Critics Take Aim at India’s Unemployment Benefit for 4 Million Workers

Critics Take Aim at India’s Unemployment Benefit for 4 Million Workers

MUGHALSARAI, India—Some 4 million workers stand to benefit from a recent move by the government of Prime Minister Narendra Modi that recently relaxed eligibility criteria and enhanced payments for those who have lost jobs during the coronavirus pandemic.

But the scheme is not without its critics.

The Ministry of Labour and Employment announced on Aug. 20 that workers covered under the Employees’ State Insurance Corporation  scheme will get 50 percent of 90 days’ wages if they have lost or will lose their jobs between March 24 and Dec. 31 this year. This could benefit 4.1 million industrial workers, the government claims. Previously, the wage benefit was marked at 25 percent.

The country went into lockdown on March 25 to prevent the spread of the novel coronavirus.

As per labor laws, businesses with 10 or more employees must register with the ESIC. This allows their employees to get INR 21,000 ($281) a month, or $335 if they are disabled, to avail them of primary or tertiary healthcare benefits.

“We have updated the ESIC database with the latest employee records,” said P. K. Singh, assistant director (general), subregional ESIC office in Pandeypur, Varanasi. “Once we receive a formal notice, we will start releasing funds to the eligible people.


“This will help provide relief to the huge number of workers who have been rendered jobless by the pandemic,” he said.

Since Modi’s Bharatiya Janata Party was elected in May 2019, the opposition has been attacking it on rising unemployment in the country.

India follows an April-March financial year, and in 2017-18 the country’s unemployment rate soared to a 45-year high of 6.1 percent from 2.2 percent in 2011-12. In April 2019, unemployment rose to 7 percent, increasing to 7.76 percent in February 2020.

The two main reasons cited for this are the government’s decision to demonetize high-value currency notes (INR 500 and INR 1,000) in November 2016 and the introduction of a new indirect tax (the goods and services) in July 2017.

The currency measure severely hit demand in the cash-dependent country, resulting in the withdrawal of 86 percent of the money in circulation. The introduction of the goods and services tax was marred by many teething troubles and affected the small and medium-size enterprises in that are the major employers. When the Covid-19 crisis hit, the economy has not recovered from these twin shocks. The lockdown has resulted in businesses closing and more people losing their jobs.

A migrant family travels inside a tempo stopped by Mumbai Police on the Eastern Express Highway in Mumbai, India on May 21, 2020. They were later provided a state transport bus. (Courtesy: Emmanual Yogini)

The unemployment rate dropped dramatically from 23.5 percent in April to 7.43 percent in July, but there is still a lot of distress.

“Had the Modi-led government taken enough measures to address India’s unemployment problem in time, the country could have avoided the failure of its economic machinery,” said Ashok Singh, president of the Indian National Trade Union Congress in Uttar Pradesh.

“Despite the unemployment rate shooting up in December 2019, the lawmakers didn’t deem it necessary to include a section on unemployment insurance and assistance in the Social Security Code Bill submitted to the parliament the same month,” said K R Shyam Sundar, professor of human resource management at the XLRI -Xavier School of Managementin Jamshedpur.

“The government is always trying to avoid the financial burden of providing unemployment assistance,” said Sundar, an industrial relations expert and columnist.   “And this fiscal mathematics is preventing policymakers from designing, even after the pandemic, a comprehensive unemployment insurance and assistance scheme. Such is the poverty of labor legislation in a neoliberal India.”

In the early 1990s, India moved away from a Soviet-inspired planned economy to a more free-market economy, with mixed results. Despite rapid economic growth, economic inequality is stark.

The top 10 percent of the Indian population holds 77 percent of national wealth, according to an Oxfam report. Many Indians are unable to access health care and 63 million are pushed into poverty because of this every year, the report states.

The government’s unemployment policies have been criticized as political gestures. The relaxation in the ESIC scheme is also being viewed with skepticism.

“The law neglects a large sector of the work force — those employed in organizations with less than 10 people,” said Devesh Tripathi a lawyer from Chandauli in Uttar Pradesh who specializes in the ESIC.

“There is a lack of clarity on how this new ESIC modification will define unemployment,” he said. “Claims of employment will also be difficult to authenticate.”

The scheme allows a worker to declare himself as unemployed. To receive unemployment relief, the insured person should have been employed for at least two years and have contributed to the scheme a minimum of 78 days prior to losing their job.

Critics say that more people could have been brought into the scheme and a greater allowance would have been possible if the government in July 2019 had note allowed the contribution to the scheme to be cut. Employers now contribute 3.25 percent, down from the earlier 4.75 percent, and employees contribute 1.75 percent, down from 0.75 percent, of monthly salaries.

Migrants from Uttar Pradesh rest along the Mumbai Nashik Highway in Mumbai, India on May 21, 2020. (Courtesy: Emmanual Yogini)

Liberalization of the economy has meant a large influx of foreign funds and privatization of major government-owned companies. The United States invested $45.88 billion in India in 2019. The government has also set itself a disinvestment target of INR 21 trillion ($284 billion) in financial year 2020-21.

But this has come at a cost to laborers.

“The public sector is the backbone of a country,” said Ashok Singh. “But the government wants to privatize it. It could have helped solve the unemployment crisis to a great extent.”

Sundar believes the country will face a bigger unemployment problem before long.

“The manufacturing and services sector will introduce technology-related unemployment in a few years,” he said. “The government must prepare a strong social security system.”

(Edited by Siddharthya Roy and Judy Isacoff.)

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India’s Textile Hubs Reel as Laborers Stuck Home

India’s Textile Hubs Reel as Laborers Stuck Home

CHENNAI, India—The southern Indian state of Tamil Nadu produces madras cotton, the world-famous textile popular in 18th century Europe and the post-World War United States. Celebrities such as Ashton Kutcher and Jessica Simpson have been spotted in madras, with its unmistakable bright checks, in recent years.

The U.S. Federal Trade Commission says genuine madras cotton must come from Chennai.

Chennai, a city of 7 million, was called Madras until the colonial name was changed in 1996. About 290 miles southwest, though, Tiruppur was the real textile city for several centuries.

“Along with Coimbatore, about an hour’s drive west, Tiruppur exported textiles worth INR 260 billion (about $3.5 billion) in the financial year 2019-20, claim local manufacturers,” said Raja M Shanmugham, an exporter from Tiruppur. “This was about half of India’s total textile exports. And out of this, about 35% went to clients in the US or Europe — including big names like Marco Polo and Tommy Hilfiger.”

As the Covid-19 pandemic exacerbated the trade war between the U.S. and China, textile manufacturers in these towns hoped to cash in. And projections were that about 10% of China’s share in the textile market could come to them.

But even if the orders came about, the stinging labor crisis affecting India will likely make it impossible to fulfill them.

“The industry here is mostly labor-intensive,” Shanmugham said. “About 500 textile manufacturers in Tiruppur and Coimbatore employ about 300,000 people.”

“In Tamil Nadu, most young people join colleges instead of working,” said Prabhu Dhamodaran, an exporter and the convener of the Indian Texpreneurs Federation. “So, most of our labor force comes from the north.”

This statement of Dhamodaran is supported by India’s census data on migrants. Northern Indian states with weaker economies and lack of industry are the biggest sources of migrant workers who travel South in search of employment.

With the pandemic striking hard, India went into a nationwide lockdown in late-March. The police and paramilitary enforced lockdown to prevent the spread of the novel coronavirus. But one the other hand, the shutting of factories forced laborers to return home as they suddenly found themselves out of employment and facing starvation and homelessness.

The plight of millions of migrant laborers, who were left without jobs and food was reported widely. With trains, buses and flights having stopped without any prior warning, hundreds died in road accidents or succumbed to starvation and exhaustion as they tried to cover hundreds of miles on foot to get back home.

Non-government organizations such as Social Awareness and Voluntary Education tried to help them out in Tiruppur.

“These laborers were harassed and humiliated in Tiruppur,” said Arockiam Aloysius, director of the organization. “They did not have food or water. Some spent nights in bus stands as they desperately tried to get home.”

Now, even as the factories reopen—despite India recording the highest number of Covid-19 cases across the world for nearly two weeks—workers are refusing to return.

“We only have about 40 percent of our required workforce,” Shanmugham said. “Our order books might improve by the end of August, but we do not have laborers to complete the orders.”

Though the central government is gradually phasing out the lockdown, traveling between states requires one to apply for permission and the Tamil Nadu government extended the state’s lockdown until the end of the month, so people can only travel for essential purposes. Those coming in are also required to be quarantined for at least two weeks.

Textile exporters feel that getting the workforce back will be a serious challenge as they are unable to provide quarantine or other facilities. Dhamodaran, who is based out of Coimbatore, said laborers who want to come back are demanding that their employers provide safe transport and quarantine facilities.

“Some of the larger companies are able to provide this. Others, particularly small and medium scale enterprises that comprise the bulk of employers, can’t do this without help from the government,” he said.

“The Tamil Nadu government is willing to help companies by issuing e-passes to these laborers,” said Thivya Rakini, president of the Tamil Nadu Textile and Common Labor Union. “But these laborers were in such a bad condition that they would not want to come back. Some of them came only because they could not find a job back home.”

So while India may dream of becoming the next big exporter in the textile industry and of reviving the lost glory of the Madras cotton, the reality of India’s unorganized labor sector and systemic blindness to the working class are a wake-up call.

(Edited by Siddharthya Roy and Matt Rasnic.)

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U.S. jobless claims fall to lowest level since COVID shutdown

U.S. jobless claims fall to lowest level since COVID shutdown

WASHINGTON — Initial jobless claims fell in the U.S. at the end of last month to their lowest level since before the COVID-19 pandemic tanked the economy.

First-time unemployment filings fell by a seasonally adjusted 249,000 to 1.2 million for the week ending Aug. 1, the U.S. Department of Labor said Thursday. It was the lowest weekly total since March, signaling a recovering economy even though numbers remain at historically high levels.

The U.S. added 1.8 million jobs in July, pushing the unemployment rate down to 10.2 percent from 11.1 percent in June, the Labor department said Friday. The Trump economy added 4.8 million jobs in June.

“June’s pace was great and would have brought us back to February unemployment levels in just a couple of months, but July’s pace is considerably slower,” said Julia Pollak, a labor economist at ZipRecruiter.

“We need to add about 2.5 million jobs a month to recover all the jobs lost due to COVID by the end of year. It doesn’t seem like that is even remotely possible given that Covid cases are still high,” she said.

Pollack attributed the decrease in jobless claims to the expiration of the extra $600 weekly federal unemployment payments, but she said the addition of jobs in July was “better than expected.”

ZipRecruiter is seeing a weekly increase in job postings, she said.

“Jobs for e-commerce specialists, online merchants, web designers,” Pollak said. “Of course there is very robust hiring for warehouse workers and delivery drivers.”

The largest gains are coming from hard-hit industries—retail and leisure and hospitality—rehiring workers, according to Daniel Zhao, a senior economist at Glassdoor.

The latest numbers are encouraging, said Lydia Boussour, a senior economist at Oxford Economics, but also show that momentum is slowing.

“Our baseline remains that labor market conditions continue to gradually improve albeit at a slower pace,” Boussour said. “While jobs will continue to be recouped as the economy recovers, we still expect the employment shortfall to persist well into 2022 as the scarring effects of the coronavirus recession on the labor market leads to a shallower recovery.”

(Edited by Allison Elyse Gualtieri and David Martosko)

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