The road to hell

The road to hell, as the old saying goes, is paved with good intentions, and so it appears with the draft Unorganised Sector Workers’ Bill.

On the face of it, this is the decent thing to do. Why shouldn’t workers in the unorganised sector get an annual bonus like their counterparts in the organised sector, as also overtime payments, gratuity, pensions, paid maternity leave, housing, legal aid, crèches and all the other benefits of an organised industrial society?

The answer is quite simple: the unorganised sector cannot afford it, and the government cannot deliver what is promised because it involves something like 300 million people who are by definition difficult to track through their employers. How will you enforce what the draft Bill stipulates, like an annual bonus of 8.33 per cent of a year’s salary or Rs 100, whichever is higher—and what penalty is enforceable on an employer for not paying?

Indeed, what if no one employer has kept the same person for a whole year—as is quite often the case? And where are the records for this, without creating another mammoth bureaucracy to beat all dysfunctional bureaucracies?

There is a difference between the ideal and the feasible, and someone in a government given to fanciful ideas should recognise this before more damage is done. A Left government in Kerala tried stipulating similar rules for agricultural workers three decades ago; the result was that many people stopped farming and kept their land fallow; nominal wages went up but there was less work. The result of what is proposed now will be the same: a reduction in employment.

This is not to say the government has no role, and that sweat shops be encouraged, but that the government’s role be restricted to specifying minimum wages and basic working conditions. One of the reasons for the organised sector not growing fast enough over the past few decades has been the high cost of labour forced on it (even casual and contract workers had to be made permanent under court orders), and this is now sought to be forced on the unorganised sector, which employs the overwhelming bulk of India’s working population.

The other old chestnut the Bill brings up, the Workers Welfare Fund, is essentially an extension of a pilot programme of the NDA government on extending the Employees Pension Scheme (EPS) to the unorganised sector. At that time, too, it was pointed out the scheme was unworkable and would bankrupt everyone.

While the draft Bill proposes that workers contribute up to 5 per cent of their monthly salaries and that this be matched by employers, the NDA had talked of a maximum monthly contribution of Rs 200 by both parties. The Bill’s scheme also includes group insurance benefits.

While it is possible that the scheme seems viable if you go by strict actuarial numbers, implementing it will be a logistical nightmare and impossible to pull off in a country with our decaying administrative culture.

Since the monthly payments to the fund by each individual will be very small in value, for instance, and the collections will have to be made over vast geographical areas, the costs of servicing the scheme are likely to be high, at 7-8 per cent of the sums collected. This itself will make the scheme unviable.

Another serious problem relates to ensuring that each unorganised sector worker, who doesn’t have a regular job each month, contributes his/her share regularly month on month, for 25-30 years.

Pension benefits for the unorganised sector are desirable, but the costs and benefits need to assessed realistically; the holes in the government-run EPS make it clear the government is in no shape to run such a scheme.