Narendra Modi government is all set to launch a Europe-style universal social security scheme for about 45 crore workers in the country which will cover all the potential security risks. The universal social security will cover risks such as loss of income, death and disability, illness and medical bills and unemployment benefits for all the registered workers in formal as well as informal sectors. For the poor who cannot pay insurance for the universal security scheme, the government will meet the cost of the program.
Currently, India does not have any social security scheme which covers risks associated with jobs – loss of income, unemployment or disability. The countries of Europe, especially Germany, Switzerland and Scandinavian countries have a robust security scheme where the government pays an allowance for unemployment, loss of income or disability arising while employed. Under the proposal by the labour ministry, the social security contributions will be mandatory but the deduction could be lower than those made currently, all of which adds up to about 30% of income. Also, a labour ministry official has said that the contribution will be such that there is no massive dent in the take-home salary of the salaried class.
“While the social security cover for people the below poverty line (BPL) would be paid from the taxpayers’ kitty, those above the poverty line would have to suffice for themselves. The coverage under the four major risks listed above may not be at one go but introduced gradually,” an official of labour ministry was quoted by The Economic Times. Going forward, the policy could introduce differential rates based on certain income slabs. “The deductions under the universal social security cover could be substantially lowered for people below the fixed income slab while those above the set income bracket may continue to pay at the existing rate,” the official said to the Economic Times.
Currently, India’s total workforce is about 45 crore, out of which approximately 4.5 crore people are in organized sector, while the rest are in unorganized sectors. Every year, more than 1 crore people are added to the country’s workforce. However, currently almost all the workers joining the unorganized sector lack any social security benefits and suffer immensely on loss of job or disability.