UPS to Central employees: Wielding wrong end of the stick!

In India’s policymaking, on one hand Centre guarantees “free” ration to 813.5 million people and on the other, it guarantees pension, the UPS, to a tiny and super privileged 2.3 million central government employees – who already have two pension schemes (NPS and OPS), besides a salary, a host of allowances and perks and also a host of social security covers like the PF, gratuity, healthcare/maternity benefits.

The issue isn’t about why the UPS but what should be the Centre’s priority.

For one, the 2.3 million central government employees entitled to the UPS constitute just 0.41% of the total workforce of 565 million (Economic Survey 2023-24). The switch to UPS would entail a fiscal outgo of ₹6,250 crore in the first year, with arrear payments of ₹800 crore – applicable from FY26.

Most of these 0.41% workers already have the market-linked pension scheme (NPS), for which the Centre pays 14% of the basic salary and dearness allowance. Some would be entitled to the old pension scheme (OPS) – best of the lot with guaranteed, fixed pension every month for the rest of their lives – who would have escaped the switch to the NPS when it came into force on January 1, 2004. The NPS was made compulsory for new recruits.

For another, the OPS is, in a way, the exclusive privilege of a few thousand current and retired MPs, MLAs, MLCs, Ministers, Prime Ministers and Chief Ministers – all politicians.

When the Vajpayee government introduced the NPS to replace the OPS for all central government servants on the plea of fiscal stability (it was argued then that the pension burden would soon be fiscally unsustainable), it kept the ultra-rich MPs and Ministers out of the NPS’s ambit.

This was jarring then; it is so now too. Here is a mind-blowing piece of statistics.

The ADR’s compilation of self-declared assets of MPs elected in the 2004 general elections (months after the NPS was enforced) showed: 156 or 28.7% the Lok Sabha MPs were “crorepatis” and the average assets of MPs was ₹1.9 crore. Take note, it was back in 2004.

After the 2024 general elections, their numbers are: 504 or 93% MPs are “crorepatis” and average assets of MPs is ₹46.36 (71 or 99% Union Ministers are also “crorepatis” with average assets of ₹107.94 crore).

All state governments followed the Vajpayee model to maintain fiscal stability, allowing the OPS for MLAs and MLCs while forcing the NPS (market-linked, not fixed pension) on their employees. When some Opposition-ruled states like Rajasthan, Chhattisgarh, Jharkhand and Punjab reverted back to the OPS for their employees in 2023, Centre refused to refund their contributions to the NPS corpus to stop them from implementing the OPS.

Here is yet another piece of statistics.

501 million (88.7%) workers are without regular wage and social security

The PLFS report of 2022-23 says only 20.9% workers got “regular wage/salaried” but even among them, 53.9% were “not eligible” for any social security cover whatsoever.

Also note, the number of “regular wage/salaried” is declining, from 22.8% in 2017-18 PLFS, and so also those “not eligible” for any social security, from 49.5% in 2017-18 PLFS – a double whammy.

The above data means, only 11.3% workers got “regular wages/salaried” jobs with social security (2022-23) and also, 88.7% or 501 million workers neither got regular wages/salary nor social security of any kind, let alone pension.

This also means, it isn’t necessary that these 88.7% got statutory minimum wages!

Why? The Centre’s statutory minimum wage is stuck at ₹176 since 2017 without revision – because the Wage Code of 2019 (passed by the Lok Sabha on July 30, 2019 and Rajya Sabha on August 2, 2019) which promised revising minimum wages and universalize minimum wages remains on paper (are not implemented). More than five years has passed since then.

Getting the priorities right

This is not difficult to list:

1. Raise minimum wages stuck at ₹176 since 2017.

2. Set up funds for universal minimum wages as per the Wage Code of 2019 first and then address many anomalies in the law (exclusion errors).

3. Set up funds for universal social security for informal worker as per the Social Security Code of 2020 first and then address many anomalies in it (exclusion errors).

4. Fill up sanctioned posts lying vacant in central government ministries/departments and entities under it like, colleges, universities, hospitals, PSUs etc. Centre has not disclosed exact vacancies; the Congress manifesto said it was 3 million.

5. Fill up vacancies with regular appointments – not contractual (Joint Secretary and downwards) or casual (group D workers).

6. Replace contractual appointment in defence forces through the Agnipath/Agniveer scheme (four-year contract after which 75% are retired). with regular appointments that existed until 2022. The Centre did not disclose such vacancies arguing that it was “a sensitive operational matter concerning national security” (Rajya Sabha reply, August 5, 2024), while that was never the case. On March 13, 2023, Centre had disclosed these vacancies – 1,35,743 (8,070 officers and 1,27,673 JCOs).

Now consider why priority must shift away from contractual and casual (points 5 and 6).

Contractual work is rapidly growing both in government and in private sectors – which means no job security (contracts are for maximum of three year) or no/limited social security cover. Remember, if consumption growth (PFCE) is low (4%) while the GDP growth is “gangbuster” (8.2% in FY24 (P), growing precarity of workers (along with lack of jobs) is a major reason.

Rising contractual and casual jobs in government

Centre stopped giving the number of “organised sector” workers after 2012. The PLFS reports don’t give such numbers either (organised-unorganised or formal-informal). The question of disclosing contractual or casual workers in government sector doesn’t arise.

Instead of fixing it, the Social Security Code of 2020 expanded the scope of contract workers by providing for “fixed term employment”. The Industrial Relations Code of 2020 removed distinction between “contractor” supplying contract workers and “employer” by including the former in the definition of the latter – without defining “contractor”. This is a veritable license for “employer” to act as “contractor” to hire and fire workers at will – without legal oversight. Both the Codes are not yet enforced (like the Wage Code of 2019).

A 2014 study by private entity Indian Staffing Federation (ISF) had found 43% government sector workers were temporary, 2/3rd incremental hiring was temporary with 80% in casual jobs, 56% workers in government schemes like ICDS, NRHM, NRLM got token “honorarium”, not salary or wages.

This study has not been updated.

The above account is of formal sector jobs.

On August 5, 2024, CEA V Anantha Nageswaran expressed concerns about growing informalisation of the economy. He called for data on post-Covid gig economy to know if labour market had become “more informal rather than becoming more formal”. If the CEA has doubts – despite years of formalisation drives like the demonetisation, GST and EPFO support – he must have sound reasons.

Slowdown in private sector jobs

Contractual hiring in private sector – including corporates or formal sector – is rampant too.

On July 12, 2024, the Ashoka University published a study, “The contractualisation of workforce in India’s factories continues”. It says, 40.2% workers in “formal manufacturing sector” were on contract in FY22 – up from 23.1% in FY03. This study analysed the NSSO’s annual survey of industries (ASI) data for this.

On August 21, 2024, Bank of Baroda (BoB) released a report “India Inc. did slow down in job creation”. It collected jobs data of 1,196 companies for FY24 from their annual reports – which are largest corporate entities accounting for 82% of the sales of 4,550 companies in the corporate database. It found:

(i) Slowdown in jobs growth to 1.5% from 5.7% in FY23 – 58,27,272 in FY22, 61,60,968 in FY23 and 62,51,808 in FY24. This was while sales slowed down but profits grew.

(ii) Of 1,196 big corporates, 700 registered a rise in job count, 121 maintained status quo and 375 recorded a decline in FY24.

(iii) IT sector’s job share was 25%, banking 22% (together 47%), finance, healthcare and auto together at 14.5%, insurance, business services and textiles together at 10%.

(iv) Best acceleration in jobs was seen in retailing sector (19.4% growth in jobs and sales), followed by trading (16.2% growth in jobs but (-)10.6% in sales) and infrastructure (15.8% growth in jobs and 15.2% in sales).

An aside.

Seemingly unaware of (iv), a few days later on August 24, 2024, Union Commerce and Industry Minister Piyush Goyal charged e-commerce giants like Amazon of “predatory pricing” and killing small, mom-and-pop shops through unfair competition.

This was ironical also because he was speaking at a function to release a think-tank Pehle Foundation’s report, “Assessing the Net Impact of E-commerce on Employment and Consumer Welfare in India”. This report said the exact opposite: “60% and 52% of vendors, respectively, state that their sales and profits have increased since the time they have started selling online.” This was reference to small, mom-and-pop shops benefitting by joining giant e-commerce platforms like Amazon.

Point (i) needs closer look: 1,196 of India’s largest corporate entities had a headcount of 6.2 million in FY24. This is just 1.1% of the workforce of 565 million (Economic Survey of 2023-24).

Take a closer look at the Indian corporate sector.

The Economic Survey of 2023-24 said, corporates were “swimming in excess profits” with their PBT “nearly quadrupled” in three years between FY20 and FY23 and corporate profits-to-GDP ratio went up to “15-year high in FY24”; but these corporates are neither creating proportionate jobs or giving compensations (“hiring and compensation growth hardly kept up with it”).

That was one part. Consider other parts (huge subsidies and special favours):

· Corporate tax was lowered to 15-22% in FY20 – after which corporate tax collection has fallen below that of individual income tax thrice (FY21, FY23, FY24) and headed for fourth (FY25 (BE).

· Effective tax rate (ratio of total taxes including surcharge and education cess to total profits before taxes) was even lower than 22% (even with surcharge and cess) for bigger corporates. In FY22 (last fiscal for which data is available), effective tax was 20.4% for PBT of more than ₹500 crore and 21.6% for PBT of ₹100-500 crore (receipt budget).

· ₹16.3 lakh crore of corporate loan defaults were written off during FY15-FY24 – but their identities are not revealed.

· Revenue foregone (excluding “unconditional” indirect tax foregone) was ₹1,09,333.4 crore in FY23 (receipt budget).

· FinMin’s Directorate General of GST Intelligence (DGGI) is likely to withdraw GST demand of ₹32,403 crore from IT major Infosys Ltd after weeks of lobbying and criticism from the software services industry.

But these data reveal a partial picture.

Two particular developments should have alerted the Centre to the job situation.

· India’s largest conglomerate, the Reliance Industries, cut 42,000 or 11% jobs, particularly in retail segment, in FY24 (as per its annual report).

· Top IT majors, TCS, Infosys and Wipro, shed 64,000 jobs in FY24.

These are highly profit-making corporates and the jobs shed are the best quality jobs (better salary, allowances and social security).

What should be the Centre’s priority – give more to the super privileged tiny minority of 2.3 million central government employees as higher pension (UPS) or devote more resources for the rest 562.7 million workers (565 million minus 2.3 million) living in precarious conditions?