Unorganised workers left high and dry by lockdown

KR Shyam Sundar | Updated on March 30, 2020 Published on March 30, 2020

The PM’s scheme could have raised minimum wage and provided cash benefit to those covered under the Unorganised Workers’ Social Security Act

The Finance Minister’s Pradhan Mantri Garib Kalyan Yojana (PMGKY) will mitigate the hardships faced by the poor households in the wake of social menace of Covid-19. The food security and limited cash transfer measures are laudable, but other measures suffer from drawbacks.

Organised sector workers

The PMGKP mentions without providing much explanation that only those wage-earners earning below ₹15,000 per month working in “businesses” employing less than 100 workers are “at risk of losing their employment” (sic). Based on this reasoning it proposes to pay the EPF contributions of both the employers and workers (arguably earning below ₹15,000), i.e., 24 per cent of their wages into their PF accounts for the next three months and for this it has provided for ₹5,000 crore. The government claims that this measure “would prevent disruption in their employment” and that it will benefit 4.8 crore employees.

The EPFO Annual Report for 2016-17 shows that as on March 31, 2017, while 19.34 crore persons were listed as having balance in their EPF accounts during 2016-17 there were only an average of 4.12 crore contributing members. The government has clearly mixed up Chapter V-B of the Industrial Disputes Act, 1947 (which theoretically provides employment security to workers with one year of continuous service in establishments employing 100 or more workers) and the EPF Act, 1952 (under which employees earning below ₹15,000 are eligible to be covered).

Further, according to the Sixth Economic Census, 2016 only 0.08 per cent out of the total of 45.36 million establishments employ more than 99 workers and 98.34 per cent of them employ less than ten workers. Seen either way, this is only a partial and meagre help. The silver lining is the explicit recognition of the government that workers in establishments employing below 100 workers are vulnerable.

The PF account-holders can secure advances from their EPF accounts on account of marriage, education, illness, purchase of houses and unemployment; now the government has added “pandemic” as another circumstance. The EPF contributors can secure a non-refundable advance of 75 per cent of the amount or three months’ wages, whichever is lower. Workers will be reducing their social security cover to enhance their current cash-flow and will encourage them to take myopic actions.

The government has appealed to the private sector firms not to terminate the employment and reduce/deny incomes to workers within them in the organised sector. This is more in the nature of moral suasion and has no legal backing. Government employees will get their incomes, including contract workers in government. However, daily-wage and precarious workers like contract, casual and trainees will least likely be covered by the EPF reliefs, lay-off compensation or income security measures, and hence will continue to be vulnerable.

The relief package for industry, especially MSMEs, will have positive implications for workers in them. The RBI’s measures will have some impact on the industry and the middle class. Urban informal sector workers have largely been left out, save for the extent to which food security measures reach them.

Unorganised and rural sectors

The government has increased the daily wage rate by ₹20 for people working under MGNREGA, which according to press reports, amounts to a wage rate of ₹202. This measure could arguably benefit return migrants apart from locals to earn higher incomes and marginally strengthen rural demand. But the impact of this patently rural measure will be limited for two reasons.

The MNREGA wage rate is far less than that for the agricultural workers and hence the marginal rise will not provide much relief. More worryingly, the average number of days of employment provided per household has been 45-50 in the recent four years. The scheme, strapped by poor transfer of funds to States, needs to be implemented effectively.

Finally, directing the States to utilise the highly-underutilised construction workers’ cess fund is not a relief measure. Besides requiring the cooperation of the States, it is a case of workers drawing from their own legitimate fund. In the meantime, several State governments have unveiled relief packages, including those for construction workers.

Direct measures such as raising the national floor level minimum wages (under the Wage Code) and providing wage subsidy to firms, direct cash benefit to the unorganised workers registered under the Unorganised Workers’ Social Security Act, 2008, release of funds from all the labour welfare funds to their respective member-workers and/or design of temporary national unemployment allowance could have wider and significant impact. The relief package, apart from food security and limited cash benefits, does not cast the social protection net wide enough to cover the weak and vulnerable.

The writer is Professor, HRM Area, XLRI, Jamshedpur

Published on March 30, 2020

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