What’s the news?

Over half of India’s salaried workforce lacks social security benefits, revealing stark inequality and a deficient system ranked poorly internationally, prompting calls for urgent reforms to ensure equitable coverage and protection for all segments of the workforce.

Central idea

Recent statistics from the Periodic Labour Force Survey Annual Report 2021–22 highlight a grim reality: approximately 53% of India’s salaried workforce lacks access to social security benefits, including provident funds, pensions, health care, and disability insurance. This dire situation extends to the informal sector, where around 91% of the workforce operates without social security. Meanwhile, India’s social security system ranks dismally low, according to Mercer CFS.

Gig Workers: Approximately 1.3% of India’s active labor force comprises gig workers, yet they rarely have access to any form of social security benefit. This absence of coverage leaves them without essential protections such as provident funds, pensions, health care, and disability insurance.
Informal Sector: A staggering 91% of India’s workforce operates within the informal sector, where access to social security remains severely limited. This lack of coverage extends to essentials like provident funds, pensions, health care, and disability insurance, contributing to a vulnerable and marginalized workforce.

Underutilization of Funds: The National Social Assistance Programme, which aimed to support elderly individuals without able-bodied earners, suffered from stagnant contributions and poor funding allocation. The Center’s contribution to old-age pension schemes remained below minimum wage levels.
Mismanagement of Funds: Instances of mismanagement are evident in various schemes. The CAG audit revealed that the National Social Security Fund had accumulated Rs. 1,927 crore since its inception, yet the entire amount remained unutilized. Similarly, funds collected for the social security of construction workers in Delhi were poorly utilized, with a significant portion going unspent.
Beneficiary Mismanagement: The CAG identified instances of funds being transferred to deceased beneficiaries, indicating flaws in the implementation of social security schemes.

Comprehensive Coverage: Brazil’s General Social Security Scheme offers a contribution-based approach that covers a wide range of situations, including accidents, disabilities, illness, family burdens, and even unemployment. This comprehensive coverage provides income support for workers and their families in various circumstances.
Government Backing: Brazil’s scheme is designed with provisions for government intervention. In cases where funds are lacking, the National Treasury steps in to ensure that social security benefits are sustained, providing a safety net for workers.
Ease of Access: The scheme in Brazil allows easy access to social security benefits through simple processes such as phone calls or bank visits. This user-friendly approach reduces bureaucratic hurdles for beneficiaries.
Inclusivity: The Brazilian scheme extends its coverage to even low-income insured individuals who face incarceration. This inclusive approach ensures that marginalized groups are not left without support.

Addressing India’s social security crisis necessitates immediate and strategic reforms. Three fundamental principles guide this transformation:

Expanded Contribution: Enhancing contributions under the Employees’ Provident Fund Organization (EPFO) system for formal workers, coupled with partial contributions from informal workers with meaningful income, could lay the foundation for a more inclusive system.
Government Intervention: The government must intervene to support those who are unemployed or earning insufficiently. Providing social protection to the poorest 20% of the workforce, including elderly, pregnant, and disabled individuals, could amount to approximately ₹1.37 trillion, or approximately 0.69% of GDP in FY20.
Streamlined Framework: Reforms should streamline and simplify existing schemes, ensuring coverage of all sectors. Establishing a pan-India labor force card and extending successful schemes like the Building and Other Construction Workers Schemes could substantially improve coverage.

As India transitions towards an aging society, ensuring social security for all workers becomes paramount. The focus must shift from rhetoric to tangible actions. Reforming social security will not only provide a safety net for workers but also contribute to equitable growth. By embracing comprehensive and inclusive policies, India can propel itself towards a more secure and prosperous future.