The poor cannot be asked to pay for their pension. It must be paid with taxpayers’ contributions, as a debt and an obligation.
Stung by charges that the government led by Prime Minister Narendra Modi works only to advance the interests of big business, it responded with the launch of three major social security schemes for the millions who are excluded from social protection as sterling evidence of its pro-poor credentials. However, a careful reading of these schemes reveals that not only are they merely recycled versions of earlier programmes, they also extend little protection to the majority of the very poor, and rely almost entirely on contributions of the poor themselves.
Most striking about the social security schemes – the Atal Pension Yojana, the Pradhan Manti Suraksha Bima Yojana and the Pradhan Mantri Jeevan Jyoti Bima Yojana – is that none of these are public funded. They only promise returns on money deposited regularly by poor people into their bank accounts, without significant public support or contributions from their employers.
To benefit from the pension scheme, workers need to first hold a functional bank account. Financial inclusion is still a mirage for the majority of India’s dispossessed populations, despite the extravagant claims of both the previous and the present government. Bank accounts have been opened for 150 million from a 450 million strong workforce. And a large proportion of these (currently 56 %, according to the Finance Secretary in Business Line) are non-operated accounts. Bank branches are distant from many remote rural habitations. Moreover, circular migration, illegalised slum and forest residence, nomadic life styles, the requirement of documentation and unwelcoming attitudes of bank functionaries to the poor, still create tall barriers to actual financial inclusion of the majority of dispossessed people.
Minimal pension gains
If a worker has a bank account, he or she must have the capacity to save and contribute fixed sums of money every month without break over several years. Consider the harsh lived reality of nine out of 10 workers in the informal sector. Most survive with low-end, low-paid and uncertain work, often involving distress migration several months in a year to far corners of the country, with lean periods of unemployment and hunger in between, and not infrequently, withheld wages and semi-bondage. A health emergency, a natural disaster, a riot, the death of a breadwinner, disability, or the social pressures of a wedding or funeral can thrust households into deeper, more stubborn poverty, and push them into debt, erasing the possibilities of their contributions to these social security programmes. The overwhelmingly large majority of these households therefore cannot depend on a scheme which requires them to put in money regularly to secure long-postponed benefits.
Take the pension scheme. Similar to the existing Swavalamban scheme, it requires unremitting monthly contributions until the worker reaches the age of 60 years. Only for people who enrol in the current year, the state will match their contributions for five years. Is this really a good deal for a worker who is able to actually ensure such regular contributions? Anumeha Yadav in the Business Standard quoted a back-of-the-envelope calculation by social security expert Ravi Shrivastava that the scheme calls for a total contribution of Rs 70,000 over 20 years for a contributor to ultimately receive a pension of Rs 1,000. If we account for inflation, the real gain after two to four decades of contributing pensions will be small. Mohan Guruswamy further points out that given that life expectancy in India is just 65.5 years, the policy taker would on average benefit for only five and a half years after he or she pays for it over a complete working age, which could be anywhere between 20 and 40 years. Life expectancy for the poor would be even lower, giving them even lower chances of actually benefiting from the pension.
The two insurance schemes – again upgraded versions of the earlier government’s Aam Aadmi Bima Yojana – promise death insurance of Rs 2 lakh and Rs 1 lakh disability insurance for a Rs 12 deposit every year, and a life insurance policy of Rs 2 lakh for Rs 330 deposited every year. But the latter scheme is incredibly weighted to protect the interests of insurance companies rather than the contributing unorganised poor worker: bank account-holders can subscribe only until the age of 50 years, and the life insurance ceases if a person dies after 55 years. The contributor would moreover earn less than the income with interest that such a corpus would otherwise have earned. Banks and insurance companies benefit further because these are long-term deposits, and also because they ensure that subscription to any of these schemes would require that there is always a minimum balance in these bank accounts.
Serious worries persist also about the claim process, and the powerlessness of impoverished rural and slum dwellers compelled to negotiate the bureaucracy of private and public banks. The experience of Rashtriya Swasthya Bima Yojna demonstrated how claims were widely delayed or thwarted. Private insurance companies earning rich profits had no interest to expand enrolment of below poverty line families under RSBY, especially in remote areas where cost of enrolment is high. Migration further reduced enrolments because of the need to make payments in person. With complicated claim procedures and low claim ratios, RSBY benefited insurance companies far more than extending genuine health protection to large populations.
No more subterfuge
Such market-based and tight-fisted social security initiatives are disingenuous and a smokescreen for the state’s continued neglect of the rights of large sections of the population to social security. Sweden offers a splendid example of a social compact in which the current active workforce pays the full cost of pensions for the aged. In this way, every generation willingly contributes a fixed part of its income for the maintenance of its pensioners.
By sharp contrast, the union government in India still runs only one old age pension scheme with a shamefully low monthly pension of Rs 200. This amount is topped up varyingly by many states. But even this covers only people over 60 years who are designated to be BPL, and most such lists have been shown to significantly exclude the most vulnerable. All of us who work in the formal sector take for granted the assurance of being paid half our last salary, indexed for inflation, after we retire. If we consider only the minimum wage for unskilled work for unorganised workers, this should entitle them by any yardstick of equitable justice to a monthly pension of at least Rs 2,000 a month.
There should be no further tolerance for official subterfuges, of which the prime minister’s package of what is deceptively purveyed as universal social protection is a particularly discouraging example. If the government claims to institute a pension programme to cover the excluded millions, this cannot be contributory when the overwhelming majority of our workers are in the informal economy, and women’s unpaid care work is not even recognised as work. It must be universal for all persons who are not covered by formal sector pension schemes. It must be equivalent to not less than half a person’s last earnings. And it must be paid by taxpayers’ contributions, as a debt and an obligation.