| August 19, 2006 | ECONOMIC AND POLITICAL | WEEKLY |
|---|---|---|
| A Model for Social Security Until now there have been only half-hearted countrywide attempts at providing a measure of social security to unorganised/informal workers. The recommendations of the National Commission for Enterprises in the Unorganised Sector (NCEUS), contained in its report submitted to the government in May, form the first substantive set of proposals to provide security to all such workers. The NCEUS proposals therefore need to be seriously discussed. As the articles in the special issue of this journal (August 12) show, there can be many layers to an analysis of the NCEUS proposals. In the commission’s scheme of things, three forms of social security will be provided to 30 crore workers, which it has estimated as the size of the unorganised worker population. These are health insurance, life insurance and old age security, with the latter funded jointly by the workers, employers and the central and state governments. The first question is: Important as the need for security is, should not the country focus first on promotional security (improving productivity of the small enterprises, accelerating employment growth) as well as on social assistance such as better primary healthcare, education and sanitation? As one set of researchers have put it strongly, are we putting the cart before the horse? The NCEUS report itself does not discuss this issue comprehensively; this is required before a decision is taken to introduce a national scheme. A legitimate response could be that social security is an independent and required need, and the unorganised workers cannot wait until promotional security has been provided. The second and equally fundamental issue relates to the model that the commission has chosen. The defined contribution model for old age security (provident fund/ pension) means that all workers (other than the below the poverty line workers) will have to make a contribution. In other words, the government will not on its own provide security. This has important implications, especially for health, where the introduction of an insurance model on such a large scale implies the burial of any hope that the state will meet at least the basic health needs of the citizen. This is no small decision, even if government healthcare services have always been vastly inadequate. The third question is that vast as the population covered will be, the benefits finally available will be very modest: life insurance of Rs 15,000, hospitalisation of up to Rs 15,000, old age security of Rs 200 a month for the BPL population and a provident fund income based on date of entry. It is quite possible that the commission has kept its benefits at a low level in order to maintain the fiscal costs at a “manageable” level. Indeed, one criticism that has already been levelled by the preservers of fiscal integrity is that this will be yet another obligation to be financed by yet another cess. (This is totally misplaced because the joint central and state contribution will add up to only Rs 25,000 crore a year when the scheme is fully operational five years from now, estimated to be equivalent to less than half a per cent of GDP.) However, in trying to “politically” sell the scheme the NCEUS has to explain why it has provided for a more modest form of security than what would be considered basic. Finally, there is a set of questions relating to organisation and administration. In dealing with what is admittedly the very difficult question of how to identify employers in the informal sector (to enforce payment of contributions) the NCEUS has yet taken the easy way out by suggesting that where the employer cannot be located, the government will take on the financial obligation. There are also many issues relating to identification of workers, which has been left to worker facilitation centres in each locality. This too sounds easier said than done, given that 30 crore workers are to be identified. And the weakest part of the financial basis of the proposed scheme is that the corpus is to be partly invested, by insurance companies, in the stock market and the expectation is of a 10 per cent |
annual return (to be guaranteed in part by the government). This is a high-risk strategy, which will in any case not yield such a high return over the long term.
Given the important nature of the NCEUS proposals, there are naturally many issues that will and should be raised. This calls for informed debate. It should, however, be acknowledged that the commission, in line with the commitment made in the common minimum programme, has taken a major step forward. It is now up to the political organisations to take this issue further, for without firm political support a national scheme of social security for 30 crore workers cannot be put in place. EPW
Economic and Political Weekly August 19, 2006
