5th International Research Conference on Social Security

Warsaw, 5-7 March 2007

"Social security and the labour market: A mismatch?"

The labour market of the future Policy challenges for social security

Bimal Kanti SAHU Employees' State Insurance Corporation Ministry of Labour India

International Social Security Association

Case postale 1, CH-1211 Geneva 22 Fax: +41 22 799 8509 e-mail: issarc@ilo.org

Research Programme
Web: www.issa.int

THE LABOUR MARKET OF THE FUTURE POLICY CHALLENGES FOR SOCIAL SECURITY PRESENTED BY B.K. SAHU, ADDL. COMMISSIONER, EMPLOYEES' STATE INSURANCE CORPORATION, MINISTRY OF LABOUR, GOVT. OF INDIA, NEW DELHI ABSTRACT Globalization causes large shifts of labour, both within and between countries. First and foremost, labour shifts from traditional, formal sectors to the informal sector and the services industry. These changes result in new challenges for social security, which are to be met by the provision of universal healthcare coverage, public-private partnerships and high-quality education. For the success of its schemes, the Government as regulator depends on the support of all stakeholders. (I). INTRODUCTION
India is one of the biggest emerging labour markets of the future that will be requiring a massive social security over. This is for the fact that Indian Labour growing despite the scenario having been under attack by the market forces. Today, the importance of Beijing Declaration is most relevant for India's labour market. Following globalisation, in a highly competitive market the Indian labour has been marginalized in the form of part time, temporary and unprotected, thus deprived of social security. It is a matter of concern that the Indian system of Social Security up till now has remained very limited, only up to 10% in the organized sector. The success story of the Bangladesh Gramin Bank is a case of Social Security of poor labourers. Due to the changes in the pattern of labour requirements, Indian Labour is also becoming migratory in nature. Labour in India and the social security they require has been kept in the low priority area. Universalisation of Education is sure to add to the generation of quality labour in India. Labour expectations are rising; hence, Indian labour is in need of a livelihood security instead of just a food security

(II). PECULARITIES OF LABOUR MARKET IN THE L.P.G. ERA

India, beside China, is a massive workmen's territory with a billion plus population. The problems of under-development, poverty, inadequate employment, extremist violence, natural disaster, corruption at different levels in the society, and lack of social security to the underprivileged section in the society, all have to be frontally tackled and confronted with. Managing all these social problems of enormous proportion affecting the labour market has become trickier because of the fact that today the world society is passing through a plethora of both structural and technological changes. Such changes are ultimately going to affect the labour force in different countries. This is a scenario where the productive power of labor and the order according to which security has to be provided in the society need to be managed and distributed among the various ranks of the working populace. The massive labour force in India, today, happens to be the next to China, and such a gigantic labour potential instead of being used and utilized straightway in the market driven economy, is made to tussle with the concepts of outsourcing. It is rather ironic that when labour has remained in great demand to move the world such labour is altogether outsourced for generation of wealth. In fact, huge outsourcing of labour has generated a phenomenon called casualisation in the job market. For India, as the case with any other underdeveloped

country, the net result has remained that labour itself has become unsecured, and the power of labour is not utilized to it's fullest potential. The disturbing trend is that the per capita productivity in the manufacturing sector is tapering very fast due to the fall in the use of the labour. This is for the simple reason that neither our economy nor the society has given adequate importance to the power of labour and its importance to the development of the society. In the Indian scenario with more than 2 billion hands, the importance of labour has not been duly recognized by the society; that has not bothered to provide security to these hands. In other words, the society, more appropriately the civil society, has become a commercial place where the terms and condition in the labour market provided by the human being are being measured in commercial terms, between the buyer and the seller. The net casualty is both the society, and the social security. Another offshoot of this disaster is the youth labour, the citadel of the future productivity of India. Their growth is charted as under for whom the need for social security is also rising. Year 1991 1997 2002 2007 Figures in Millions 85 93 105 117

(Source Unemployment among Indian Youth in India, Employment and Training Papers 36, Institution of Economic Growth, New Delhi) The role of the Beijing declaration is praiseworthy in this context. The declaration addresses point blank some major issues: (i) The majority of the working populations in the world do not have any form of social security; whatever security was available some years ago has declined; (ii) Public discussion is more on the cost involved ignoring the spirit of social security; (iii) Demographic ageing is treated as a challenge to social security protection; (iv) Financial sustainability of benefit schemes puts a question mark on the level of protection; (v) All these above factors when combined leave a feeling of confusion and lack of public confidence in the viability of the social security of the scheme. Now coming to the concept of privatization, in this highly competitive market the world is the market at large and all the trade barriers have been liberalized, there is nothing at bargain except the cost of labour. Most of the third world countries have traditionally remained agriculture based and the agriculture being the backbone of the Indian economy has remained a labour intensive one. Under different constraints, the importance of labour was compromised for which the per capita productivity in the agricultural sector has showed a trend of decline. Added to this, the property owners love to reap where they never sow and demand a rent even for his natural produce. Against such primitive economic infrastructure sudden influx of technologies and assimilation of trade barriers have been so staggering that the labour succumbs as the first casualty in the face of these individual greed, and also the multi national companies that are making major thrust into the labour contributing to the agricultural sector and management of the same. Since the cost of the land for use in agricultural and manufacturing, activities are constantly accelerating; in essence, the spread of privatization is trying to squeeze into labour components. The different guises under which labour continues to be expedited are as under

Sl.No.

Nature of Engaging Labour

Average share of total engagement in labour in percentage Mid 1980s Around 1990 1997 and after

1 2 3

Part time Temporary Salaried but unprotected

17.59 13.80 -

18.60 11.76 32.35

20.85 13.12 38.38

(Source : all from ILO Governing body 276th Report on Globalization, Geneva, November, 1999) Consequently, the outsourcing agencies under the guise of privatization devour the profit in proportionate to the capital out of the total value added to the material by the labour. This is the sad part of the story where privatization has exploited grounds of liberalization in the age of globalization, and the victim has been the labour market.

(III). ADEQUACY (?) OF THE PRESENT SOCIAL SECURITY SYSTEM TO MEET THE PRESENT DAY CHALLENGES
During the last half a century, social security in India has evolved in a very limited sphere headed by a very few legislations. Some of which are rarely seen on the ground. To name a few, Minimum Wages Act, 1948, Maternity Act, 1961, Workmen Compensation Act, 1968. These legislations have largely remained on paper. The only two legislations that have catered only to less than 10% of the working population in the organized sector in independent India are the Employees' Provident Fund Act, 1951 and the Employees' State Insurance Act, 1948. For the last 50 years, the social security provided by these two enactments has remained by and large confined to urban and semi-urban areas. They have not yet been made any dent beyond that. The quagmire of the poverty has remained staggering in the face of the working population, and consequently the society in the Indian sub-continent that has failed to provide day-today food security to the teeming million, and also to provide the cover of social security to the working people at large. Another reason for such failure has been violation of the labour laws that has never been stringently dealt with. The soft approach of imposing a penalty of some thousand rupees, which is also in rarest of the rare cases, has never seen any employer arrested for violating labour laws. On the contrary, the workers who deserve a sensitive social security system are penalized by the employers for demanding their legal rights. In a poverty stricken society, there is none to provide the social security to them except themselves. We may take a very recent case from my neighbouring country Bangladesh. The war against poverty waged by the Nobel peace laureate 2006, and micro-economist Md. Yunus and his Gramin Bank is a brilliant example of social security. In my personal view, I would say that only when the country and the society does not respond to the security needs of the working class the members of the society step in under compulsion. And this lack of responsiveness to the emergent needs of the present day working class that has eaten away the concept of social security. The system has remained very inadequate, in my opinion.

(IV). POSITION IN INDIA

As regards the term of Globalization, the same is defined as a process of rapid economic integration among the countries by the process of liberalization of the trade, investment of capital flow and rapid technological change. We in India understand that globalization involves enterprises and workers of nearly all countries, in goods as well as in service sector. Since the complex process of liberalization, privatization, and globalization is a multifaceted one, it is not possible to identify a simple relationship in LPG and social progress that includes social security. In a country like India, the tax system is becoming less distributive. The peculiar trend is that in the LPG era where it is not only a cheap labour that is threatened to its extinction but the high income enterprises are also not out of danger. Today, the society that has become so ruthless that it threatens job insecurity of a worker in India, as well as the social security that is available, may be limited to a certain extent. Therefore, on the threshold of the globalization in the Indian economy the labour market has become more vulnerable to the international shocks when the society of India has not been able to accept the change. Moreover, the inflow of capital that sustains the economy as well as procures the labour has also become more volatile. Consequently, an unpredictable social economy falls short of expectation in the field of social security particularly in the Indian scenario. The onslaught of globalization is viewed as a challenge to the Indian economy, where the concepts of labour reforms and social security are placed down the ladder. At the end of the day, the labour is at the receiving end that faces the hardship. Broadly speaking as on date the working population in various sectors in India is projected as under (in millions): (a) Total workforce-400 (b) In organized sector-40 (c) In unorganized sector-360 This shows that only 10% of the working population is available under the social security cover, while the majority is the deprived lot. Indian labour is confronted with another concern: the concern of migration. As we have seen that after the Second World War, the enormous migration of labour in the Americas, in the continents, and from the main land of China into Hong Kong. Today, in the present dispensation, Indian labour force is confronted with the similar situation. They bear the same characteristic of migrated workers from rural to urban set-up. It is the tragedies of the Indian labour that the skilled labourers in India based in rural areas have no employment opportunities. Under agonizing pain they move to the urban and semi urban areas where the value of the productive labour has already been started declining. The elder populations are fading and the graying labours in the rural sector find no rural outlets. The net result is that they have become liability to the society than an experienced asset. Moreover, when labour is not utilized to the optimum extent, sedentary lifestyles eat away their productivity. This is also fallout of the LPG era. A careful study of the following facts reveals how the ingredient of labour has fallen far behind the optimum level, both in resurging rural and burgeoning urban scenario.

India : Distribution of Youth Labour in Rural and Urban areas

Usual Activity Year 15-19 Male 20-24 15-24 15-19 Female 20-24 15-24 15-19 Persons 20-24 15-24

RURAL LABOUR Labour Force 1987-88 1993-94 62.9 59.7 91.8 90.2 75.8 73.2 41.5 37.1 48.4 46.9 45.0 42.0 53.0 49.5 68.8 67.9 60.5 58.2

URBAN LABOUR Labour Force 1987-88 1993-94 42.9 40.4 79.2 77.1 60.3 57.4 16.9 14.1 22.5 23.0 19.6 18.5 30.8 28.4 51.8 51.0 41.1 39.1

So far India is concerned, globalization is also a process of opening of a quality labour, capital and service market to the world economy and trade. Notwithstanding the fact that this process of globalization has aided the transformation of the South Asian economies including India, it has aroused fear and suspicion; perpetuating inequality, poverty in some segments of the society and contributing immensely to weakness of the Indian economy to defend it from the external shocks. In short, globalization is already showing a backlash of economic growth, and social deprivation. This has happened because of the fact that labour has been placed in the back burner, and the society has not been able to secure it.

(V). FUTURE STRATEGY TO MEET THE CHALLENGES

In the Indian scenario, the challenges are Himalayan. This is proposed to be tackled by a four-pronged strategy: i) In India during the last half a century, the concept and definition of social security has largely remained confined to the arena of provident fund, and employees' state insurance schemes only. Conversely speaking, the service that has remained limited to the extent of medical benefit, cash benefit under ESI, and pensioners' benefits under the EPF scheme for the half a century has constricted the meaning of social security and the concept has remained stagnant. It is time that the dynamics of social security is widened that will cover the security and insurance into the frontiers of health, labour, and employment. It is rather encouraging that the institution of social security has tried to stand on its own feet since independence without any financial support even from the Government in our country, and not even a single arm of the society has supported the endeavours of the system called social security. There is very urgent need to raise the awareness in the society that the root of productivity in the society is labour and to keep the labour in good stead, there is need for a healthy work force. Therefore, only an integrated health and labour will be one frontier of strategy that will spread side by side the extensions of coverage of the workmen, both horizontally and vertically. ii) As far as the requirement of education is concerned, there is need for universalization of education for all and specialization in education for the workforce that will contribute its power to the specialized job market. It has been observed through study that the youth of the country caters to the 70% of the productivity and rest 30% is the productivity generated by the mid and the upper middle level of labour force. Also there is need for involving one and all stakeholders in the society- the workforce, trade unions, policy

iii)

iv)

makers, and employers into the crusade against lack of education among the workforce. And the last but not the least is the requirement for reversing trend by virtue of which labour and social security would be assigned their due place. That is raising the social awareness to keep labour at the top of the priority at par with capital. It is time to realize that a labour is also a capital. Once labour is assured of its pride of place, social productivity will consequently increase. Therefore, the society should build up the strategy for social security to cover health, education and optimal employment to the labour force so that the challenges in the era of LPG can be met. What we require to address squarely is expanding and strengthening the service delivery structure of social security, particularly the medical benefits. Funding a social security scheme that is both economical and efficient in services.

(VI). CONCLUSION
For India, in the era of LPG, both industry and agriculture are at cross road. Though, India is a food surplus country and has over 45 million tons of wheat and rice in its godown, over 250 million children, women and men go to bed hungry every day. From the only food secured to become livelihood secured India needs to overcome the biggest challenge of social security in the country. Only a sustained effort of placing labour under a sound social security can ensure it.

SUMMARY
1. India is one of the biggest emerging labour markets of the future that will be requiring a massive social security over. 2. The potential of Indian Labour is growing despite the scenario having been under attack by the market forces. 3. The importance of Beijing Declaration is most relevant for Indias Labour market. 4. In a highly competitive Indian market the labour has been marginalized in the form of part time, temporary and unprotected, thus deprived of social security. 5. Indian system of Social Security has remained very limited uptill now, only upto 10% in the organized sector. 6. The success story of the Bangladesh Gramin Bank is a case of Social Security of poor labourers. 7. Indian Labour is also becoming migratory in nature with the changing scenario. 8. Labour in India and the social security they require has been kept in the low priority area. 9. Universalisation of Education is sure to add to the generation of quality labour in India. 10. Indian labour is in need of a livelihood security instead of just a food security. (The opinion expressed are authors personal and in no way convey any official policy)