Even 73 years after Independence, only 9.3% of India’s 466 million-strong workforce has social security. This means the remaining 90.7% still cannot aspire to protections that civil servants, employees of most registered private sector enterprises, banks and public sector employees, legislators and judges take for granted.
No other G20 country has such a high share of informal workers. This puts India, the fifth-largest economy in the world, in the same league as Sub-Saharan Africa. In order to ensure social security for all workers, the draft Code on Social Security, which is being discussed by Parliament’s Standing Committee on Labour, must show greater ambition than it does in the current version.
What’s wrong with the current code
India must provide social security to all its citizens, at least within the next 20 years. The draft code does not state this as a goal. It seeks to amalgamate nine existing social security legislations passed between 1923 and 2008. This is, in no way, an advance on the nine pre-existing Acts. The objective of a single code cannot be to merely consolidate Acts that, in eight of nine cases, belong to the 20th century.
The code demonstrates a lack of vision. India’s median age today is 29 years, but two decades later, it will have over 140 million people over the age of 60 years who should stop working unless they wish not to. Those who are not working will also be living longer. India should attempt to lay out a roadmap well before 2040 to ensure that when this happens, social security for all will be guaranteed. The MPs in the Standing Committee on Labour should respond to the challenge effectively, as laws of this kind are not prepared every few years.
The current Code does not recognise that informal workers always have multiple sources of livelihood, which evolve in response to their needs and the labour market demands. The poorly educated keep switching beyond different forms of employment, often within the span of a few months: from being casual-wage workers to self-employed and then back again. They may be agricultural workers for part of the year; then construction workers; then, fruit or vegetables vendors; and back to agriculture for some months.
It does not offer clarity on the cess collected for the Construction Workers Fund. If the fund is collected in one state, but the worker – often attached to the contractor – migrates to another, where is he a beneficiary? In state one or state two or both? It is not enough to say that the issue of portability of benefits will be resolved later through the rules to be formulated by the Central and state governments. The portability of registration as well as that of benefits needs to be resolved in this Code itself.
The draft code relies on a system of thresholds defined by the number of workers employed in an establishment. For example, organisations with less than 10 workers qualify for benefits under the Employees State Insurance Corporation, and less than 20 for benefits under the Employees Provident Fund Organisation. This system, which is already present in the existing labour laws, has not worked in favour of anyone – organised or unorganised – regardless of whether the employing unit is registered under any Act. Gradually, these thresholds will need to be lowered, at least for those who are regular salaried workers in the non-agricultural sector. In 2017-’18, their number stood at 104 million. This is 40% the number of people in the non-agricultural workforce.
The code makes no mention of the contract worker, who is supplied by a labour contractor to a principal employer. The code must recognise that the contract worker should be held to the responsibility of the principal employer by the code. In other words, if an enterprise employs 19 workers on regular roll, while the contract workers in the same unit may not be shown, then all workers will be denied enrolment for provident fund benefits. The same applies to the threshold of 10 workers for the Employees State Insurance Corporation. That is how thresholds for entry are used to deny social security to workers.
Previous attempts to build a comprehensive social security system have failed. India cannot risk repeating its past mistakes. Like several other countries, India has tried to expand the coverage of formal sector pension schemes. Since the Employees’ Provident Fund Act was introduced in 1952, coverage of all pensions increased from 1% of the labour force to 9% in 2018.
The code draft does not mention the National Pension Scheme of 2004, of which one of the stated goals include contribution by all informal workers. The 2008 Act on Social Security for Unorganised Workers and the National Pension Scheme also failed to provide for unorganised workers.
In the current draft Code, we have one final opportunity. It should not be hurried through Parliament to showcase another achievement of the government, especially during a crisis in which the worst affected are ordinary workers.
Santosh Mehrotra is Professor of Economics and Chairperson at the Centre for Labour, JNU, and author of Reviving Jobs: An Agenda for Growth.