Social security for the unorganized in India: an approach paper

This paper suggests that traditionally the ILO and ministries of labour the world over believed that all workers would eventually end up in large enterprises, or at least in the formal sector. However, experience has proved otherwise. On the contrary, voluntary retirement schemes, out sourcing employment and casualization have become the key words of the corporate world these days. So the extension of formal social security programs cannot be the simple answer to satisfying the social protection needs of increasing number of workers and their families outside the formal sector.

The most vulnerable groups outside the formal labour force are the labour force in the informal sector and disabled and old people who cannot count on their family support, who cannot be reached by other social policies and who have not been able to make provisions for their own pension due to little or no income. New institutions and forms of social security will have to be developed to meet the specific security needs of these various groups. This paper suggests ideas and administrative arrangements for social protection for these groups, keeping in mind the economic constraints both of contributor and the Government.

The author suggests dividing types of workers in the unorganized sector into their major characteristics in the labour markets. This division will help in designing appropriate social security scheme for them. Based on these, the schemes would have to be drafted and contribution rates or finances would have to be decided. The broad divisions therefore will be:

• regular wage earners including protected wage earners. This division includes the workers working in the organized as well as small-scale sector who were hither to have not been extended any type of social security due to inadequate legislative provisions for compulsory social security
• casual and temporary wage earners. This again is found in both organized and the unorganized sectors
• contract workers
• piece rated workers including home workers
• self employed workers of all the categories
• self employed employers with very small means of profit or with no profit business

The social security programs suggested for the above categories of employees, based on contribution levels as well as participation of the government could include:

• monthly pension scheme for the retired at the age of 60 years
• provident fund scheme in addition to the pension scheme for the workers in the regular establishments and who have slightly higher wage structure than the rest of the unorganized [wage will be quantified in the scheme]
• family pension scheme for all
• medical and disablement benefits
• crop insurance to farmers without linking to the banking finance for agriculture but linked to the holdings of land

These programs either could be run through the existing institutions or as suggested separate organizations need to be created. However, the limitations of the existing organizations and the legislations have to be examined before assigning additional responsibility.

The Paper covers plans for implementation, coverage, recording of contributions, etc., and administrative set-up and reforms required