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The race to retrenchment

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Page context: Home > Transport International Magazine > Issue 23 April 2006 > The race to retrenchment

In the second report of her observations as a secondee to the World Bank, Jane Barrett Identifies the flaws in the Bank’s approach to redundancies and the need for new approaches to the issue

New technology and new forms of work organisation on the railways have resulted in job reductions worldwide. The biggest cuts have tended to be among track maintenance staff, but cuts have also been experienced in shunting, signalling, administrative and other functions. Faced with the threat of job cuts, a trade union’s first obligation is to defend all existing jobs. In the event of being unable to stop the cuts in their entirety, the next line of defence is to negotiate the numbers and the terms of the redundancies.

When World Bank-led reforms indicate a need for staff retrenchments, the numbers involved tend to be decided by the Bank and management using a desktop-oriented approach, which includes benchmarking labour to traffic volume ratios.

Such an approach does not take into account various local internal and external factors. The internal factors include rates of attrition, capacity to train the remaining workforce, the pace of change likely to accompany any technological change, and the existence of a plan for future human resources requirements. The external factors include the social costs to government (and society) of additions to the ranks of the unemployed or underemployed (those who move into survivalist informal economy activities).

Invariably, because the internal factors are not taken into account, the enterprise ends up with fewer workers than it requires. There are then problems of re-employment from among the retrenched. Zambia is a case in point, where currently there is a shortage of train drivers one and a half years after retrenchments took place.

A condition of the Bank loan towards severance pay in Zambia was that workers who were retrenched and received redundancy pay should not be re-employed for three years. This is odd because everyone received redundancy pay – including those who were re-employed by the new private operator. It is also somewhat disingenuous of the Bank to impose such conditions, when these do not apply to its own staff who have previously been made redundant. While the condition remains in place in Zambia however, the new rail operator is forced either to employ previously retrenched train drivers on a casual basis, or to recruit and train new drivers at vast expense.

Lack of analysis

In the case of Macedonia, the World Bank consultant on labour retrenchment and social mitigation to the railway reform project herself highlighted the weaknesses in arriving at numbers for retrenchment. In a report dated February 2004 she expressed concerns that a figure of 880 redundancies was arrived at by analysing volume and revenues only.

She stated “What appears to be absent is any authoritative information based on an analysis of operations and infrastructure or on what human resources Macedonian Railways would ultimately require for the provision of a safe and reliable rail service. When this question was asked, the response was that the two new entities established under the Railway Law would decide in the future”.

The desk-top approach to arriving at figures for redundancy also denies that a redundancy exercise imposes costs to the government and society at large, for example in the form of increased numbers of unemployed workers requiring social support, and a shrinking formally employed population with a disposable income to spend on goods and services. The external costs are not internalised in the decision-making on figures.

Scope for victimisation

There are also issues relating to the final selection of workers for retrenchment. The Bank appears to favour a complex process, which introduces a high risk of subjectivity and the potential for victimisation. The Bank encourages the negotiation of agreements that take into account a combination of education, working experience, performance, disciplinary record, length of service, age, and health.

This is not in line with standard international industrial relations practice, which favours processes that start with the identification of departments or categories of workers for redundancy, followed by the application of the simple objective criteria of length of service, where those with longer service are favoured for retention. Any exceptions, for example, the identification of “critical grades” are issues for negotiation between management and trade unions.

In a complaint lodged with the International Labour Organisation the Bank stands accused of being complicit in the victimisation of members of the independent railway trade unions in Macedonia. Indeed the problem was predicted a year earlier by the consultant to the project when she pointed out that “Guidelines for performance rating related to redundancy criteria are not formalised. This could lead to inconsistent rating and open the door to the formalised system of appeals by workers.”

Losing track of workers

On the question of the tracking of retrenched workers, there seem to be few detailed examples of successful post-retrenchment tracking. In Romania it was understood by the Bank that the government, through the department of labour, would track the retrenched workers in 1998 and again in 2003. When asked about whether tracking had taken place, the director general in the department of transport stated that he understood that the department of labour had maintained lists of the retrenched workers, performed some tracking function, and had provided conversion programmes.

However according to the unions, there was no monitoring at all by the department of labour. Their anecdotal description of the fate of the retrenched workers is as follows:

“There were three categories of retrenched workers:- those who were close to retirement and who took severance pay in tranches and then onto pension; those who were taken on by the private sector in similar jobs; and those who did not find similar jobs and who had skills limited to the railways and therefore found themselves unemployed.

“No re-training was offered to this category. Of the drivers who were retrenched, about 20 per cent fell into this last category. Some of them have been re-hired back into the company. Some others went abroad to do unskilled work. Among the non-drivers, the people in the third category were probably above 50 per cent. They spent their retrenchment money and then got nine months’ unemployment payments. Some have got jobs in other sectors. Some remain unemployed. The unions get informal feedback from retrenched workers but we don’t have our own data system for accurate monitoring.”

Jane Barrett, policy research officer for the Satawu trade union in South Africa, was seconded to the Europe and Central Asia region of the World Bank on behalf of the ITF in 2005 under the Bank’s exchange programme.

The voice of labour

On the retrenchment of railway workers in Romania:

“Railway reform has been a failure. The layoffs did not take account of the real situation in the market. Thousands of overtime hours are still being worked. There has been no change in the management type or techniques. The rolling stock remains obsolete and little has been allocated to refurbishment.”

“The main indicator that management and others always look at is productivity measured in terms of tons or passengers per km. This is not the best measure from the point of view of infrastructure, as the output here is track maintenance not delivery of tons. Colours on a graph do not take the place of real internal restructuring. As long as the personnel is reduced and nothing is put in its place, there will be no improvement in output.”

“In 1999 and again in 2000 there was a need to hire back about 1,000 people from those who had been laid off. The companies even had to train and hire new people where they couldn’t find previous employees.”

“The majority (of those retrenched) were in fact close to retirement. There had been no new recruitment from 1990, so the workforce was ageing. The younger workers were less qualified. The sudden exodus of 26,000 meant that there was no time to transfer skills. None of this would have happened if there had been real dialogue.”

Extracts of interviews with four Romanian railway trade unions conducted by Jane Barrett in July 2005.

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Issue 23 April 2006

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