Welfare for all: Rs 139 per Indian, per month

June 28, 2009: The Times of India

In a few days, the UPA government will present its first budget to the country. Announcements made during the election campaign and after taking charge indicate that there will be a focus on the aam admi — cheap food grain for consumers, investment in basic infrastructure, healthcare, etc. But, one of the biggest problems faced by the country’s 500-million-strong workforce is that a safety net to cover loss of jobs or livelihoods still seems below the government’s radar. 

India spends just over 1% of its gross domestic product (GDP) on social welfare schemes. Most of the workforce in the unorganized sector is left totally uncovered. Compare this to advanced countries, which have strong welfare provision and spend 20% to 30% of their GDP on extensive programmes to ensure unemployment allowance, healthcare and pension. 

Studies have shown that many of the poorer countries in Africa and Asia spend more than India on social welfare schemes. Bangladesh spends 3.8% and Senegal 4.3% of GDP respectively on social welfare. 

An ILO study has shown that India could provide the most basic social security to all its citizens if every Indian spent just Rs 139 per month, that is, about 4% of its GDP in 2008. 

So, it is doable if the government is willing. As the people fight the global downturn, which has devoured millions of jobs elsewhere in the world, isn’t it time the UPA government provide longer-term relief to the people?

Where is my social security, Mr Prime Minister?

Unemployment is death by a thousand cuts. Life itself is dependent on gainful work. That is why losing one’s job is the beginning of a downward spiral — poverty, indebtedness, disease and suffering follow in quick succession. 

The current economic turmoil has caused mass unemployment around the world. In 2008, just over 190 million people or 6% of the global workforce were unemployed. The economic downturn had only just begun. By February this year, unemployment in the US stood at 12.5 million with the economy shedding up to 600,000 jobs every month. By April, unemployment in OECD countries — the world’s 30 richest — had topped 37 million. India has also been affected, though not quite so badly. According to a sample survey by the labour ministry, about five lakh Indian jobs were lost in the last quarter of 2008. 

Unemployment is often seen as an involuntary occurrence. People lose their jobs because of events beyond their control — economic downturns, disease, disability, or, in the case of women, social prejudice. Sometimes, people are unemployable. That is why there is a need for a collective remedy, a system that can help tide people through the dark days of joblessness. 

More than 60 countries worldwide provide some form of unemployment insurance. It is part of a larger social welfare commitment, which includes retirement and old age pension, sickness and maternity benefits. Often, affordable housing and education are part of the package. It is not just advanced economies that provide social welfare, though the richer countries have the most comprehensive systems. Several South American and African countries also offer their people some form of social welfare. 

In the past two decades, governments have retreated from social welfare spending, making the transition from ‘insurance’ to ‘assistance’. But industrialized countries still spend anything between 15% and 30% of their GDP on social security such as unemployment benefit, pension and healthcare. Yet India, one of the more advanced developing countries, barely manages to spend about 1% of its GDP on social services. Guy Standing, professor of economic security at the University of Bath in Britain, says India has one of the world’s lowest levels of social welfare expenditure and even that is mostly wasted. “What is perhaps most worrying in India is that politicians use social protection schemes cynically to boost their political prospects, so that they can show discretionary benevolence, particularly just before elections,¶ he told TOI. 

The need for social security is greater in the developing world than in the developed. The developing world’s concept of social security needs to be expanded — it has to include the aim of eliminating mass poverty, ill-health and illiteracy because without this social security cannot exist. In India, there are additional obstacles, such as caste discrimination. Given the scale of these problems, social welfare spending is at a rudimentary level in most developing countries including India. 

Although the law recognizes various rights, such as livelihood, these are not enforceable. In a belated attempt to rectify this, the National Rural Employment Guarantee Act was adopted in 2006 but it only provides for a maximum of 100 days of manual labour in a year at the minimum wage. Perhaps a fatal flaw in India’s social security framework is that it only covers the organized sector, which accounts for just 8% of the workforce. The vast majority of Indian workers are in the unorganized sector. Some half-hearted attempts were made to bring them under some sort of social security coverage by passing a law in December. 

For India to progress, policy has to be boldly refocused on providing social security, including a safety net for when one loses one’s job. As Guy Standing puts it, “We have found in Africa that when you provide low-income people with a little money without conditions, they mostly spend it in the best interests of their families and communities. They do not need to be told or led to do what state bureaucrats think is what they should do. 

If India is really to escape from its caste-driven and Raj-affected past, it must loosen up.¶