Providing social security to unorganised workers

14 July 2006

Among the several important failures of the Indian development process so far, the complete neglect of working conditions and social security for most of our citizens is one that is especially marked. Yet, until recently, this issue received almost no attention from policy makers and certainly very little attention from the media, which has never extended itself to highlight the everyday problems of ordinary people. The National Labour Commissions, both the first and second, did highlight the special and continual problems faced by workers in unorganised activities, but these have mostly been treated as reflecting a depressing reality rather than as objects of policy intervention.

Of course, there have been some minor measures by central and state governments towards some social security provision to deprived and marginalised categories, such as pensions for widows, but these have been so limited in scope and so paltry in amount that they have amounted to almost nothing. That is why the concern expressed in the UPA government's National Common Minimum Programme, and the subsequent setting up of a high-level Commission to look specifically into these and other issues relating to enterprises and employment in the unorganised sector, was greatly to be welcomed.

The first report of this Commission has just been released (''Social Security for Unorganised Workers: Report of the National Commission for Enterprises in the Unorganised Sector'', Government of India, May 2006) and it makes far-reaching but workable proposals to provide some minimal social security to the vast majority of our workers. It also provides the framework for important and necessary legislation to ensure that this is provided, which should become an immediate priority of this government.

The first issue of course is defining the universe which is covered by the term ''unorganised''. The unorganised sector is defined by the Commission as referring to all unincorporated enterprises owned by individuals or households, employing less than ten people. However, it is also recognised that even in the so-called formal sector, there are many workers who do not have the rights and privileges of ''organised'' workers, and therefore includes in its purview not only all those working in the unorganised sector, but also those workers who are in the formal sector, but without any employment security and social security provided by the employer.

The nature and extent of the problem then immediately become obvious. Using these definitions, the Commission estimates the number of workers in the unorganised sector to stand at 340 million in January 2000, and the total informal workers (including those working without protection in the organised sector) at 362 million. This amounts to 86 per cent and 91 per cent respectively of total employment in India at that time.

It is often thought that informalisation is a feature that is predominant in agriculture and some services, with more ''modern'' sectors exhibiting less of it. In actual fact, most formal or organised economic activities also rely on the use of ''informal' - that is, unprotected, workers to different degrees, so that their prevalence is much more widespread than is commonly supposed in almost all the sectors.

The most important feature shared by all these workers is the absence of any sort of protection: whether it be employment security, pension, or coverage for risks such as ill health, accidents, death etc. Indeed, for most of these the most basic protection, that is minimum wage, is also not ensured. The problem is compounded for the very large proportion of workers who are self-employed at low levels of productivity and therefore income, where it is not possible to put any responsibility of protection or social security upon employers.

The Commission divides the social security problems of all informal workers into two categories. The first is seen to arise out of capability deprivation, and essentially relates to the terms, conditions and remuneration of employment. This creates such problems as inadequate work availability, low earnings from work, insecurity of contract and possibility of termination, low health and educational status leading to access to only low productivity jobs. The second category of problems belongs to those arising from both predictable and unforeseen adversity, because of the absence of any safety nets to meet ill health, accidents, old age and death.

The first set of problems clearly require more than social security measures, since they reflect broad development processes and macroeconomic strategies that have involved the persistence of poverty, low levels of education, aggregate low productivity and so on. It is clearly unrealistic to expect social security measures to address these larger problems in any meaningful way. Instead, this Report focuses on measures to alleviate to some extent at least, the second set of problems, and to provide to the bulk of citizens in India who have hitherto been excluded, at least a modicum of basic protection against adversity.

It is clear that there is no alternative to a very proactive role of the state in providing such security. The Report provides some very interesting international experience, both historical of some developed countries and current of some developing countries such as China, Indonesia, Tunisia and Brazil, to show how such measures to provide social security can be combined with measures to increase aggregate economic growth. The important lesson from all this international experience is that a country need not wait until it is fully ''industrialised'' with high levels of per capita income, to extend social security to those who have so far been excluded.

Various such schemes have indeed been suggested, for example by the National Commission on Rural Labour and the Second National Labour Commission. However, this particular Commission has suggested a bold new scheme which departs from these earlier proposals in some significant ways. There are several major differences, and important features of these recommendations, which make this a very different proposal which is intended to lead to landmark legislation:

It is a national initiative proposing universal coverage of all informal workers in both rural and urban areas, and in both unorganised and organised sectors.
It is a rights-based scheme, proposing a legally enforceable entitlement.
All informal workers are eligible to join, irrespective of occupation or duration of employment.

It is a voluntary and contributory scheme, whereby the worker, the employer and the government each pays Rs. 1 per day per worker. (In the case of BPL workers, the worker's contribution is to be borne by the central government.)
It is designed to provide a minimum combination of health, life and old age benefits at the national level. State governments are free to add to this as they choose, in terms of contributions or additional benefits.
The basic benefits that are recommended by the Commission consist of the following:

Health insurance:

Hospitalisation costs for member and family up to Rs. 15,000 per year.
Maternity benefits up to Rs. 1000 per delivery for member or spouse.
Sickness cover for earning head of family at Rs. 15 per day for a maximum of 15 days.One time grant of Rs. 25,000 in case of accidental death or Rs. 15,000 for permanent disability of breadwinner.

Life insurance:Rs. 15,000 for natural or accidental death.
Old age security:All BPL workers to get pension of Rs. 200 per month after the age of 60 years.

All non-BPL workers to be entitled to a Provident Fund accumulating from the date of registration into the scheme and earning a guaranteed return of 10 per cent per year.

Provident Fund scheme can also be used a unemployment relief - after 10 year's contribution, if the worker becomes unemployed, s/he would be entitled top draw up to 50 per cent of the accumulated sum as unemployment benefit for a period of 6 months. When the worker becomes employed again, s/he can continue with the scheme by renewing the contribution.

Of course these are not huge amounts that are being provided under the proposed scheme, and the amount of coverage is still so low that it would still leave most families with need to look elsewhere to finance the total costs of these contingencies. But in a context where thus far there has been nothing at all in terms of either state provision or even access to pension funds and insurance schemes for most of the poor, these are likely to play an extremely important role in providing some degree of relief from uncertainty and fear of the future which are currently such a constant feature of the material life of informal workers.

Source: Macro Scan More

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