Not unemployment, but wages are India’s real problem; key labour reforms govt must drive

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Published: June 8, 2019 11:14 AM

India’s job problem may still be easier to solve than its battle for wages since country’s labour laws have several issues that need to be first rectified, says Manish Sabharwal of Teamlease Services.

pension scheme for traders, know how small businessmen and shopkeepers can avail thisIndia’s job problem may still be easier to solve than its battle for wages since country’s labour laws have several issues that need to be first rectified, says Manish Sabharwal of Teamlease Services. Image: Reuters

Even though unemployment is a burning issue, the real concern for India revolves around wages. India’s job problem may still be easier to solve than its battle for wages since country’s labour laws have several issues that need to be first rectified, says Manish Sabharwal of Teamlease Services. “India’s labour laws have an insane reverse payroll wedge — employers are forced to deduct 40 per cent-plus of gross wages from chithi waali salary (gross wages) for employees with monthly wages up to Rs 25,000. Yet, haath waali salary (net wages) are only 9 per cent lower for employees with monthly wages above Rs 25,000,” he writes in The Indian Express.

While EPFO is most expensive government securities mutual fund globally, ESI is world’s most expensive health programme, he adds. It requires competition to fix these models, he adds. The government must bring about reforms in this regard including making employee contribution optional, providing option to choose the handler of employer contributions and capping of social security programme charges to their costs. “One driver of 20 million new social security payers has been the Pradhan Mantri Rojgar Protsahan Yojna — this partial reimbursement to employers for incremental low-wage employees has incentivised social security enrolment, is easy to verify, and hard to fudge and should be extended for a fixed period of three years,” he also notes. The country needs more formal enterprises and non-farm jobs to provide formal jobs to the aspirants, he says. Ease of doing business interventions, cashless transactions, reformed labour laws, single labour code are some of the reforms that the country needs now, he adds.

Meanwhile, India’s unemployment rate surged to a 45-year high during 2017-2018, the government survey showed. The assessment by the National Sample Survey Office (NSSO) conducted between July 2017-June 2018, showed the unemployment rate stood at 6.1 percent, the highest since 1972-73.

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