Crises and the Workers at the Margin

Informal sector functions as the backbone of the Indian economy. It constitutes around 60% of the economy and employs around 80% of the workforce of the country. If we add the informal laborers in the organized sectors in the form of casual/contract laborers, the figure will go up to 90%. The vulnerable living conditions of the informal sector workers, without any safety nets to fall on, are unacceptable in an equitable democratic society.  The current episode of COVID-19 has once again revealed the perilous nature of the informal sector. The measures taken to contain the disease, social distancing, and lockdown, have brought all economic activities to a standstill, and we’re forced to choose between lives and livelihoods. This has serious effects on the economy and livelihoods of almost all sorts of people. But, as Adam Smith pointed out in his famous The Wealth of Nations, “the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate”.

Once economic activities are stopped, and there is no income coming in, the workers do not have any means of subsistence.  The evidence and stories about the humanitarian crisis coming from various parts of the country are dire According to the report of Stranded Workers Action Network (SWAN), a group of volunteers conducting relief works for the stranded workers across the country, 72% of the workers who have contacted them have food ration left for only two days. Though the central government and state governments have announced various relief packages for the poor and vulnerable, 97% of the workers did not receive any cash relief.[1] We have also seen the terrible massive exodus of migrant workers from the big cities.

The same is the fate with the small businesses in the country in which a substantial portion of the population  are  self-employed and have shut down putting their few employees also at risk. The real output loss affects businesses irrespective of their size, but big business can traverse through this crisis with their cash stock. After the double blow of demonetization and the implementation of GST, the current crisis has hit the small businesses hard and they are forced to exit the market. Also, to make the situation worse, the gig workers, are not even considered as employees under the Indian laws and are therefore unable to avail of any form of employee benefits.

The relief measures by governments like food rations and temporary shelters would help the informal workers to navigate through this crisis in the short-term. However, in the long-run, considerable deliberations should be made on the social security schemes of the government, which ensures a life with dignity for these workers. The existing frameworks have to be carefully reviewed, and redesigned if needed, to ensure stable livelihood for the poor and marginalized.

India had adopted two major initiatives in the early 2000s to deal with the plight of the working masses in the unorganized sector. The first, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA, 2005) and the second, Unorganized Workers’ Social Security Act (UWSSA, 2008). NREG program was envisioned as to provide additional guaranteed work to the underemployed workers in rural India and it was rolled out massively, thus becoming the flagship program of the then government. NREG program continued to be the major welfare program of the Government of India with the highest budgetary expenses among other social schemes. Like in the past rural distresses, in the current situation too, NREG is considered to be a tried-and-tested program.

On the other hand, UWSSA was not implemented well and still plans on its comprehensive execution are just in progress. UWSSA came into being considering the recommendations of National Commission for Enterprises in Unorganized Sector (NCEUS). The social security benefits to meet any uncertain events were only available to workers in the formal sector. The NCEUS report proposed a scheme for a universal social security cover for all workers. UWSSA did not live up to the recommendations of NCEUS and could only be considered as a watered-down version of those recommendations. Whatever has been done in this regard through various social security schemes was unsatisfactory. For instance, the NCEUS recommended a system where the benefits claimed could be portable and thus take care of migrant needs.[2] Such a system would have be immensely useful in the current situation, where the state and the public authorities were totally confused and helpless while dealing with the stranded migrant workers. If we had implemented a proper social security scheme for the informal workers, we could have easily dealt with the issues with which we are grappling now by facilitating identification, and delivery mechanism for marginal workers.

In the last couple of years, there were some clamor around the weakening of MGNREGA, the present crisis has shown that, if anything, we need more of such social security programs. The current pandemic has exposed the importance of having an appropriate social security mechanism and the holes in the existing system. It is high time to make structural changes in the social security system of the country. The NREG program has to be directed to address the structural issues in the rural economies to reap maximum benefit from it. Moreover, proper and reliable social security benefits are to be extended for the informal workers, including the gig workers.


[1] The SWAN report is not based on a random sample survey, it collects information from the workers who call them for relief. Hence, the estimates will have serious selection bias. So far 16863 workers have contacted them.

[2] Refer Ravi Srivastava. (2012). Social Protection For Workers In India: Struggling For Basic Rights Under Increasing Labour Market Flexibility. Indian Journal of Labour Economics, 55(2) and Ravi Srivastava. (2020). Vulnerable Internal Migrants in India and Portability of Social Security and Entitlements. WP 02/2020, Centre for Employment Studies Working Paper Series, Institute for Human Development.

Author Bio

Shihas Abdul Razak

Shihas is an Associate with Azim Premji foundation.

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