Labor reforms to address the unorganized sector in India

In India (as in many developing economies), the unorganized or small-scale sector is considerably larger than the organized sector in terms of employment and share of GDP. It contributes to more than 50% of the country’s GDP and employs 94% of the total workforce.

To define — the unorganized sector is a set of economic activities characterized by the relative ease of entry, reliance on indigenous resources, the small scale of operations, labor-intensive operations, reliance on skills acquired outside the formal educational system, and unregulated competitive market. In other words, it consists of all unincorporated private enterprises owned by individuals or households engaged in the sale or production of goods and services operated on a proprietary or partnership basis and with less than ten total workers.

The laborers under the unorganized sector in India can be divided into several categories depending on their type of work, they are:

Under Occupation include

Small and marginal farmers, landless agricultural laborers, sharecroppers, fishermen, those engaged in animal husbandry, beedi rolling, labeling and packing, building and construction workers, leather workers, weavers, artisans, salt workers, workers in brick kilns and stone quarries, workers in sawmills, oil mills, etc.

Under Nature of Employment include

Attached agricultural laborers, bonded laborers, migrant workers, contracts, and casual laborers.

Under Specially Distressed Category include

Toddy tappers, scavengers, carriers of head loads, drivers of animal-driven vehicles, loaders and unloaders.

Under Service Category include

Midwives, Domestic workers, Fishermen and women, Barbers, Vegetable and fruit vendors, Newspaper vendors, etc.

To provide legal and social protection to the informal or unorganized sector workers, regulate the market, and protect employment certain labor reforms have been taken into account. As per the article published by Money Life, the government has rolled the following reforms for the year 2019–20:

  1. The employee contribution has been kept intact and the government contribution has been increased to Rs7,000 per month from Rs3,500 per month.

2. The minimum pension for every laborer has been fixed at Rs1,000 per month and an increase in the ceiling for Employee State Insurance Scheme.

3. The ceiling for payment of gratuity has been raised to Rs20 lakh from Rs10 lakh and that for ESI’s eligibility cover has been increased to Rs21,000 from Rs15,000 per month.

4. The government has increased the honorarium by about 50% to all categories of workers under the Anganwadi and Asha Yojana.

5. The interim budget has provisioned for a monthly pension of Rs3,000, to those 60 years of age and has monthly income up to Rs15,000, with a contribution of the only Rs100 per month, by workers in the unorganized sector. The government will deposit equal matching shares in the pension account of the worker every month, etc.

In response to India’s deteriorating macroeconomic situation, the motivation to revise labor laws is driven by the desire to attract foreign capital and manufacturing firms, particularly the ones shifting base from China. While doing so India should adhere to the ILO (International Labour Organisation) recommendations. As per the ILO, any policy or labor reform response should ensure recovery through fiscal and monetary stimulus measures, support to enterprises, jobs and income through social protection, retention and financial relief to companies along with ensuring that workers’ need to be protected by strengthening occupational safety and health measures. It further said the most important element was “to strengthen the social dialogue, collective bargaining, labor relation institutions and process for implementing solutions”.

Contributed By- Umme- Aiman Rampurwala, Content Writer @ Mitti Ke Rang

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