Killing with kindness

It has to be a bit more than a coincidence that the country's best-performing sector (IT and ITeS) is also its least regulated. So if there's something to the view that governments kill sectors they try to help, the attempt to help the country's unorganised sector has to be viewed with some concern. On the face of things, The Unorganised Sector Workers' Social Security Bill is just framework legislation to take account of all social security schemes and seeks to set up national and state level advisory boards to oversee these schemes. Indeed, it lists the eleven social sector schemes that are already in force today, from the National Old Age Pension Scheme to the Aaam Admi Bima Yojana. The problem with the Bill, however, is the likelihood that the government will come up with more such schemes in the future. Indeed, the Bill indicates as much: "The Central Government may formulate, from time to time, suitable welfare schemes for different sections of unorganised sector workers on matters relating to life and disability cover, health and maternity benefits, old age protection and any other benefits as may be determined by the Central Government."

Anyone familiar with the state of unorganised sector workers would say it is high time some benefits were mandated. But what if the unorganised sector can't afford it? That is, the benefits hike wages so much that they make the sector unviable. What happens to the workers then? Or the expansion of job opportunities, which, at the moment, are probably increasing at rates not seen before in the economy? Normal economics would also suggest that if employment is growing at levels faster than before, it would also be doing something to wage rates, though a lot also depends upon whether those looking for jobs are increasing at a faster pace. One proposal doing the rounds earlier, for instance, was to mandate an annual bonus of 8.33 per cent of the previous year's salary. Another sought to take a rupee each day from each unorganised sector employee, get a matching amount from the employer (if he/she wasn't identifiable, the government would pay this amount), and then pay an annual pension from the amount collected and health insurance. This included a payment of up to Rs 15,000 as hospitalisation expenses each year, a maximum of Rs 1,000 per delivery, a life insurance cover of Rs 15,000, a personal accident cover giving Rs 25,000 in the case of death, a sickness allowance of Rs 750 in a year in case a worker is hospitalised, 5 per cent of the hospital bill as transport allowance in case the hospital is not reasonably close by, a monthly pension of Rs 200 for the poor, and a provident fund that gives a guaranteed return of 10 per cent for the non-poor, and so on.

Given that there's a Rs 20,000 crore-plus hole in the Employees Pension Scheme, which is also based on certain fixed returns but has to deal with around 10 million employees, imagine the impact on a scheme which has over 300 million employees. Besides, collecting a rupee every day from workers migrating all the time and often unemployed is a logistical and financial nightmare. Just the costs of collecting the money would make the scheme unviable since all banks/post offices have certain minimum collection costs irrespective of the value of the funds being transferred. In which case, the fact that Parliament's adjournment resulted in the Bill not getting passed may not be such a bad thing after all.