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Needed, a Helping Hand

Give Informal workers social security, say in laws governing them
Sonal Khetarpal | Print Edition: June 14, 2020
Needed, a Helping Hand
Illustration by Raj Verma

A leather factory in Kanpur refused to pay its 10 workers. A handloom workshop in Varanasi asked its five artisans not to show up from the next day. And, with no customers, a tea stall vendor in New Delhi's Connaught Place shut shop, leaving the helper to fend for himself.

This section of society (there are 45 crore unorganised workers in the country), accounting for 90 per cent of the country's workforce, has been hit the hardest by the nationwide lockdown to counter the Covid-19 threat. CMIE data shows that out of the 12.2 crore people who lost jobs in April, 75 per cent were small traders and daily wage labourers. The government has announced many schemes to help them, including free ration, credit assistance to street vendors and additional funds for MGNREGA, but these will address only the immediate concerns. In order to give these workers a modicum of financial security and tap their skills/efforts for economic revival, the government will have to overhaul its approach towards labour laws which, right now, serve only 10 per cent of the labour market that is organised.

It is not an easy task but a beginning of sorts has been made.

Recognition & Voice

The first hurdle is the sheer size of the unorganised sector and lack of data. "If there is no data of how many people are engaged in which activity and where, providing benefits is difficult," says Partha Chatterjee, Head of Economics Department, Shiv Nadar University.

In a small step towards recognising their rights, the finance minister recently announced that informal workers should be issued an appointment letter. However, not many expect even this token step to be followed, though technology can help. Chatterjee suggests an app-based system using the Aadhaar card (or any identification document) for registration. "This will give us a better idea of the size of the economy and labour market movements," says Chatterjee.

Experts say time has come to draft policies to give these workers some protection from vagaries of economic forces. Priya Naik, CEO, Samhita Social Ventures, says it is critical to ensure that all stakeholders are at the table while drafting the policies. "The priority should be to keep the most vulnerable in mind in terms of their most pressing needs."

Ravi Venkatesan, Founder of coalition Global Alliance for Mass Entrepreneurship, who was on the global board of Volvo, says it is mandatory for Swedish firms to ensure that labour representatives comprise a third of company boards. He says: "Their voice on the table meant everyone understood the value of human capital. It was for the first time I saw what responsible union leadership is." To follow such enlightened polices, a country needs a high proportion of formal workers, and that is not possible unless businesses themselves get incentives to join the formal economy.

Formalisation Efforts

A simple way to reduce unorganised work is to formalise firms. Businesses prefer to remain informal because of high compliance burden. "Harassment by inspectors and long list of approvals and rules come in the way of conducting business. So, people prefer to stay under the radar," says Venkatesan.

"At state level, there are 387 labour laws, at the Centre about 44, apart from 27,000 compliances and 13,033 filings. This is way too much. We need labour laws, but simpler, lesser and easy to understand laws," says Rituparna Chakraborty, Executive Vice President of staffing firm TeamLease. She suggests that a single labour commission can look at streamlining these provisions into one labour code. The Centre has already started the process by consolidating labour laws into four codes. The first on wages has been enacted. The rest are pending in Parliament.

The cost of formalisation has to be cut too. Compliances around hiring increase the cost of employing people on payroll. "The burden could be as high as 30-40 per cent of workers' cost. ESIC itself is 4 per cent, and provident fund 24 per cent. Then there is gratuity, bonus, at 8.33 per cent, all of which informal employees are not getting today. They are not getting minimum wages but market rates. The total burden will easily be 40 per cent or more," says Lohit Bhatia, President, Indian Staffing Federation. This fear of spending 40 per cent more on salary has led to rise of platform-based work where workers earn on the basis of tasks done.

Social Security

The International Labour Organisation report, "ILO Monitor 2nd edition: COVID-19 and the World of Work", has estimated that 40 crore informal workers are at the risk of falling into poverty due to Covid-19. There is a need to provide some social security to informal workers. The government can look at extending the scope of existing social security schemes, says K.R. Shyam Sundar, Professor, HRM Area at Xavier School of Management, Jamshedpur. Under the Pradhan Mantri Shram-Yogi Maandhan, informal workers aged 18-40 years and with monthly income up to `15,000 will get a monthly pension of `3,000 through direct benefit transfer. This could be extended to provide unemployment benefits to migrant workers and five million street vendors also, suggests Sundar. He says the rationale should be to put more money in hands of workers, which will increase consumption and, hence, generate demand.

Bhatia of ISF says to protect individuals like chowkidars, drivers and maids who are hired by multiple employers in individual capacity, the government had prepared a draft legislation for domestic workers in 2008. It was not ratified. This will offer social security to these five crore people who are hired without offer letters.

Providing healthcare benefits for this section of society is also crucial. Chatterjee of Shiv Nadar University says the government recognises this and has extended insurance cover to informal workers through schemes like Ayushman Bharat. "To begin with, the government can start by extending ESIC facilities to informal sector workers as well," he says.

While the informal sector waits for these basic reforms, the key to their success will be in implementation.

(With inputs from Joe C. Mathew)

@sonalkhetarpal7

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