February 20, 2020
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Security Smokescreen

A heavier wallet to splurge at the cost of social security may prove costly to workers

Security Smokescreen
Illustration by Sajith Kumar
Security Smokescreen

Take home more, spend more but save less for the future. That appears to be the placebo the government is lining up to suppress a chronic illness plag-uing the Indian workforce—the salaried class unhappy with their pay that hardly offsets inflationary pressures and leaves little for sundry indulgences such as buying a new home appliance or eating out in a gourmet restaurant. The remedy comes with a side-effect, though. A fatter pay cheque will come with reduced contribution towards social security schemes such as pension and healthcare that will see you through during an emergency or after retirement and in your old age.

The ideal situation is to get a hefty pay hike. But that hardly happens in India where nearly 15 million join the workforce every year, mostly in the unorganised sector in the absence of regular jobs as the world’s fastest-growing major economy struggles to cope with its bulging population.

As a counterbalance there’s a push to recast policies on state-run benefits through a law to be enacted in Parliament. A social security code, which forms the crux of a draft bill, is being worked out to complement the NDA government’s nudge to every bus­iness establishment, including those with a single employee, to join the social security umbrella.

A higher take-home pay, according to media reports, means a happy workforce that forms a major chunk of the electorate, a constituency all political parties will have their eyes on before parliamentary elections due next year. But the “code” has not passed muster with trade unions, labour experts and left-leaning parties. They say India can ill-afford to cut individual contribution to retirement and health schemes for a plump pay because the country ranks below even several poor nations in Africa in terms of adequate social security.

The doubters include the Bharatiya Mazdoor Sangh (BMS), an affiliate of the ruling BJP’s ideological fountain Rashtriya Swayamsevak Sangh (RSS), which is not pleased with the contours of the draft. “It is clear that the move for increased take home will not benefit workers but it is a requirement of the market as it will improve liquidity. As workers, we are purchasers. Having more money in hand may see workers make direct buys instead of purchases via easy monthly instalments (EMI). This will help revive the market that is facing suffocation,” says BMS general secretary Virjesh Upadhyay even as he praises the government’s efforts.

But he clarifies that no formal proposal to raise the take-home salary of workers by cutting statutory contributions towards provident fund, health and family insurance and in some cases pension has come to the Central Board of Trustees of the Employees Provident Fund Organisation (EPFO). “We are going to oppose it as it is a matter of security for the future. Any reduction in such social security is a direct hit on a worker’s future,” he says and recalls how trade unions opposed a similar move in Parliament two years ago and requested the government to hike the salary of workers instead of reducing their contribution towards social security schemes such as provident fund.

“The code is not comprehensive. It does not attempt to universalise ben­efits or bring comprehensive and uniform social security cover…It does not fully achieve simplification, amalgamation and rationalisation of central labour laws on social security. It will result in non-uniformity in serving benefits across the country,” the BMS states in a note.

“Reduction in workers’ contribution to social security is a satanic ploy to serve employers”
Tapan Sen, CPM parliamentarian

The CPM has been equally scathing in its remarks. It points out that central funds such as the employees provident fund (EPF) and employees state insurance (ESI) amounting to around Rs 12 lakh crore, plus the money to be collected from self-employed workers and those in the unorganised sector, will be placed under the National Council of Social Security on the prime minister’s watch.

An advisory board will advise the national council, which will not be strictly tripartite in composition, and undermine trade unions’ representation. The diminished role of trade unions raises fears that the council could agree to make the funds available for speculation in the share market to satisfy the finance capital lobby. The CPM states that the entire fund vested in 15 social security schemes has been “hijacked” while the code has not specified anything on benefits for workers. The government may leave that to be decided by bureaucrats through rules once Parliament passes the legislation on the social security code, it says.

The party alleges that the proposed code does not ensure continuity of guaranteed social security as the entire exercise is designed to dismantle and demolish organisations that deliver benefits such as the EPF, Construction Workers Welfare Scheme, and Beedi Workers Welfare Scheme. “The proposed social security bill is nothing but a fraud. What is social security has not been defined. The draft bill has listed a number of social security schemes like pension, etc., but what is the basis or the formula is not spelt out. Unless all these are put in the law, everything remains at the discretion of the government, which says all these things will be spelt out in the rules…What is not spelt out or ensured statutorily will not help as the rules are not enforceable,” says CPM parliamentarian Tapan Sen.

He calls the government’s plan a “satanic ploy to serve the employers” as any reduction in a worker’s contribution will automatically red­uce the employer’s share too. In case of provident fund, for instance, the employee contributes 12 per cent of the salary and an equal amount is given by the employer. The CPM says the new code will not safeguard the interests of the workforce as even a two per cent reduction means a lot for an employer, particularly if there are hundreds of workers.

Prof Ravi Srivastava of JNU shares the same fears, saying the proposed law will dismantle existing social security organisations and give way to private sector intermediaries regulated by the central government. In view of the progress in the administrative system of the EPFO and the ESIC in the recent past an alternative trajectory could be to integrate and retain the current institutional framework for the organised sector and work progressively to lower the employee threshold and to carefully evaluate this roll out. For the remaining workers, a simpler and more flexible system needs to be evolved.

But not all are willing to cast aside the government’s social security bundle as a market-driven, employer-friendly effort. Prof Raghav Gaiha of University of Pennsylvania finds the draft bill an “overambitious but politically shrewd initiative” to get out of a complicated web of legislation currently governing workers’ social security in India. These laws include acts passed in Parliament such as EPF, ESI, maternity benefit, employees’ compensation and unorganised social security. “The lab­our law framework has evolved in a piecemeal manner and has a fragmented corpus of separate enactments that cause regulatory uncertainty for business owners, including foreign investors. Hence, the new social security code is likely to reduce this uncertainty,” Gaiha says.

Jayan Jose Thomas, an associate professor at IIT Delhi, points out that of the estimated 470 million working population in India, almost 90 per cent don’t have any or reasonable social security. After 2011-12, there are indications that employment growth has slowed down, as did investment. “There is every reason to believe that jobs in productive sectors, say manufacturing, have dwindled, which was not the case in the past high productive years. So, social security has become important now. And providing some kind of social security such as subsidised food grain has bec­ome a bigger challenge,” Thomas says.

The country has been sold trickle-­down economics before but no tangible gains were recorded. With the expected rise in migration from villages and agriculture-related sectors, the government will have to work harder to meet challenges beyond creating jobs. So far, despite the best intentions, the government’s efforts on social security have been inadequate.

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