India - Protecting the workforce

A draft national employment policy, prepared by the central Ministry of Labour and Employment and the International Labour Organisation, has raised two issues that have major significance for India’s workforce — labour market flexibility and social security. The policy’s implicit call for flexible labour markets, while advocating the need for a minimum, statutory social security for the unprotected workforce, can succeed only with a mechanism that effectively insulates India’s unorganised workers from market-driven uncertainties. One serious social-fallout of India’s economic reforms has been their impact on millions of workers, particularly in the unorganised sector. As the latest Economic Survey shows, unemployment rose from 6.06 per cent in 1993-94 to 8.28 per cent in 2004-05. More telling is the reminder from Parliament’s Standing Committee on Labour that 422.6 million of the total workforce of 457.5 million (a shocking 92 per cent) is unprotected. In addressing the sensitive issue of labour sector reforms, the basic question is: ‘What comes first, flexible markets, or social security?’ Given the declining role of the state as an employment provider, the increased vulnerability of the workforce to economic fluctuations, and the absence of a meaningful social safety net, measures to ensure the security of the workforce should precede market flexibility. An acceptable social security policy that ensures the protection of unorganised workforce must be the top priority.
The workers in the unorganised sector, who are estimated to contribute around 60 per cent of the national income, require comprehensive and effective protection. As the National Commission for Enterprises in the Unorganised Sector noted, “the time has come to initiate a protective social security system that is inclusive of all workers in the informal economy.” The Unorganised Sector Workers’ Social Security Bill, 2007 has chosen the welfare scheme model that has succeeded in some sectors, such as construction workers. It proposes a national fund to ensure an uninterrupted flow of money. However, the Parliamentary Standing Committee found it inadequate to “meet the aspirations of the millions of workers in the unorganised sector” and came up with an amended version. One of its significant recommendations is central funding for national minimum social security benefits such as life and accident cover, health insurance, and maternity benefit. The amended Bill could be a good starting point for an inclusive social security system.