People's Democracy

VRS - The Voluntary Retirement Scandal

Jayati Ghosh

DELHI’S Jawaharlal Nehru University, where I teach, has a branch of the State Bank of India. It is a small branch, but a very busy one, which caters not just to the students, teachers and staff of the university, but also to many residents of the neighbouring areas. But perhaps because of all this, the service was quite intimate and personal, even if not always spectacularly efficient. The banking staff knew most of the people who came to the bank, and they generally did their best to cater to particular requirements. Even when there were delays or huge crowds, they sought to explain it with apologies.

            Last year, the State Bank of India, along with a number of other nationalized banks, implemented a voluntary retirement scheme for its employees. A large number of employees actually took advantage of this scheme and sought premature retirement. In consequence, the overall employment of the State Bank of India has shrunk. This branch too lost a substantial number of its employees.

            The consequences, unfortunately, are only too evident to those who use the bank. There is now significant understaffing, and consequent overwork of the remaining employees, with obvious effects on the service. Transactions – even simple matters such as withdrawing money from an account - which earlier required a few minutes, can now take up to an hour. There are usually crowds waiting at each counter, with more waiting time and more mistakes.

The fault is not that of greater inefficiency of the remaining workers, but that there are simply not enough people left to do all the required jobs easily and efficiently. What is worse is that the remaining workers are now not just overworked but harried and anxious. The same people who earlier would perform their functions pleasantly and smilingly, are now tense, rushed and even surly, as they struggle to meet the demands of increasingly irritated customers.

The bank manager also throws up his hands in despair. He points to the rows of empty seats, and asks how he can possibly deploy the few remaining people in a way to ensure that all the customers’ needs are met. If only there had been no VRS, he muses.

This story is repeated in branch after branch of various nationalized banks across the country. But the rot is not confined here. It is even more marked and evident in the private sector. Recently, two major multinational banks merged, in an example of growing concentration of the world banking industry. Obviously, that meant that the banks in India also had to merge. This has entailed the closing of some branches and the drastic pruning down of staff in others, again through a Voluntary Retirement Scheme which has focused on getting rid of active union members.

The consequence, even in this newly merged multinational bank, is a significant deterioration in service. Not only have the number of employees dwindled, but experienced and skilled workers have been replaced with raw recruits who have yet to learn their work and are prone to many more errors. Many of the bank’s customers now find it extraordinary that a major bank, which has after all to ensure great care in the detail of its transactions, is willing to live with such a situation – all in the name of reducing staff in order to improve overall efficiency !

These individual examples point to a much more general tendency, and expose the basic flaw in much of the reasoning of those who argue that there is overstaffing in all public sector enterprises, and that workforces can be cut down without any effect on functioning and productivity. The urban middle classes of our country somehow seem to have bought this myth, purveyed vigorously by employers and by neoliberal rightwing economists.

That is why "downsizing" is supposed to be a good thing, even for essential public services, and why companies that shed workers are praised rather than condemned. All too often, it is assumed that the only people to lose in this process are the workers who lose their jobs. And the policy response then is to try and set up "safety nets" for such workers.

But for a whole range of services, both public and private, the consumers of such services also lose from the process of reducing the number of workers. As the examples of the banks indicate, there are real losses in terms of delays, reduced capacity of the remaining workers to cope with the greater load, resulting mistakes, and a more oppressive atmosphere in the workplace.

In fact, the only real benefit from such downsizing is usually to be found in the balance sheets of the companies, as they can show lower labour costs and therefore possibly higher profits. This is what creates the competitive pressure across an industry for other companies to follow suit, and to try and reduce the number of their workers. The current tendency in the banking industry is a direct reflection of such pressures.

It is time to call the bluff of those who try and make us believe that downsizing increases efficiency. Instead, it is really a way of shortchanging both workers and consumers, and increasing profits at the expense of everyone else. The irony, of course, is that when all employers try this approach, it leads to lower economic activity in general, and as a result, for macroeconomic reasons, profits do not rise either !