Social security benefits for salaried employees shrinking post pandemic

Workers in rural areas, women hit harder

A larger share of the Indian salaried class is finding itself uncovered by any kind of social security benefit, especially after the pandemic.

The share of those employed in salaried jobs or regular work has contracted in 2022-23 to 21 per cent compared to 23 per cent before the pandemic in 2019-20. And the share of salaried workers ineligible for any social security benefit has increased. About 54 per cent of those in regular /salaried jobs were not eligible for any kind of social security benefit in FY23 compared to 52 per cent five years ago, according to data from Periodic Labour Force Survey (PLFS)  (chart 1). 

Social security refers to insurance programmes that include pensions, health insurance, maternity benefits and gratuity.

Santosh Mehrotra, visiting professor of economics, Centre for Development Studies, University of Bath, UK, says that the quality of employment being generated in a post-pandemic economy needs to be understood.

“Growth in non-farm jobs has slowed down and is not keeping up with the rate at which young people are looking for it,” he says. “Real wages have been stagnating or falling in non-farm jobs. The fall in social security benefits reflects the worsening of the quality of work and the decrease in the number of such jobs.”

He adds that improved levels of education among the youth, particularly among women, mean that they are eager to join the workforce but are unable to do so because of the decline in the quality of regular work.

“There is a general tendency in small-scale enterprises to avoid declaring the number of employees so they do not have to pay provident fund and other social security benefits even though they pay their employees regular wages,” says PC Mohanan, former acting chairman, National Statistical Commission. He adds that enterprises with more than 20 employees are legally bound to pay social security benefits to them.

This decline in social security coverage is starker in rural areas compared to urban centres. The share of workers ineligible for any benefit in urban areas increased during the pandemic. However, in FY23, it stood at 49.4 per cent, the same as in FY19. In contrast, ineligibility has increased in rural areas from 56 per cent in FY19 to 60 per cent in FY23 (chart 2).   

“Covid lasted over three cycles of the Periodic Labour Force Survey (PLFS). About 59 million workers were added to agriculture during this period, and the share of agriculture in total employment shot up from 42 per cent in 2018-19 to 46 per cent in 2022-23,” Mehrotra says. There are now too many workers in rural areas seeking the same jobs, so whoever is employing them can do so at worse terms, he adds. “The labour market is in the doldrums in rural areas, which is why MGNREGA demand has not let up and the government is now increasing its allocation.”

Mehrotra explains that the addition of agricultural jobs is the exact opposite of what one would like to see in a developing economy.

Similarly, a gender-based analysis shows that social security programmes cover fewer female workers than men. About 57 per cent of the women employed in regular jobs/salaried work were not covered under any social insurance programme. For men, this figure stood at 53 per cent (chart 3).

 

There are state-wise differences, too. For example, in Chhattisgarh, barely 15 per cent are employed in salaried jobs. And, 70 per cent of these are not covered by any security programme. In comparison, Mizoram, which has a higher proportion of workers in salaried jobs (about 26 per cent), has better social security coverage. However, in Punjab, where 33.4 per cent of the employment is generated from regular/salaried jobs, the social security coverage is lower. States like Uttar Pradesh and Rajasthan also fare poorly (chart 4).

Mohanan explains that in smaller states and Union territories, like Mizoram, people in regular employment are usually in the organised sector, which explains the better coverage of social security.

“But in larger states and cities like Delhi, people are employed in small-scale enterprises, but are not be eligible for EPFO and other such schemes,” he adds.