Thursday, March 30, 2023
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India’s informal workers need more than Modi govt’s labour code to get social security

Expecting India's low-paid, unorganised workforce to be part of a fully contributed social sector architecture is unrealistic, writes IAS officer serving in Bihar.

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Eighteen years after the Second National Commission on Labour mooted the idea of amalgamation of the labour laws, and almost five years after the Narendra Modi government declared its intent to implement the idea, the four Labour Codes have got Parliament’s nod, the last three in September 2020. Rules are being framed and the Codes are likely to become enforceable with effect from 1 April 2021.

The Code on Social Security amalgamates nine existing laws, oldest being the Employees Compensation Act, 1923, and the latest being the Unorganised Workers Social Security Act, 2008. This Code has generated huge expectations and has a great potential to implement social security in the wider context of socio-economic upliftment.

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Issues miring Indian workforce

Before analysing the implications and potential of social security code for unorganised workers, let us consider some glaring facts. First, almost 85 per cent of our workforce are unorganised workers, with negligible or non-existent social security. Second, the demographic transition would make India an ageing society by 2040, requiring preparations for stronger social security architecture.

Third, low wages present the biggest challenge for the workforce in India, with more than 80 per cent earning less than Rs 10,000 per month. Expecting this low-paid workforce, which also faces frequent changes in profession and workplace, to be part of a fully contributed social sector architecture would not be realistic. Fourth, the large size of migrant workforce, estimated to be about 100 million, necessitates portability of social security.

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Impact on socio-economic indicators

The greater share of unorganised workers in the workforce combined with low earning and non-existent or minimal social security is reflected in India’s overall socio-economic indicators. The Global Hunger Index (GHI) 2020 ranked India at 94th place, along with Sudan, in a list of 107 countries. The index reflects wasting and stunting of children below five years, share of population with insufficient calorie intake, and child mortality – all reflections primarily of subsistence-level earning and inadequate social security.

A recent paper, published in the journal Food Policy, estimates that three out of four rural Indians cannot afford a nutritious diet. The study estimates that even if they spent all their income on food, 63.3 per cent of the rural population, or more than 52 crore Indians, would not be able to afford that nutritious meal.

Against this backdrop, India needs to gradually formalise the economy and build a strong, adequate, comprehensive, universal and portable social security architecture for the unorganised workforce, so that it becomes a tool of economic growth and upliftment through direct social intervention.

Also read: Farmers and labourers over a privileged few – India is finally going the right way

Proper conceptualisation of social security

The understanding of social security has, for long, been visualised in terms of and influenced by the International Labour Standards (ILO)’s Social Security (Minimum Standards) Convention, 1952, which emphasised on measures that help workers in contingent times. However, the ILO Social Protection Floors Recommendation, 2012 elevated the right to social security as a human right, moving beyond treating social security as a protection against certain life risks and social needs, and called for reconceptualising social security as an essential tool to prevent and reduce poverty, inequality, social exclusion and social insecurity; to reduce differences within and among the region; to promote equal opportunity and gender and racial equality; and to support the transition from informal to formal employment.

Seen in these terms, ‘Social Protection Floor’ opens up possibilities of income support, regulation of wages and other measures to narrow the gap between formal and informal employment, and ensure decent work conditions. The ILO Convention identified nine branches of social security, which are (1) medical care; (2) sickness benefit; (3) unemployment benefit; (4) old-age benefit; (5) employment injury benefit; (6) family benefit; (7) maternity benefit; (8) invalidity benefit; and (9) survivors’ benefit, defining their minimum standards as well.

While the available social security in the organised sector more or less ensures these components, the inadequacy becomes prominent in case of unorganised workers.

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Recommendations by the Standing Committee

The Parliamentary Standing Committee on Labour, which examined the bill introduced in December 2019 and submitted its report on 30 July 2020, had given certain fundamental recommendations as to the broad architecture of the Social Security Code, which reflected the current internationally accepted standard.

It recommended that the Act should provide for “a firm legal and institutional framework for a universal right based social security with a secure financial commitment and within a definite time frame”. It further recommended to specify “either in the Preamble or at any other appropriate place, the principles to be followed for provision of Social Security benefits to all workers in accordance with the provisions stipulated in the Constitution of India, ILO Conventions and other International Instruments which espouse and guarantee various labour rights.” It also desired “that a clear and specific enforcement date need to be stipulated in the Code itself so as to ensure effective provision of Social Security to all the workers within a definite timeline.”

However, even in the revised Preamble to the Social Security Code, the vital recommendation of acceptance of social security as a universal right, enunciation of principles and, above all, the definite time frame of implementation are missing. Section 1(3) of the Code does not provide a timeline or time frame, rather allows to fix different dates for giving effect to different provisions.

The Committee also recommended amending the definition of ‘unorganised worker’, ‘unorganised sector’ and ‘wage worker’, to make them clearer. However, this vagueness has not been removed in the final Act. However, in the Code, ‘unorganised worker’ refers to ‘wage workers in the unorganised sector’ and ‘unorganised sector’ refers to an ‘enterprise’, but the crucial definition of enterprise is missing in the Code. Hence the vagueness still persists.

Also read: India’s labour reforms trying what Bangladesh, China, Vietnam did — swap income for security

Implementation: Key to unlocking potential

The Code on Social Security falls short of expectations in providing globally accepted standard of social security to the unorganised workers. It is no less significant that out of 14 chapters and 164 sections, just one chapter (Chapter IX) and 6 sections (Section 109-114) deal with the social security of unorganised workers, while they constitute 85 per cent of the workforce. The provisions are based mainly on the now-repealed UWSS, 2008, whose stipulations and implementation left much to be desired.

The past experience shows that the desired objective can be achieved only through universal registration, portable benefits and sincere implementation in a specified time frame. The old UWSS Act also provided for registration and portability, but in 12 years of its existence, even the modalities of registration and portability could not be spelt out. The absence of clear definitions in the present Code would further complicate achievement of universal registration.

Another critical issue not dealt with adequately is the contribution by the widely varied categories of unorganised workers, with a low and irregular income. Further, the scope of benefits has failed to come out of the minimalist constraint to the level of internationally accepted standards.

Thus, to achieve the desired objectives of the security code and unlock the full potential, the forthcoming Rules have to cover these critical gaps in significantly basic issues such as detailed modalities and portability of registration, timeline for universal registration, a clear definition of unorganised workers to be covered under the Code, realistic determination of mode and amount of contribution by the unorganised workers, and a firm time frame for universal coverage of all workers by globally accepted standard of social security.

The author is a senior IAS officer serving in Bihar. Views are personal.

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  1. Typical bureaucrat confused writing — and thinking. Headline of the long-winding article and writer’s conclusion are at odds. No wonder India is a such a mess.

    (You will be hard-pressed to find even a single govt circular or notification which is well-thought and drafted — almost all require clarifications through subsequent notifications, sometimes the very next day!)

  2. “The past experience shows that the desired objective can be achieved only through universal registration, portable benefits and sincere implementation in a specified time frame.”
    Very true. But to achieve this, is it not necessary that potential recipients have a unique identity? I wonder why there are objections to issuing a statutory, unique identity to Indian citizens to be compulsorily used especially for benefits from the State. It is a difficult exercise as the same were ignored for decades since Independence. But it is an imperative. Elected representatives have to reconcile and find a way.
    Else any approach to more equitable economic status, which is the ultimate aim of all policies, will remain a dream forever. Also all attempts to achieve better living conditions for all without identifying who should get what will at best be hollow overtures.

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