Unemployment benefits in India : Analysis – UPSC GS3

Indian labour laws do not expressly provide for unemployment benefits. But various schemes and acts have provisions for unemployment benefits.
Rajiv Gandhi Shramik Kalyan Yojana:
  • The Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) provides unemployment allowance to involuntarily unemployed insured persons who have made contributions for two years to Employees’ State Insurance.
  • The scheme is designed under the Employees’ State Insurance Act (ESIA), 1948.
  • It provides cash support at the rate of 50% of the last average daily wages for the first 12 months and 25% for the next 12 months.
  • It covers those who become unemployed due to retrenchment, closure or permanent invalidity.
  • Apart from the cash relief, the scheme also provides for medical care during unemployment tenure as well as vocational training to equip the worker for future employment opportunities.
Atal Beemit Vyakti Kalyan Yojana:
  • The Union government introduced the Atal Beemit Vyakti Kalyan Yojana (ABVKY) in 2018 on a pilot basis for two years.
  • Under this scheme, unemployed insured persons are provided cash allowance at the rate of 50% of the average per day earning of the claimant for 90 days.
  • Given that the pandemic resulted in the closure of many companies, this scheme was extended during the COVID-19 period.
Industrial Disputes Act:
  • As per the provisions of the Industrial Disputes Act (IDA), 1947, industrial establishments employing 100 or more workers must pay retrenchment compensation to workers in case they lose jobs due to government-sanctioned workers’ retrenchment or closures of establishments.
All schemes have failed:
Laws and schemes have failed to offer relief to workers.
    • Employees’ State Insurance Act under which the Rajiv Gandhi Shramik Kalyan Yojana functions has limited coverage in India and has also been plagued by the issue of slow expansion in its coverage.
    • The available data of the RGSKY points out the very low number of workers availing unemployment allowance.
    • Similar observations were also made under ABVKY.
    • This indicates the failure of these schemes to provide unemployment benefits to the organised sector workers even during the pandemic.
    • These facts strengthen the case against the government’s sole reliance on these schemes.
  • Industrial Disputes Act:
    • Employment-intensive industries like construction and services are excluded from the provisions of the Industrial Disputes act.
    • Given that a substantial number of workers are employed in these sectors, they are rendered devoid of the benefits under the IDA.
    • Notably, many States have amended provisions under the IDA to apply it to establishments employing 300 or more workers. This has resulted in a scenario where workers employed in smaller establishments are unable to receive retrenchment payments.
    • The retrenchment compensation paid under the IDA remains very low and is insufficient for the workers to sustain on till they find another employment.
    • The burden of unemployment allowance is transferred to the employer under the Industrial Disputes act while the government absolves itself of all responsibilities. Notably, employers have been hesitant in paying the retrenchment compensation to workers.
  • New labour codes:
    • The Social Security Code (SSC), 2020, though included unemployment protection in its definition of ‘social security’, did not provide for a scheme for the same. It only offers vague promises of schemes to the unorganised workers. This is a point of concern given that workers in the unorganized sector are more prone to unemployment through disruptions like the pandemic and they lack even basic social security.
    • Notably, the SSC has no concrete provision relating to unemployment allowance for workers of the organised sector. This is a point of concern given that the hire and fire reforms in the Industrial Relations Code could accentuate unemployment, especially in urban areas.
Way Forward:
  • An urban employment guarantee scheme on the lines of the successful MGNREGA should be framed to provide adequate employment opportunities for workers in the urban labour market.
  • Economists have shown that relief to workers does not cost much as a proportion of GDP. The governments should abandon their neoliberal policies and consider allowing for a universal unemployment allowance scheme to ensure inclusive economic development.
  • The Social Security Code must be amended to provide for a universal unemployment allowance scheme funded by the tripartite contributions of employers, workers and the government.
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