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Labour Regulations and Worker Welfare: The Case of Provident Fund in India
Published in Oxford University Press
2016
Pages: 1 - 28
Abstract

The impact of labour regulations on economic activity and formal sector job growth has been an issue of considerable interest in academic as well as policy circles in the Indian context. Two characteristic features of this debate stand out: first, the relative overemphasis on select aspects of labour regulations pertaining to job security provisions (in particular, the Chapters V-A and V-B of the Industrial Disputes Act, 1947 (IDA)); second, the relative under emphasis on the extent and nature of compliance with the labour regulations. The focus on select labour laws pertaining to job security provisions, such as the IDA, has come at the cost of a relative neglect of the impact of other labour regulations on worker welfare that, given their lower firm size thresholds combined with the preponderance of small sized firms in the Indian economy, affect a much larger set of firms and workers employed in them. But before we look at the impact of labour regulations, it is pertinent to ask the extent to which these regulations are complied with, so that the debate on their impact is situated in ground realities. Given that regulations are weakly enforced in developing countries such as India, it is surprising that there has not been an adequate emphasis on arriving at the estimates of non-compliance with India’s labour laws. In this essay, we look at compliance with an important labour regulation pertaining to workers’ social security: the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF). Under this, establishments employing 20 or more workers are mandated to provide contributions towards the provident fund of those employees whose wages are below a certain threshold. We focus on the EPF for the following reasons: first, unlike the IDA or the Factories’ Act 1948 which are applicable only to the manufacturing sector, the EPF has a wider coverage in terms of sectors of work; second, the government's recent initiatives on EPF, in the form of subsidizing employers' contributions, demonstrate its belief in the scheme's potential to be an important tool for delivering social security to workers. Moreover, jobs with social security form the basis for achieving ‘decent work for all’, a key sustainable development goal adopted by the United Nations. Since 2004-05, the National Sample Surveys on Employment and Unemployment (NSS) have captured workers’ self-reported data on access to various social security provisions, including provident fund contributions by the employers. Our estimates from this data suggest that the evasion of the EPF Act is quite widespread: in 2011-12, 75 percent (6.6 million) of regular salaried employees earning wages below the threshold and working in establishments employing 20 or more workers have reported to be not receiving provident fund benefits. This has increased sharply from 46 percent (4.5 million) in 2004-05. These individuals constitute about 10 percent of the total workforce employed in regular salaried jobs, in the respective years. We find that lack of written job contracts is an important correlate of non-compliance with the Act. We discuss various pathways that might lead to this correlation and suggest avenues for future research.

About the journal
JournalData powered by TypesetIndia Development Report
PublisherData powered by TypesetOxford University Press
Open AccessYes
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