Path to universal social security

Path to universal social security

Parliament’s Standing Committee on Labour wants social security to be universalised. This is, indeed, the right thing to do. For social security to be truly universal, it has to be taken out of the ambit of the labour ministry and labour law. It must be the shared responsibility of the Centre and the states, parcelled out to different ministries and coordinated by an agency dedicated to the task. In other words, social security has to be reimagined from ground up.

Evidently, this cannot be done at one go. The approach would have to be incremental, with existing arrangements continuing during the transition. By means of Aadhaar and Aadhaar-linked bank accounts and payment systems, soon to be supplemented with Aadhaarlinked health records, it is possible to keep track of an individual applicant’s financial situation, health status, veracity of disability claim or unemployment status, as the case may be. Health insurance is being offered separately and its scope is being expanded. Old-age pension for the destitute is already in place, although the amounts are meagre.

What is now required is to figure out how to incorporate larger and larger swathes of the population into formal social security coverage. An organised sector employee is compelled to save about a quarter of her earnings, although a portion of that saving, dressed up as it is as the employer’s contribution, is not readily appreciated as the employee’s own. Many workers do not have fixed or identified employers in the informal sector. Saving for a rainy day will have to be labelled as just that, without any disguise. If all payments are electronic, it would be a simple matter to sequester a quarter of an informal sector worker’s earnings and deploy it in separate buckets for retirement saving and insurance for disability, unemployment and health, forcing worker and employer to settle on a higher gross wage.

For all payments to become electronic, the first step is to extend the coverage of the goods and services tax to most of India’s 6.3 crore enterprises, from about one crore now, and follow up their audit trails.