways’ 1.3 million employees (source: Business Standard report quoted above), or about a million employees. With the coming of private players, this number is surely going to go down (thanks to workers leaving, etc.) and this surely cannot be good news for the unions.

In other words, what is good for workers is not necessarily good for unions, and vice versa. And it is important to take this into account while making policy. In popular discourse, workers’ welfare and workers’ unions’ welfare get conflated, leading to policies that are pro unions but (they have higher bargaining powers) but not necessarily pro workers.

Recognition of this distinction can lead to much superior public policy.