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SHRINKING PIE

In fast growing India, workers are losing social security benefits even faster

Reuters/Abhishek N. Chinnappa
Shattered calm.
Published Last updated This article is more than 2 years old.

The massive demonstration by garment workers in Bengaluru earlier this month forced the Indian government to rethink its policy on provident fund (PF) withdrawal.

New norms, introduced in February, prohibited withdrawal of the employer’s contribution until the age of 58. This clearly hurt those workers facing long spells of unemployment, who were dependent on the PF money to make ends meet.

This is the second time the Narendra Modi government has had to roll back proposed PF-related measures. Finance minister Arun Jaitley’s budget proposal to tax PF withdrawals was shelved after vocal outrage from the middle class.

However, the strident tone of the Bengaluru protest has taken many by surprise—although it shouldn’t, if one paid attention to the issue.

The Indian working class is being confronted by a slow erosion of job conditions and access to benefits. The number of workers covered by benefits such as PF, paid leave, or maternity leave, is on the decline. And worryingly, these changes have coincided with the fastest economic expansion in India’s history.

Limited access to benefits

Employment in India is largely categorised as self-employment, regular employment, and casual employment, according to the National Sample Survey Office’s sample surveys covering the period between 2004 and 2005, and 2011 and 2012.

Of these categories, the first is not eligible for social security—the self-employed can’t claim employer-linked benefits.

But there has been an increase in the percentage of regular and casual workers in the workforce, which grew from 43% in 2005 to 47.78% in 2012. The share of regular workers alone rose from 14% to around 18%, a hugely positive outcome since this category receives regular wages and salaries, unlike casual labour, who are largely daily wage or similar short-period workers.

The increase in employment, however, has not translated into an increase in the number of those availing social security benefits. Nearly 100 million Indian workers, not including the self-employed, have no access to benefits.

What is worrying is that a significant portion of regular wage workers—over 55%—was bereft of social security in 2011-12, compared to about 53% in 2004-05.

Gendered access to benefits

Among casual labourers, males are overwhelmingly denied access to benefits, but in regular wage employment, a larger proportion of women are out of the social security net. And it’s getting worse.

Between 2005 and 2012, the proportion of regularly employed women who did not receive any benefits rose from 57% to 59.5%. But the share of men without benefits in this category grew even more quickly during the same period.

Although the gender gap here has narrowed, women are still relatively more disadvantaged.

During the same period, the number of regular wage employees increased by about 16 million, with roughly 3.5 million of them being women. However, the number of those without any benefits increased by an alarming 12 million.

Effectively, three out of every four new workers had no access to any benefits even though output grew at unprecedented rates.

Reason for low access

The Employee Provident Fund (EPF) Act legally applies to only those companies that hire more than 20 workers. The result is that all informal workers—who comprise most of India’s workforce—are excluded from the scheme.

There is no reason to believe that there has been a reduction in the number of enterprises that hire 20 or more workers. Roughly, more than a third of all regular wage workers are occupied in workplaces that hire more than 20 workers. Though data for the period 2004 and 2005 is incomplete, it is unlikely that employment in large establishments fell by such a magnitude so as to increase the number of those left out of the safety net.

In fact, nearly 37% of workers in establishments with more than 20 employees find themselves with no access to benefits. These are workers who are legally eligible, but are not included in any social security scheme.

One can only hint at the possible causes for the fall in coverage even though regular jobs and employment in large enterprises are increasing. Workers earning more than Rs15,000 per month have the option of choosing not to participate in the scheme. Maybe more workers are opting for better schemes elsewhere.

Job insecurity keeping workers off benefits?

The EPF Act states that contractual employees are eligible to enrol in the PF scheme, the liability for which rests on the principal employer. However, the tenuous nature of contractual employment may well prevent workers from pursuing their claims aggressively, simply because contractual employees can be terminated with little or no notice.

The inability of tribunals to deal with such cases also tilts the scales against the interests of labour, since many workers may not be able to fight these cases. Of the 3,303 cases registered with the EPF Appellate Tribunal between 2013 and 2014, only 494 could be decided, leading to a severe backlog.

Data to test this hypothesis is hard to come by, but looking at the nature of contracts may help.

In 2012, of the total regular wage workers with no benefits in establishments hiring more than 20 workers, nearly 85% either had no written contract or had one for a period of less than a year. Therefore, one of the major indicators determining whether a worker receives benefits or not could be his or her bargaining power, proxied by the length of contract.

Workers on longer-term contracts are better placed. Manufacturing and other industries have witnessed a significant rise in both contractualisation and insecurity of contracts. Perhaps, the key to falling social security coverage must be sought in the changes occurring in the Indian workplace.

Worsening working conditions and labour militancy

Given the fact that labour found itself losing access to hard-earned benefits, is it any wonder that it chose to protest so stridently in Bengaluru?

This pattern of diminishing working conditions is repeated across a number of indicators such as access to paid leave and reducing permanency of contracts. The protests at several car-making units witnessed over the last few years were also spearheaded by dissatisfied contractual workers.

India faces the prospect of labour militancy if it does not act decisively to arrest the attenuation of workers’ rights and benefits.

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