September 6, 1952

Labour Turnover in lndustry ONE of the major factors affect­

ing industrial relations and labour efficiency in the instability of the labour force, i.e., changes in its composition. It is a problem in the industrial life of all countries, being wasteful and destructive of the potential manpower of the nat ion, and a serious obstacle to the com­plete utilisation of the country's productive forces. The problem of labour instability, or more speci­fically, of labour turnover has attracted serious attention in the West. In the USA, several research projects have lately been under­taken on this question. In this country, however, it has received l i t t le attention so far, although its importance was fully realized by the Royal Commission on Labour.

W h a t is Labour Turnover ?

Labour turnover has been defined by the American Management Association as " the extent of shift and replacement of labour occur­r ing in the maintenance of the work ing force." " Labour tu rn ­over," according to the Bombay Text i le Labour Inqu i ry Committee (10,37-40), " measures the extent to which old employees leave and new employees enter the service of an industrial organization in a given period." The Labour Investigation Committee which made an inten­sive survey of a large number of industries in 1944-45 adopted a similar definition.

There are, however, two aspects of the problem: the proport ion of workers who go out of employment dur ing a period of t ime (separa­tions) and that of the newly enrol­led (accessions). There is, how­ever, no unanimity as to what sepa­rations and accessions should exactly mean. For example, there is a difference of opinion as to whether the workers who are found to be surplus and are discharged should be taken in to account in calculat­ing the turnover rate. The official statistics of labour turnover in the UK and the U S A include such discharges and dismissals. On the other hand, Professor Sargant Flo­rence says: " It seems fantastic to an economist to lump together cost-incurr ing and cost-saving events under one definit ion." A recent study of this subject by the Bir­mingham University also excludes labour losses due to redundancy f rom the calculation of the labour turnover rate. Workers who leave

a concern but return to it after a m i n i m u m specified period are consi­dered as new recruits. The dura­t ion of this m i n i m u m period natur­ally differs in different countries. In the Uni ted States, o ld employees who return to a concern after 7 or more consecutive calendar days, authorized or unauthorized absence are considered as " accessions."

F rom the point of view of stabi­lising the labour force, it is not so much the definition of labour tu rn ­over as the analysis of the factors responsible for it which is of signi­ficance. Labour turnover must be distinguished on the one hand, f rom absenteeism, which does not involve any break in the workers7

employment, and from the wider problem of mobility of labour f rom one industry to another, in res­ponse to changes in the conditions of supply and demand on the other. It is confined to the m u l t i ­lateral changes that take place in the composition of labour in differ­ent industries and industrial units wh ich cannot be attr ibuted to any general shifts in the demand for labour. So far as industry is con­cerned, the problem posed by the constant shifts of labour is the cost incurred in replacing the employees who leave. Workers who are dis­charged because there is no work to do, do not give rise to this prob­lem as there is no question of replacement cost in their case. It would , therefore, appear logical that labour losses due to redund­

ancy should be excluded from the computation of labour turnover rates. On the other hand; workers going on leave, authorized or other­wise, do give rise to the problem of turnover and should be taken into account in calculating the incidence of turnover. It would also be more appropriate to approach the prob­lem of labour turnover from the angle of separations than that of accessions. For, all accessions do not involve a turnover of labour. Dur ing a boom period, for instance, when new industries are being established and old ones expanded, employment increases. But the accessions thus caused are not in the nature of replacements, and no waste of resources is caused.

Labour turnover is caused by lay­off, voluntary resignation, dismissal, retirement or death of workers. A certain m i n i m u m turnover is not only inevitable but also necessary, e.g., by retirement and death. For the U K , Prof. Florence calculates that " for men and single women the m i n i m u m unavoidable turnover for physical reasons in a manufac­tu r ing industry is slightly over 4 per cent per year." A recent study of a cross section of the manufacturing industry in Birmingham also con­cludes that an allowance of 2 to 4 per cent is adequate for annual unavoidable turnover, even under conditions of ful l employment. The actual turnover for selected indus­tries in 1950, however, ranged be­tween 29 and 44 per cent.

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September 6, 1952 THE ECONOMIC WEEKLY

No Statistical Data Although labour turnover has

been recognised as one of the fac­tors which needs to be carefully watched and kept under control , statistical information on its inc i ­dence and on the causes responsible for it is scanty. Even in Br i t a in , only a few of the employers com­pile this information though the data are easily obtainable from the records which factories maintain. Matters arc far worse here. The Roya l Commission on Labour recommended that adequate data should be collected on the subject but no action seems to have been taken on this recommendation either by Government or the employers. The Bihar Labour Enquiry Com­mittee, which reported in 1940, does not even refer to this ques­t ion . The Bombay Texti le Labour Inqu i ry Committee, however, noted the absence of reliable data and emphasised the need for it . The Committee observed: " 'Though a high rate of turnover exists in all organized industries in India , there are no reliable data available con­cerning the. extent of the turnover. Reliable and adequate records, un i ­formi ly f i l led in and accompanied by careful and critical analysis, are essential and without these, the per­centages of labour turnover have l i t t le practical value."

The Bombay Labour Office which conducted a census of wages in the principal industries in the province in 1934 collected some data on labour turnover as well . This was perhaps the only attempt at assessing the incidence of labour turnover in Indian industry before the second W o r l d War. A similar attempt was made dur ing the war by the Labour Investigation Com­mittee. A great deal of informa­tion was collected by it but the value of such information, it. felt,

could not be very great " f o r the reason that the figures supplied by employers were neither uniform nor accurate nor based upon a clear definition of labour turnover."

In the Bombay State, it is pos­sible to estimate labour turnover f rom the returns submitted by the Cotton 'Textile Industry under Rule 72-A of the Bombay Industr ia l Relations Act , since M a r c h 1950. Form IV (Employment) under this rule furnishes the fol lowing infor­mat ion: (i) Number of operatives on the first and last days of each month, (i i) . , Number of operatives discontinued and ( i i i ) , Number of operatives recruited or reinstated. Using the average of the first series as base, the Labour and Housing Department of the Government of Bombay has computed the turnover per 100 workers in terms of 'sepa­rations ' and ' accessions ' from the second and th i rd series. These data relate to both permanent and badli workers (substitutes) and include those who are retrenched.

Incidence of Labour Turnover Generally, the extent of turnover

depends upon the. type of persons employed (their sex, length of ser­vice, skill, etc.) , the location of fac­tories and the attitude of manage­ment towards workers. .It varies f rom industry to industry, the var i ­ations reflecting differences in the scope for movement wi th in an industry rather than in the nature of the work done. The average size of firms and the degree of con­centration or localisation of indus­try influence the worker's chances of finding alternative employment.

In the General Wage Census taken by the Bombay Labour' Office, labour turnover in M a y 1934 in the engineering industry of the Pro­vince was 1.1 per cent which works out to an annual rate of 13.14 per

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ing M a y and October 1934, it was 1.0 per cent or 12 per cent per percentage of labour turnover was in Ahmedabad and Bombay, the percentage of labour turnover was 2,64 and 2.59 respectively, while for Sholapur (July) it was 0.93, 'The census in Sholapur was taken w i t h i n six weeks of the end of a general strike which partly account" ed for the lower percentage in that centre. But , by and large, labour in Sholapur is more stable than in Bombay and Ahmedabad, as it is drawn largely from the neighbour­ing villages. The average turnover for all cotton mills in the Province was -2.36 per cent for the census month or 28.32 per cent for a year. These figures relate to labour turn­over among permanent workers alone.

Dur ing the war, owing to the intense demand for labour for defence production, turnover was generally much higher than in the pre-war period. This was noted in the ad hoc surveys of industries made by the Rege Committee, who summarized its findings on the extent of labour turnover in India as follows;

" It would appear that the cotton textile industry in Bombay has a somewhat higher monthly turnover rate than in Madura , Calcutta, Nagpur, Akola or Lahore, for the probable reason that the number of mills in Bombay is far greater- than anywhere else and it is possible for workers to move from mi l l to m i l l . It must be remembered, however, that the figures refer only to perma­nent workers and no account has been taken of badli labour, which predominates especially at Nagpur and Madura . In the engineering group, the rates are fairly high, especially at Calcutta and Lahore. The highest rates for any industry are those recorded for the glass industry, in which labour has prov­ed to be extremely mobile owing to the scarcity of trained men and the anxiety of employers to obtain such men at any cost front any­where. In the min ing sections, i ron ore has a higher range of turnover rates than gold, mainly because the former requires much less skill than the latter, and also because labour supply (mainly from tribal sources) in the i ron ore areas is much more plent i ful than in Mysore. In the mineral oi l industry, the rates appear to be very h igh . Thus, at Digboi , Assam, the rate has been as high as 18 per cent in 1939 and 28 per cent in 1943. In the other

cent. in the printing industry, dur-

THE ECONOMIC WEEKLY September 6, 1952

industries such as p r in t ing presses, wool len textiles, cement, potteries, rice mills, etc., the rates do not, on the whole, appear to be excessive except for particular localities (Report p. 107),

There were a few industries where the rate of turnover showed a fal l du r ing war. These were, however, mainly industries ( i ron ore mining and gold mining) where prospects of obtaining alternative employ­ment were not very bright.

The figures published by the Bombay Government for the period M a r c h 1950 to June 1951 (page 927) show a considerable fall in labour turnover from the high figures of the war period. This is due to the fa l l in the industrial act ivi ty in the post-war period as compared w i t h the peak levels attained dur ing the war. They also confirm the general experience that the incidence of turnover varies inversely w i t h the size of the plant and directly w i t h the degree of con­centration of industry (page 928). The smaller turnover in large estab­lishments may be at tr ibuted to the fact that the latter offer relatively steadier work, higher earnings and better employment conditions than the small concerns. Lower rates of turnover also indicate the efficiency or' employment services and welfare activities which are undertaken more extensively by the larger establishments. It cannot be assum­ed that the trend in the Bombay cotton m i l l industry is representa­tive of the conditions in the coun­t ry as a whole. The labour employed in it is well organized and probably enjoys more amenities and better conditions of work than its counterpart in most other centres.

Some Broad GeneraIizations Some general conclusions sug­

gested by a study of the problem of labour turnover in this country and abroad are as follows:

(a) Labour turnover is related to the size of the plant, being higher in smaller units than in units of larger capacity;

(b) ft is higher in centres where the number of units of any particular industry is fairly large;

(c) It is higher where work ing conditions are comparatively bad and wages low;

(d) It is tower where a cons­cious personnel policy is fol­lower/ by employers;

(e) It shows marked seasonal fluctuations and is higher in the agricultural season;

( f ) I t varies directly w i t h the volume of employment;

(g) It is related to (1) the ave­rage age of the labour force, (2) the length of service of the employees and (3) the degree of skil l required;

(h) It is higher in the case of women than men and in new factories than in estab­lished concerns.

Causes of Labour Turnover Resignation, dismissal and dis­

charge account for a large propor­t ion of the high labour turnover in India. Dissatisfaction wi th working conditions, insufficient wages, sick­ness, family circumstances, distance of the place of work and last, but not the least, exodus to villages dur ing the agricultural season, are the main reasons for workers to give up their jobs. In fact, in a number of industries like mining, plantations, cotton textiles (except in Bombay), jute mills and in some of the unorganised industries like rice mi l l ing , mica splitting, etc., employment is considered by the workers as a subsidiary occupation. As compared w i t h the turnover caused by voluntary resignations, that resulting from dismissal and discharge is of minor importance.

Apart from the objective factors responsible for labour turnover, there is also the cast; of the men­tally unsettled, a small class prob­ably, who find it difficult to settle down to any one job for long.

Disadvantages of H i g h Turnover A high rate of turnover is harm­

ful to the efficiency of ^workers as well as to the quali ty and quantity of production. it is. moreover, a serious obstacle to the complete u t i ­lisation of a country's human and material resources, although wi th our vast mass of unemployed and under-employed l a b o u r e r s, the national loss due to this source belongs to the second order of smallness. Extensive changes in the composition of labour, however, make it difficult to establish con­tacts between the employer and the

employee and to bu i ld up a sense of co-operation between them.

The cost to the employer of con­stant changes in his labour force, involving the employment of new men, is represented by reduced pro­duction, greater wastage, and less careful handling of machinery. From the point of view of the worker, frequent changes in the place of employment, in the long run , affect his skill and efficiency and deprive h im of the advantages which continued employment brings. The cost to the community is reflected in the loss of productive labour power and increase in costs of production due to the employ­ment of less efficient labour.

Measures for Reducing Turnover T h a t the turnover of labour in

India is very high in a number of industries is well recognised but the economic loss which it involves is not so well appreciated. The need for reducing this loss as much as possible and of improving industrial relations is urgent. Al though the causes of the high degree of labour instability in the country are known in a general way, for adopting effective measures against i t , more definite information is necessary regarding the extent of labour t u rn ­over in each industrial unit and of its incidence in terms of age group, sex. earnings, length of service, etc. Collection of this information on a scientific basis raises some technical problems which can be easily solv­ed. But un t i l these data are avail­able, remedies can be discussed only in general terms.

Since labour turnover is likely to be high due to the presence of " floating " workers who are un ­able to settle down to one job for long and new employees in the first few weeks or months, the res-ponsibility of the management would be " first to pick people who w i l l be able to settle down, and secondly, to ensure that the atmo­sphere in. the unit where, the employee works gives an encourage­ment to stay." Payment of bonus

(Continued on page 937)

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