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Home > Archives (2006 on) > 2008 > May 31, 2008 > Social Security for Contractual Labour : Issues and Challenges

Mainstream, Vol XLVI, No 24

Social Security for Contractual Labour : Issues and Challenges

Monday 2 June 2008, by Jyoti Bhargava, P K Bhargava


Modern governments are committed to promote the welfare of its citizens and in the process, therefore, a number of initiatives have continued to be undertaken over time to protect them from various calamities and contingencies of life. The net of material welfare of the state has thus widened in an effort to ensure a minimum standard of life for its citizens. However, in this race relatively less developed countries like India have lagged behind in the absence of availability of adequate employment opportunities. The organised sector of the economy has not been able to absorb the increasing labour force with the increasing size of the population. Under such a situation, the unorganised sector plays a dominant role in providing employment opportunities to a significant portion of the labour force. The nature of employment in the unorganised sector, by and large, is of contractual type as the element of uncertainty continues to be very high in the absence of any suitable legal framework. The workers, therefore, suffer from income insecurity, occupational insecurity and natural insecurity.

With the changing economic scenario since 1991, the problems of workers in the unorganized sector have tended to be compounded so far as social security is concerned. In an effort to compete globally and to preserve the existence of the enterprise, there is an ever increasing attempt to achieve the goal of cost effectiveness which encourages enterprises to engage labour on contractual basis, specially in areas where unskilled labour is required and the same may continue to be available in abundant supply in a country like India. Needless to say, the required type of skilled labour continues to be in short supply and does not, therefore, pose any employment problem.

The first Indian National Commission on Labour (1966-69) defined the ‘unorganised sector work-force’ as “those workers who have not been able to organise themselves in pursuit of their common interest due to certain constraints like casual nature of employment, ignorance and illiteracy, small and scattered size of establishments”. It may also be pointed out that the organised sector comprises enterprises for which adequate data and information is available and same are covered with a legal framework. On the other hand, the unorganised sector refers to those enterprises whose activities and/or collection of data are not regulated under any legal provision or where any regular accounts are not maintained. Further, in the unorganised sector, in addition to the unincorporated proprieties or partnership enterprises, enterprises run by the cooperative societies, trusts, private and limited companies are also covered. The informal sector, therefore, can be considered as a sub-set of the unorganised sector.

The size of the unorganised sector is relatively large and will continue to be so in the years to come in view of the limited employment opportunities in the organised sector as also due to the outsourcing of a number of occupations/activities from the organised sector. The results of the Survey of the National Sample Survey Organisation (NSSO), carried out in 1999-2000, revealed that out of a total workforce of 397 million, only 28 million (seven per cent) workers are employed in the organised sector and the remaining 93 per cent are employed in the unorganised sector. The Survey also revealed that over a decade, employment in the organised sector has been almost stagnant or has slightly declined.

As per the Survey, there were 44.35 million enterprises and 79.71 million workers in the non-agricultural informal sector of the economy. Among these 25.01 million enterprises employing 39.74 million workers were in the rural areas whereas 19.34 million enterprises with 39.97 million workers were in the urban areas. The informal sector thus provides income-earning opportunity to a larger work force and a larger number of workers are getting their livelihood from the informal sector. The unorganised sector, therefore, has been playing a vital role in providing employment in the economy. It is estimated that the contribution of the unorganised sector to the net domestic product and its share in the total NDP at current prices is over 60 per cent. It accounts for over 40 per cent of our exports. In terms of savings also, its share in the gross domestic savings is significant.

IN view of the importance of the unorganised sector in the Indian economy, it is not only desirable but essential that the workers in this sector, whose employment is of a contractual character beset with uncertainty, should be given due protection by the state. It is, however, unfortunate that this large segment of the workforce has continued to be neglected and the vested interest groups have continued to plead that enactment of legislation and other regulatory measures of social protection will adversely affect the existing mechanism prevailing in the informal sector as any intervention is likely to lead to market imperfections creating hurdles in the smooth functioning of the market and economy. Besides, it would also necessitate huge infrastructure and institutional arrangements involving substantial finance. It needs no emphasis that the government has to play the role of a facilitator and promoter to protect the workers in the informal sector so that they not only have a sense of security but at the same time have a decent work environment enabling them to participate in the mainstream of development.

It is better late than never that the Unorganised Sector Workers’ Social Security Bill, 2007, was presented in the Rajya Sabha on September, 10, 2007. The Bill provides for ‘Aam Admi Bima Yojana’ , ‘National Old Age Pension Scheme’ and ‘Health Insurance Scheme’ as part of the schedule having 11 schemes to the proposed legislation.

The Health Insurance Scheme has been formulated for the BPL workers and will progressively cover six crore families in the next five years. In all, it will help benefit more than 30 crore workes. The National Old Age Pension Scheme will be extended to all persons below the poverty line above the age of 65 years. A pension of Rs 200 per month will be provided and States will be requested to add another Rs 200 to this scheme. Further, through the scheme of Aam Admi Bima Yojana, all the rural landless households in the country will be provided life and disability insurance cover. The cover will be Rs 75,000 on death due to accident and permanent diability due to accident. In case of partial disability due to accident, the insurance cover would be Rs 37,500. The premium to be charged under the scheme will be Rs 200 per annum per member, of which 50 per cent will be contributed by the Central Government and the remaining by the State governments.

It may be pointed out here that the coverage of the BPL families represents a beginning; the objective is to cover all workers in the unorganised sector, including those living above poverty line, in a phased manner—a commitment of the government towards the needs of the unorganised sector workers.

The aforesaid Bill with relevant details envisages various social security benefits which may be formulated from time to time by the Central and State governments for the benefit of workers in the unorganised sector. There is the provision for the National Social Security Advisory Board and State Social Security Advisory Board which will assist in a variety of ways in formulation and implementation of suitable schemes for different sections of the unorganised sector workers.

It will be a great service to the nation if the measures/schemes incorporated in the Unorganised Sector Workers’ Social Security Bill are carried out in the manner in which they have been envisaged, as the workers in the unorganised sector have contributed and will continue to contribute to the growth and prosperity of the Indian economy. However, if past experience is any guide one is prone to argue about the efficacy of various programmes of the government as the implementation part has been very unsatisfactory, rather poor. In fact, an appraisal report can be written in advance as is evidenced by the reports of various anti-poverty programmes launched in the past. The story about the generation of employment in the rural areas in different States in terms of the National Rural Employment Guarantee Act, 2005, is also a case in point. Besides, at times resource crunch too continues to be an impediment in the process, especially at the States’ level.

Should the role of the state be limited to the extent of a facilitator indirectly (rather than directly taking the responsibility) and that voluntary agencies/associations be involved to achieve the desired goals? In this context, the example of the Self-Employed Women’s Association (SEWA) is noteworthy. This organisation has been helping thousands of Indian women in meeting their business needs. SEWA has over 4,20,300 members at the grassroots level and is involved in manufacturing, crafts and services. Its domestic success has encouraged it to setup a trade facilitation centre to help women to move into export business. Vinayak Ghatate, a World Bank Consultant, pointed out that the SEWA Trade Facilitation Centre (STFC) is able to manage its entire micro-enterprise activity through the effective deployment of information and communication technology (ICT) solutions. “It uses e-business as a marketing tool for tapping the virtual marketplace and for showcasing its products via websites,” he explains and maintains: “Modern technology also allows the organisation to adapt more rapidly to changing trends and manage its stocks more effectively.” Through its co-operative approach and various activities, SEWA has been instrumental in bringing greater security and prosperity to India’s rural poor. It would be in the fitness of things if the SEWA model is followed and implemented together with state support; a majority of workers/contractual labour, outside the organised sector, will have security and prosperity which will go in a long way to benefit them as also the society at large.

In view of the above, it is amply clear that the unorganised sector of the Indian economy provides employment to a large segment of labour force, including contractual labour, and that measures need to be taken to protect the workers from income insecurity, occupational insecurity and natural insecurity. The efforts and steps proposed to be undertaken by the state in this direction are appreciable. However, paucity of resources especially at the States’ level, may be a hindrance to achieve the desired goals. Hence the role of the state should be that of a facilitator and at the same time to extend required assistance to voluntary agencies/associations, such as the Self-Employed Women’s Association (SEWA), to provide necessary social security to the workers of the unorganised sector.

Professor P.K. Bhargava is Professor of Economics and formerly Dean, Faculty of Social Sciences, Banaras Hindu University, Varanasi.
Dr (Mrs) Jyoti Bhargava is a Senior Lecturer in Commerce, National P.G. College, Lucknow.

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