Economics Playlist
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1
Introduction to Economics
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2
National Income
17 topics
3
Inclusive growth
15 topics
4
Inflation
21 topics
5
Money
15 topics
6
Banking
38 topics
7
Monetary Policy
15 topics
8
Investment Models
9 topics
9
Food Processing Industries
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10
Taxation
28 topics
11
Budgeting and Fiscal Policy
24 topics
12
Financial Market
34 topics
13
External Sector
37 topics
14
Industries
21 topics
15
Land Reforms in India
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Poverty, Hunger and Inequality
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Planning in India
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Unemployment
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Chapter 18: Unemployment
Chapter Test17 topics•Estimated reading: 51 minutes
Unemployment in India
Key Point
Unemployment refers to the situation where people who are willing and able to work cannot find jobs. In India, unemployment is measured by the National Statistical Office (NSO) using surveys like the Periodic Labour Force Survey (PLFS). It is a critical socio-economic issue as it affects income, development, and overall standard of living.
Unemployment refers to the situation where people who are willing and able to work cannot find jobs. In India, unemployment is measured by the National Statistical Office (NSO) using surveys like the Periodic Labour Force Survey (PLFS). It is a critical socio-economic issue as it affects income, development, and overall standard of living.
Detailed Notes (18 points)
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Concept of Unemployment
Economists consider a person unemployed if they cannot get work even for one hour in half a day.
NSO defines unemployment as: People who are not working due to lack of work but are actively seeking jobs or showing willingness to work under existing conditions.
Unemployment rate is measured as: (Unemployed Workers / Total Labour Force) × 100.
Census of India Reports
Census is the process of systematically collecting and recording information about population.
Started in 1872 under British Viceroy Lord Mayo; first complete census was held in 1881.
Conducted every 10 years; as of 2011, 15 censuses have been conducted.
Post-1949, conducted by Registrar General and Census Commissioner under Ministry of Home Affairs.
Legal basis: Census of India Act, 1948.
The 2021 Census was postponed due to COVID-19 pandemic.
Limitation: Since Census happens every 10 years, unemployment data becomes outdated quickly.
Employment and Unemployment Surveys by NSO
Reliable estimates of employment-unemployment are given by NSO (under MoSPI).
Earlier: Quinquennial (every 5 years) Employment-Unemployment Surveys by NSSO (till 2011–12).
Since 2017: Periodic Labour Force Survey (PLFS) launched for more frequent and up-to-date data.
PLFS gives both quarterly (urban areas) and annual (rural + urban) estimates.
Provides data on workforce participation, types of employment (self-employed, regular, casual labour), and unemployment rates.
Unemployment Data Sources in India
| Source | Frequency | Key Points |
|---|---|---|
| Census of India | Every 10 years | Comprehensive data, but outdated due to long gap |
| NSSO Quinquennial Surveys | Every 5 years (till 2011–12) | Provided employment-unemployment data |
| Periodic Labour Force Survey (PLFS) | Annual + Quarterly (since 2017) | Gives frequent, reliable estimates of unemployment and labour participation |
Mains Key Points
Discuss how unemployment affects economic growth and poverty reduction in India.
Analyse the limitations of Census data for employment analysis due to long gaps.
Evaluate the role of PLFS in providing real-time labour market data.
Suggest policy measures to tackle unemployment with focus on skill development and entrepreneurship.
Prelims Strategy Tips
Unemployment rate formula: (Unemployed / Labour Force) × 100.
Census of India: every 10 years, first complete in 1881, latest in 2011.
PLFS started in 2017 to replace NSSO’s 5-year surveys.
Registrar General & Census Commissioner conducts Census under MHA.
Periodic Labour Force Survey (PLFS) & Measurement of Unemployment in India
Key Point
PLFS is India’s key survey by the National Statistical Office (NSO) to measure employment and unemployment trends. It provides short-term (quarterly for urban areas) and long-term (annual for rural + urban) data on indicators like Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), and Unemployment Rate (UR). To measure unemployment, NSO uses three approaches: Daily Status, Weekly Status, and Usual Status.
PLFS is India’s key survey by the National Statistical Office (NSO) to measure employment and unemployment trends. It provides short-term (quarterly for urban areas) and long-term (annual for rural + urban) data on indicators like Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), and Unemployment Rate (UR). To measure unemployment, NSO uses three approaches: Daily Status, Weekly Status, and Usual Status.
Detailed Notes (33 points)
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Objective of PLFS
To provide estimates of employment-unemployment indicators in urban areas every 3 months using Current Weekly Status (CWS).
To provide annual estimates for both rural and urban areas using both Usual Status (PS+SS) and Current Weekly Status (CWS).
Key Indicators of PLFS
Labour Force Participation Rate (LFPR): % of persons in labour force (working, seeking, or available for work) out of total population.
Worker Population Ratio (WPR): % of employed persons in the total population.
Unemployment Rate (UR): % of unemployed persons among labour force.
Current Weekly Status (CWS): Based on work status in the last 7 days before the survey.
Measurement Approaches of Unemployment
# 1. Daily Status Approach (CDS)
Records employment/unemployment status for each day of the reference week.
Unit: Half-day (4 hours).
Full-day employed: If worked ≥ 4 hours; Half-day employed: 1–4 hours; Unemployed: < 1 hour.
Captures short spells of unemployment common in farming/non-farming households.
Most inclusive approach; shows highest unemployment estimates.
# 2. Weekly Status Approach (CWS)
Records activity status during the 7 days preceding the survey.
If a person worked for at least 1 hour on at least 1 day → considered employed.
If actively looking but did not work → considered unemployed.
Captures short-term fluctuations in employment.
# 3. Usual Status Approach (UPS/PS+SS)
Captures long-term unemployment.
Uses majority time criterion over the last 365 days.
Principal usual activity status: Longer time spent in one activity (work/unemployed).
Records only those as unemployed who did not get gainful work for the major part of the year and were seeking work.
Provides lowest unemployment estimates.
Employment Exchange Data
Directorate General of Employment (DGE) under Ministry of Labour manages National Employment Services.
Operated via Employment Exchanges across India.
Provides registrations of job-seekers but does not always reflect actual employment status.
Note
PLFS + Census + Employment Exchanges together give different but complementary estimates.
While PLFS captures real-time dynamics, Employment Exchanges show demand-supply mismatch, and Census gives broad population trends.
Unemployment Measurement Approaches
| Approach | Time Frame | Features | Estimate Level |
|---|---|---|---|
| Daily Status (CDS) | Each day of last 7 days | Half-day as unit, captures short spells of unemployment | Highest |
| Weekly Status (CWS) | Last 7 days | Employed if worked ≥1 hour on ≥1 day | Medium |
| Usual Status (UPS/PS+SS) | Last 365 days | Long-term unemployment, major part of year without work | Lowest |
Mains Key Points
Explain the objectives of PLFS and its role in measuring real-time labour market trends.
Compare Daily, Weekly, and Usual Status approaches with examples.
Discuss challenges of unemployment measurement in informal sectors and agriculture.
Evaluate policy implications of PLFS data for employment generation programmes.
Prelims Strategy Tips
PLFS started in 2017 by NSO under MoSPI.
Key indicators: LFPR, WPR, UR, and CWS.
Daily Status gives highest unemployment, Usual Status lowest.
Employment Exchanges provide job-seeker registration data but not actual employment.
Latest Trends in Employment and Types of Unemployment in India
Key Point
Recent PLFS and Economic Survey data show that Worker Population Ratio (WPR) has been increasing, Unemployment Rate (UR) has been decreasing, and Labour Force Participation Rate (LFPR) among rural women has risen significantly post-Covid. India faces multiple types of unemployment such as disguised, structural, seasonal, technological, cyclical, frictional, voluntary, and involuntary unemployment, reflecting both rural and urban challenges.
Recent PLFS and Economic Survey data show that Worker Population Ratio (WPR) has been increasing, Unemployment Rate (UR) has been decreasing, and Labour Force Participation Rate (LFPR) among rural women has risen significantly post-Covid. India faces multiple types of unemployment such as disguised, structural, seasonal, technological, cyclical, frictional, voluntary, and involuntary unemployment, reflecting both rural and urban challenges.
Detailed Notes (33 points)
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Latest Trends in Employment
Worker Population Ratio (WPR) for persons aged 15+ years has shown an increasing trend from 2017-18 to 2019-20.
Unemployment Rate (UR) for persons aged 15+ years on usual status basis is decreasing over the same period.
Labour Force Participation Rate (LFPR) in 2019-20: Male = 76.8%, Female = 30%.
Economic Survey 2022-23 findings:
* Labour markets have recovered beyond pre-Covid levels in both urban and rural areas.
* Unemployment rate fell from 5.8% (2018-19) to 4.2% (2020-21).
* Rural Female LFPR rose significantly from 19.7% (2018-19) to 27.7% (2020-21).
* Job recovery aided by government measures for MSMEs, street vendors, and manufacturing units, along with schemes to support employment.
Types of Unemployment in India
# 1. Disguised Unemployment
More workers are employed than required, making some redundant.
Common in agriculture; marginal productivity of extra workers = zero.
Example: A farm needs 4 people but employs 6; the extra 2 contribute nothing.
# 2. Structural Unemployment
Caused by mismatch between skills of workers and jobs available.
Example: MBA graduate working as cashier due to lack of suitable jobs.
# 3. Seasonal Unemployment
Workers employed only during certain seasons.
Example: Agricultural labourers and construction workers without jobs in off-season.
# 4. Technological Unemployment
Workers lose jobs due to adoption of new technology or automation.
Example: Robots replacing manual jobs in factories.
# 5. Cyclical Unemployment
Linked to business cycles: jobs lost in recessions, regained in booms.
Example: Workers laid off in an economic slowdown.
# 6. Frictional Unemployment
Short-term unemployment when people shift jobs or seek better opportunities.
Considered voluntary as jobs exist but workers are transitioning.
# 7. Voluntary Unemployment
When a person chooses not to work, demanding higher wages or refusing available jobs.
# 8. Involuntary Unemployment
Person is willing to work at prevailing wages but cannot find employment due to external factors like recession or lack of demand.
Types of Unemployment in India
| Type | Definition | Example |
|---|---|---|
| Disguised | More workers employed than required, marginal productivity = 0 | Agriculture with surplus labour |
| Structural | Mismatch between skills and jobs | MBA working as cashier |
| Seasonal | Employment only in certain seasons | Agricultural labourers, construction |
| Technological | Jobs lost due to automation/technology | Robots replacing factory workers |
| Cyclical | Job loss due to recession | Layoffs during economic slowdown |
| Frictional | Temporary unemployment during job change | Switching jobs |
| Voluntary | Not working by choice | Rejecting jobs due to wage demands |
| Involuntary | Willing to work but no jobs available | Recession-hit workers |
Mains Key Points
Discuss recent improvements in employment indicators as per PLFS and Economic Survey.
Highlight rise in rural female LFPR and its socio-economic significance.
Explain different types of unemployment in India with examples.
Critically analyse how disguised and structural unemployment affect long-term growth.
Suggest policy measures to address technological and cyclical unemployment.
Prelims Strategy Tips
WPR increasing, UR decreasing (2017-20).
Rural female LFPR rose sharply post-Covid.
Types of unemployment important for prelims: Disguised (agriculture), Structural (skill-job mismatch), Seasonal (agriculture), Technological (automation).
Sectoral Distribution of Employment and Causes of Unemployment in India
Key Point
PLFS and QES data show that employment in agriculture is declining, while industry and services sectors are expanding as major job providers. Despite this, India faces persistent unemployment challenges due to population growth, stagnant agriculture, decline of small industries, low investment in manufacturing, and lack of skills.
PLFS and QES data show that employment in agriculture is declining, while industry and services sectors are expanding as major job providers. Despite this, India faces persistent unemployment challenges due to population growth, stagnant agriculture, decline of small industries, low investment in manufacturing, and lack of skills.
Detailed Notes (19 points)
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Sectoral Distribution of Employment
Agriculture: Share and number of workers in agriculture has been steadily declining between 2017-18 and 2019-20 (PLFS).
Industry: Added 4.8 million jobs in 2018-19 and 3.4 million in 2019-20.
Services: Contributed significantly with 10.1 million jobs in 2018-19 and 6 million in 2019-20.
Quarterly Employment Survey (QES):
* Covers establishments with 10+ workers in 9 sectors (manufacturing, construction, trade, transport, education, health, accommodation/restaurants, IT/BPO, financial services).
* These sectors account for 83% of total employment in establishments (Eco Survey 2022-23).
* 4th round (Jan–Mar 2022) estimated total employment at 3.2 crore.
Annual Survey of Industries (ASI) FY20:
* Shows steady rise in organized manufacturing employment.
* Employment per factory has gradually increased.
* Largest employers: Food products (11.1%), Apparel (7.6%), Basic metals (7.3%), Motor vehicles/trailers (6.5%).
Causes of Unemployment
Large Population: India’s population growth creates pressure on job availability.
Social Factors: Caste system and social discrimination restrict occupational choices.
Stagnant Agriculture: Low productivity and lack of alternative opportunities trap workers in underemployment.
Decline of Cottage Industries: Small-scale and traditional industries, which were labour-intensive, have weakened.
Low Manufacturing Investment: Weak industrial growth and infrastructure gaps reduce employment creation.
Lack of Skills and Education: Large informal workforce lacks specialized skills needed in modern industries, keeping them in low-paying informal jobs.
Sectoral Employment Distribution (2018-20)
| Sector | Jobs Created / Trend |
|---|---|
| Agriculture | Declining share and number of workers |
| Industry | +4.8 million (2018-19), +3.4 million (2019-20) |
| Services | +10.1 million (2018-19), +6 million (2019-20) |
| QES (9 sectors) | 3.2 crore jobs (Jan–Mar 2022), 83% of organized jobs |
| ASI (Manufacturing) | Largest employers: Food (11.1%), Apparel (7.6%), Metals (7.3%), Motor vehicles (6.5%) |
Mains Key Points
Analyse how structural shift from agriculture to industry/services impacts employment quality.
Discuss significance of QES and PLFS data in employment policy design.
Examine causes of unemployment like overpopulation, stagnant agriculture, and skill gap.
Critically evaluate India’s manufacturing sector as a potential job creator.
Suggest reforms in education, skilling, and MSME growth for employment generation.
Prelims Strategy Tips
Agriculture share in employment is declining, services growing fastest.
QES covers 9 major sectors, accounting for ~83% of organized jobs.
ASI FY20: Food products industry = largest employer in manufacturing.
Formal and Informal Sector in India
Key Point
The Indian economy is divided into the formal (organised) sector and informal (unorganised) sector. The formal sector includes government-regulated enterprises with job security, social benefits, and legal recognition. The informal sector includes unregulated activities such as street vending and small unregistered businesses, employing the majority of India’s workforce but without job security or social protection.
The Indian economy is divided into the formal (organised) sector and informal (unorganised) sector. The formal sector includes government-regulated enterprises with job security, social benefits, and legal recognition. The informal sector includes unregulated activities such as street vending and small unregistered businesses, employing the majority of India’s workforce but without job security or social protection.
Detailed Notes (19 points)
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Formal / Organised Sector
A structured and government-regulated part of the economy.
Has legal contracts between employer and employee, with fixed working conditions.
Workers receive job security, fixed wages, and social security benefits (like PF, pension, ESI).
Covers public and private enterprises employing more than 10 people.
Businesses in this sector are legally registered, pay taxes, and follow labour laws.
Example: Banks, IT companies, government offices, big manufacturing units.
Status: Labour Ministry data (Jan–Mar 2022) shows formal sector employment at 31.8 million across 9 sectors, a small rise from 31.4 million in 2021-22.
Informal / Unorganised Sector
Refers to economic activities not regulated by the government.
No formal contracts or guaranteed wages; workers often lack job security.
Characterized by small-scale, self-employed, and unregistered enterprises.
Includes farmers, agricultural labourers, street vendors, home-based businesses, small shops, construction workers, casual labourers.
Workers in this sector usually do not receive social security benefits.
Often operates outside taxation and licensing framework.
Status: About 27.69 crore workers are registered on the e-Shram portal (2022).
Importance
Formal sector contributes to economic stability, government revenue (taxes), and long-term job security.
Informal sector provides livelihoods to the majority of India’s workforce and acts as a safety net when formal jobs are scarce, but it is vulnerable and lacks social protection.
Difference between Formal and Informal Sector
| Basis | Formal Sector | Informal Sector |
|---|---|---|
| Meaning | Government-regulated businesses and economic activities | Unregulated businesses outside government control |
| Social Security | Employees entitled to benefits like PF, pension, ESI | No entitlement to social security benefits |
| Salary/Wage | Higher and fixed pay scale | Low and uncertain pay scale |
| Job Security | Stable jobs with fixed working hours | No job security, irregular hours |
| Taxation | Enterprises licensed and pay taxes | Generally do not pay taxes |
| Employees | Firms with 10+ employees | Mostly self-employed or firms with <10 workers |
| Trade Unions | Right to form unions to protect interests | No legal right to form unions |
Mains Key Points
Formal sector ensures stability, revenue, and worker protection but employs fewer people.
Informal sector is largest employer but faces vulnerability and exploitation.
Policy challenge: Shift workers from informal to formal sector while ensuring livelihood security.
Schemes like e-Shram, Social Security Code, and Skill India aim to bridge the gap.
Prelims Strategy Tips
Formal sector = regulated, job security, social benefits.
Informal sector = unregulated, largest workforce (~80% of India’s workers).
E-shram portal launched to register informal workers.
Gig Workers in India
Key Point
Gig workers are individuals engaged in short-term, flexible jobs, often through digital platforms like Ola, Uber, Swiggy, and Zomato. They are not regular employees but independent workers who provide services on demand. India is one of the largest hubs of gig work, and this sector is expected to expand significantly in the coming decade.
Gig workers are individuals engaged in short-term, flexible jobs, often through digital platforms like Ola, Uber, Swiggy, and Zomato. They are not regular employees but independent workers who provide services on demand. India is one of the largest hubs of gig work, and this sector is expected to expand significantly in the coming decade.
Detailed Notes (18 points)
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Concept of Gig Work
The word 'gig' means a short-term job or task.
Gig workers are not permanent employees; they work for a fixed time or task.
They usually sign agreements with companies to provide services to customers.
Examples: Cab drivers with Ola/Uber, food delivery workers in Swiggy/Zomato, freelance designers, tutors, etc.
Types of Gig Workers
Platform-based workers: Work through digital platforms or apps (e.g., Uber, Ola, Swiggy, Zomato).
Non-platform workers: Do not use apps but are casual workers or freelancers in traditional sectors (e.g., part-time tutors, plumbers, construction workers).
Current Status of Gig Economy in India
According to Economic Survey 2020-21, India is already among the largest countries in gig and platform work.
The rise of e-commerce and digital services is creating millions of gig opportunities.
2019-20: 68 lakh gig workers (6.8 million), about 2.4% of non-farm workforce.
2020-21: 77 lakh gig workers (7.7 million), about 2.6% of non-farm workforce.
Future (2029-30): Gig workforce expected to grow to 2.35 crore (23.5 million), about 6.7% of non-agricultural workforce.
Significance
Provides flexible income opportunities, especially for youth and migrants.
Helps companies scale quickly without permanent employees.
Contributes to India's growing digital economy.
Growth of Gig Workforce in India
| Year | Gig Workers (in millions) | Share in Workforce |
|---|---|---|
| 2019-20 | 6.8 million (68 lakh) | 2.4% of non-farm workforce |
| 2020-21 | 7.7 million (77 lakh) | 2.6% of non-farm workforce |
| 2029-30 (Projected) | 23.5 million (2.35 crore) | 6.7% of non-farm workforce |
Mains Key Points
Gig economy provides livelihood flexibility but lacks job security and benefits.
Key challenge: balancing worker protection with business flexibility.
Policy measures like social security codes, e-shram registration, and platform regulations can improve gig workers’ conditions.
Gig economy contributes to entrepreneurship and digital economy expansion.
Prelims Strategy Tips
Gig economy = short-term, flexible jobs, often via digital platforms.
Platform gig workers use apps (e.g., Uber, Swiggy), non-platform are traditional freelancers.
India’s gig workforce projected to reach 2.35 crore by 2029-30.
Informalisation of Indian Workforce
Key Point
Informalisation refers to the rising trend of workers and economic activities outside the formal sector, where workers lack legal protection, contracts, or social security. In India, more than 90% of the total workforce is engaged in the informal sector, which contributes nearly half of the country’s GDP.
Informalisation refers to the rising trend of workers and economic activities outside the formal sector, where workers lack legal protection, contracts, or social security. In India, more than 90% of the total workforce is engaged in the informal sector, which contributes nearly half of the country’s GDP.
Detailed Notes (25 points)
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Concept
Informalisation = more workers shifting into jobs without contracts, fixed wages, or legal protection.
It is one of the most dominant features of India’s labour market today.
Despite contributing half of GDP, informal jobs dominate, engaging over 90% of workers.
Government’s Formalisation Efforts
Goods and Services Tax (GST) to bring businesses under one tax system.
Digital payment systems to track and formalise economic activity.
E-Shram portal launched (2021) to register unorganised workers and provide them social security benefits.
E-Shram Portal Analysis
Launch: 26 August 2021, to register construction workers, migrants, street vendors, domestic workers, etc.
Card: e-Shram card with unique 12-digit number.
Benefits: Insurance – ₹2 lakh for accidental death or permanent disability, ₹1 lakh for partial disability.
# Key Statistics
Occupation: Agriculture (52.11%) highest share, followed by domestic workers (9.93%) and construction workers (9.13%).
Social Category: 74% from SC, ST, and OBC; 25.56% from General category.
Income: 94.11% earn ₹10,000 or below per month; only 4.36% earn between ₹10,001–₹15,000.
Age: 61.72% between 18–40 years; 22.12% between 40–50 years; 13.23% above 50 years; 2.93% between 16–18 years.
Gender: 52.81% female, 47.19% male.
Top States: Uttar Pradesh, Bihar, West Bengal, Madhya Pradesh, Odisha.
Challenges in Informal Sector
Economic Exploitation: No fixed contracts, minimum wages, or job security. Code on Wages 2019 is weak in coverage.
Tax Evasion: Informal businesses avoid taxes by hiding income and expenses.
No Fixed Working Hours: Long working hours common, especially in agriculture.
Lack of Statistics: Absence of official data makes it hard for policymakers.
Vulnerability to Disasters: Informal workers worst hit during floods, droughts, pandemics (e.g., COVID-19 crisis) due to no social security.
E-Shram Portal – Informal Worker Data
| Category | Details |
|---|---|
| Occupation | Agriculture (52.11%), Domestic Workers (9.93%), Construction (9.13%) |
| Social Category | 74% SC/ST/OBC, 25.56% General |
| Income | 94.11% earn ≤ ₹10,000; 4.36% earn ₹10,001–₹15,000 |
| Age | 18–40 years (61.72%), 40–50 years (22.12%), >50 years (13.23%), 16–18 years (2.93%) |
| Gender | Female (52.81%), Male (47.19%) |
| Top States | UP, Bihar, West Bengal, MP, Odisha |
Mains Key Points
Informalisation reflects lack of formal job opportunities and weak social security system.
E-Shram portal is an important step towards mapping and supporting informal workers.
Challenges include exploitation, lack of minimum wages, absence of taxation, and vulnerability to disasters.
Need for policies to integrate informal workers into the formal economy with proper protections.
Prelims Strategy Tips
Informal sector employs over 90% of India’s workforce.
E-Shram Portal launched in 2021 for registration of unorganised workers.
Most registered informal workers earn less than ₹10,000 per month.
Government Initiatives for Informal/Unorganised Sector & Impact of Unemployment
Key Point
The Government of India has introduced multiple schemes to provide social security, health, pensions, and employment opportunities for workers in the informal/unorganised sector, who form more than 90% of the workforce. However, unemployment continues to pose challenges such as poverty, social unrest, and loss of human capital.
The Government of India has introduced multiple schemes to provide social security, health, pensions, and employment opportunities for workers in the informal/unorganised sector, who form more than 90% of the workforce. However, unemployment continues to pose challenges such as poverty, social unrest, and loss of human capital.
Detailed Notes (13 points)
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Key Government Schemes for Informal/Unorganised Sector
National Pension Scheme for Traders and Self-employed Persons: Introduced under the Unorganized Workers Social Security Act, 2008. Provides old-age protection to shopkeepers, traders, and self-employed persons (18–40 years) not covered under EPFO/ESIC/PM-SYM.
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY): Annual life insurance scheme providing coverage against death from any cause.
Pradhan Mantri Shram Yogi Maan-dhan Yojana (PM-SYM): Social security pension scheme for unorganised workers such as street vendors, construction workers, rickshaw pullers, rag pickers, fishermen, handloom workers, etc.
Ayushman Bharat–Pradhan Mantri Jan Arogya Yojana (AB-PMJAY): World’s largest government-funded health insurance scheme offering free healthcare up to ₹5 lakh per family per year.
Atal Pension Yojana (APY): Launched in 2015 to provide pension benefits to workers in the unorganised sector, especially poor and underprivileged.
Garib Kalyan Rozgar Yojana: Launched in June 2020 with ₹50,000 crore budget to create employment opportunities for migrant workers during COVID-19 crisis.
Impact of Unemployment in India
Poverty: Unemployment worsens poverty as individuals lack steady income.
Extra Burden on Government: Forces government to spend more on welfare schemes, leading to rising fiscal deficit.
Increase in Anti-Social Activities: Idle youth may be drawn towards terrorism, crime, or illegal activities, weakening democratic values.
Hampers Economic Growth: Reduces productive labour force, slowing GDP growth and resource generation.
Loss of Human Resources: Leads to drug addiction, alcoholism, or even suicides among unemployed, resulting in irreversible loss of manpower.
Key Schemes for Informal Sector Workers
| Scheme | Objective/Benefit |
|---|---|
| National Pension Scheme (Traders & Self-employed) | Old-age protection for traders, shopkeepers, and self-employed. |
| PMJJBY | Life insurance for death due to any reason. |
| PM-SYM | Pension for unorganised workers like vendors, labourers, fishermen. |
| Ayushman Bharat (PM-JAY) | ₹5 lakh health insurance per family per year. |
| Atal Pension Yojana | Universal pension system for poor and unorganised workers. |
| Garib Kalyan Rozgar Yojana | Employment support for migrant workers post-COVID. |
Mains Key Points
Unorganised sector schemes aim to provide social security but face issues in awareness and implementation.
Pension and health insurance coverage remain inadequate despite government efforts.
Unemployment impacts include poverty, burden on state finances, and rising crime.
Formalisation of workforce is essential to reduce dependency on welfare schemes.
Prelims Strategy Tips
PM-SYM is a pension scheme for unorganised workers aged 18–40 years.
Ayushman Bharat is the world’s largest health insurance programme.
Atal Pension Yojana provides pension benefits mainly for poor and unorganised workers.
Government Initiative to Control Unemployment – MGNREGA
Key Point
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005, provides a legal right to work for rural households by guaranteeing 100 days of wage employment in a year. It is a demand-driven programme aimed at reducing rural poverty, creating durable assets, and ensuring social security.
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005, provides a legal right to work for rural households by guaranteeing 100 days of wage employment in a year. It is a demand-driven programme aimed at reducing rural poverty, creating durable assets, and ensuring social security.
Detailed Notes (23 points)
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Overview of MGNREGA
Launched in 2005 as a landmark social security scheme.
Provides at least 100 days of guaranteed paid employment to every rural household whose adult members volunteer to do unskilled manual work.
Aimed at both poverty alleviation and creation of durable rural assets.
Legal guarantee: If work is not provided within 15 days of demand, unemployment allowance must be paid by the State.
Salient Features
Demand-driven: Employment is given when a household demands work, not automatically assigned.
Women participation: Minimum 33% of beneficiaries must be women; in practice, women’s participation has crossed 50%.
Registration: Rural households apply to Gram Panchayat for job cards; this job card is necessary to seek work.
Payment rules: Wages must be paid within 15 days of work done.
Transparency: Mandatory social audits ensure accountability in fund usage and work quality.
Prohibitions: Contractors and labour-displacing machinery are not allowed.
Gram Sabha’s role: Decides and prioritises the type of works to be undertaken, ensuring community participation.
Choice of Works
Works include activities that address chronic rural poverty such as drought-proofing, afforestation, water conservation, soil erosion control, and rural infrastructure development.
Economic Survey 2021-22
Budget allocation: ₹73,000 crore in 2021-22 (up from ₹61,500 crore in 2020-21).
Employment generated: Over 8.70 crore individuals and 6.10 crore households provided work in FY 2021-22.
Employment and MGNREGA
As of August 2020, MGNREGA generated 3089.49 crore person-days of work.
By 2019, over 3.6 crore geo-tagged assets were created (such as ponds, check dams, roads).
Women participation has exceeded expectations, with some states reporting more than 70% participation by women.
Example: In Kerala, women accounted for about 79% of total employment generated under MGNREGA.
MGNREGA – Key Features and Achievements
| Aspect | Details |
|---|---|
| Launch Year | 2005 |
| Legal Guarantee | 100 days of paid employment per rural household per year |
| Budget Allocation 2021-22 | ₹73,000 crore |
| Person-days Generated | 3089.49 crore (till Aug 2020) |
| Women Participation | More than 50% (against minimum 33%) |
| Assets Created | 3.6 crore geo-tagged assets by 2019 |
Mains Key Points
MGNREGA is a major social safety net for rural India, reducing rural distress and providing income security.
It also helps create rural infrastructure (water harvesting, irrigation, afforestation).
Women participation has improved due to guaranteed wages and proximity of work.
Challenges remain: delayed wage payments, corruption, ghost beneficiaries, and lack of convergence with other schemes.
Strengthening social audits and use of technology (geo-tagging, DBT) can improve transparency.
Prelims Strategy Tips
MGNREGA provides a legal right to work (first such programme in the world).
Minimum 33% participation of women is mandated; actual participation is over 50%.
It is a demand-driven scheme, not supply-driven.
Unemployment allowance must be paid if work is not given within 15 days.
Government Initiatives to Control Unemployment – PMKVY & Others
Key Point
Pradhan Mantri Kaushal Vikas Yojana (PMKVY), launched in 2015, is India’s flagship skill development scheme that provides industry-relevant skill training to youth for better livelihood opportunities. Alongside, several other initiatives like Start-up India, Stand-up India, PMMY, GKRA, PM GatiShakti, and PLI Scheme aim to boost self-employment, entrepreneurship, and job creation.
Pradhan Mantri Kaushal Vikas Yojana (PMKVY), launched in 2015, is India’s flagship skill development scheme that provides industry-relevant skill training to youth for better livelihood opportunities. Alongside, several other initiatives like Start-up India, Stand-up India, PMMY, GKRA, PM GatiShakti, and PLI Scheme aim to boost self-employment, entrepreneurship, and job creation.
Detailed Notes (19 points)
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Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
Launched in 2015 under the Ministry of Skill Development and Entrepreneurship.
Objective: To train India’s youth with industry-relevant skills so they can secure better jobs or start their own ventures.
Between 2016-17 and 2021-22, under PMKVY 2.0, about 1.10 crore persons were trained.
Other Major Initiatives
Start-Up India Scheme (2016): Builds an ecosystem to encourage and support entrepreneurship across the nation.
Stand-Up India Scheme (2016): Provides bank loans between ₹10 lakh and ₹1 crore to women and SC/ST entrepreneurs for setting up Greenfield enterprises.
National Skill Development Mission (2014): Drives the ‘Skill India’ agenda by converging multiple skilling initiatives with speed, scale, and quality.
Pradhan Mantri Mudra Yojana (PMMY): Offers collateral-free loans up to ₹10 lakh for small/micro businesses to promote self-employment.
Garib Kalyan Rojgar Abhiyaan (GKRA, 2020): 125-day programme to provide work to returnee migrant workers in 116 districts across Bihar, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, and Uttar Pradesh.
PM GatiShakti (2021): A transformative infrastructure push through seven engines (Roads, Railways, Airports, Ports, Mass Transport, Waterways, Logistics) creating massive job opportunities.
Production Linked Incentive (PLI) Scheme: Across 13 key sectors to boost manufacturing, attract investments, and create large-scale employment.
Aajeevika – NRLM (2011): Creates platforms for rural poor to improve incomes through sustainable livelihoods and better access to credit and financial services.
Way Forward
Promote labor-intensive sectors like food processing, textiles, and hardware manufacturing to generate mass employment.
Increase government jobs in health, police, education, and public services.
Encourage decentralized industrial development to ensure balanced regional growth.
Strengthen rural development to reduce urban migration pressures.
Keep youth as the central focus of entrepreneurship and innovation projects.
Key Employment-Related Initiatives
| Scheme | Year | Objective |
|---|---|---|
| PMKVY | 2015 | Industry-relevant skills training for youth |
| Start-Up India | 2016 | Promote entrepreneurship ecosystem |
| Stand-Up India | 2016 | Bank loans for SC/ST and women entrepreneurs |
| PMMY | 2015 | Collateral-free loans up to ₹10 lakh |
| GKRA | 2020 | Employment for migrant workers in 116 districts |
| PM GatiShakti | 2021 | Infrastructure-driven job creation |
| PLI Scheme | 2020 | Boost manufacturing and generate employment |
| NRLM (Aajeevika) | 2011 | Sustainable rural livelihoods |
Mains Key Points
PMKVY and related schemes play a key role in skilling, reskilling, and entrepreneurship promotion.
They also address structural unemployment by aligning skills with market demand.
Need to focus more on quality of training, placement, and monitoring outcomes.
Government must ensure rural industrialization to control migration.
PLI and PM GatiShakti can be leveraged to boost job creation in both urban and rural sectors.
Prelims Strategy Tips
PMKVY is implemented by the Ministry of Skill Development & Entrepreneurship.
Under PMKVY 2.0, 1.10 crore youth trained between 2016-17 and 2021-22.
GKRA was launched during COVID-19 to support migrant workers.
PLI Scheme covers 13 key sectors like electronics, pharma, and textiles.
Labour Reforms in India
Key Point
Labour reforms in India aim to simplify and modernize existing labour laws, protect workers' rights, and ensure industrial growth. With over 40 central laws and 100 state-level laws, labour reforms seek to bring transparency, reduce compliance burden, and balance the interests of both workers and employers.
Labour reforms in India aim to simplify and modernize existing labour laws, protect workers' rights, and ensure industrial growth. With over 40 central laws and 100 state-level laws, labour reforms seek to bring transparency, reduce compliance burden, and balance the interests of both workers and employers.
Detailed Notes (16 points)
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Overview
Labour laws are rules and regulations that govern the legal rights and duties of workers and employers.
They ensure fair working conditions, distribution of powers, and provide a framework for individual and collective bargaining.
In India, nearly 90% of workers are in the informal/unorganized sector with limited social security.
Background
The Second National Commission on Labour (2002) highlighted the multiplicity and complexity of labour laws.
Recommended that over 40 central laws should be consolidated into 4-5 Labour Codes for transparency and uniformity.
Suggested grouping laws into Industrial Relations, Wages, Social Security, Safety, Welfare, and Working Conditions.
Need for Labour Reforms
Complex & Overlapping Laws: Over 100 state laws and 40 central laws create confusion and administrative burden.
Balancing Rights: Employers feel laws are excessively pro-worker, while reforms aim to protect workers and encourage productivity.
Ease of Doing Business: Multiple inspections, returns, and registers hinder growth and create suspicion around industries.
Promote Employment & Growth: Overly complex laws discourage industries from hiring more workers, pushing them towards capital-intensive production.
Simplification & Updation: Labour laws must adapt to emerging forms of labour, like gig workers and platform-based jobs.
Poor Enforcement: Weak monitoring, inadequate penalties, and corruption reduce effectiveness.
Global Competitiveness: Rigid labour laws make Indian firms less competitive compared to countries with flexible labour markets.
Key Challenges in India’s Labour Laws
| Challenge | Explanation |
|---|---|
| Multiplicity of Laws | Over 140 central and state laws create complexity. |
| Ease of Doing Business | Industries face multiple inspections and compliance hurdles. |
| Enforcement Issues | Weak monitoring and corruption reduce effectiveness. |
| Global Competitiveness | Rigid laws make India less competitive globally. |
| Outdated Provisions | Many laws are colonial-era and need modernization. |
Mains Key Points
Multiplicity and rigidity of labour laws hinder both worker welfare and business competitiveness.
Codification into Labour Codes aims to ensure transparency, reduce overlaps, and promote ease of doing business.
Reforms must strike a balance between protecting workers and enabling industries to grow.
Labour reforms are essential for promoting labour-intensive industries, creating jobs, and boosting global competitiveness.
Implementation and enforcement of reformed laws remain a challenge due to weak administrative capacity.
Prelims Strategy Tips
Labour is in the Concurrent List – both Centre and States can make laws.
Second National Commission on Labour (2002) recommended consolidation into 4-5 Labour Codes.
About 90% of Indian workforce is in the informal sector.
Labour reforms aim to balance workers’ rights with industrial growth.
Labour Codes Introduced by Government
Key Point
The Government of India replaced 29 existing labour laws with 4 simplified Labour Codes – Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions Code (2020). The aim is to simplify, modernize, and bring uniformity in labour regulation while balancing workers’ welfare with economic growth.
The Government of India replaced 29 existing labour laws with 4 simplified Labour Codes – Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions Code (2020). The aim is to simplify, modernize, and bring uniformity in labour regulation while balancing workers’ welfare with economic growth.
Detailed Notes (32 points)
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Overview
Labour is a concurrent subject, meaning both Centre and States can make laws.
Earlier there were 29 central labour laws which were often complex, overlapping, and outdated.
In 2019–2020, these laws were amalgamated into 4 Labour Codes for uniformity and ease of compliance.
Objective: Simplify laws, reduce red tape, protect workers’ rights, and promote business competitiveness.
Four Labour Codes
1. Code on Wages, 2019
Subsumes: Payment of Wages Act, 1936; Minimum Wages Act, 1948; Payment of Bonus Act, 1965; Equal Remuneration Act, 1976.
Regulates wage and bonus payments across all industries.
Introduces *floor wage* to remove regional disparities; minimum wages fixed by states/centre cannot be lower than floor wage.
Prohibits gender discrimination in wages and recruitment.
Ensures overtime pay at least twice the normal wage.
Applies to all employees, regardless of wage level.
2. Industrial Relations Code, 2020
Subsumes: Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946; Industrial Disputes Act, 1947.
Aims to improve dispute resolution and industrial harmony.
Provisions related to strikes, lockouts, layoffs, retrenchment, and closure simplified.
Encourages negotiation at enterprise and industry levels.
3. Code on Social Security, 2020
Subsumes: EPF Act (1952), ESI Act (1948), Employees’ Compensation Act (1923), Maternity Benefit Act (1961), Payment of Gratuity Act (1972), among others.
Extends social security schemes (EPFO, ESIC, gratuity, maternity benefit) to gig workers, platform workers, and unorganized sector workers.
Creates a universal registration process for workers through Aadhaar-based system.
4. Occupational Safety, Health & Working Conditions Code, 2020
Subsumes 13 labour laws including Factories Act, 1948 and Mines Act, 1952.
Focuses on workplace safety, health, and working conditions.
Applies to establishments with 10+ workers (or hazardous activity).
Includes welfare provisions like working hours, leave, drinking water, safety standards.
Benefits of Labour Codes
Simplifies compliance for employers by reducing multiple laws into 4 codes.
Expands coverage to informal, gig, and platform workers.
Promotes ease of doing business while ensuring worker safety and social security.
Removes inconsistencies between central and state laws.
Labour Codes and Subsumed Laws
| Labour Code | Acts Subsumed |
|---|---|
| Code on Wages (2019) | Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, Equal Remuneration Act |
| Industrial Relations Code (2020) | Trade Unions Act, Industrial Employment Act, Industrial Disputes Act |
| Code on Social Security (2020) | EPF Act, ESI Act, Employees’ Compensation Act, Maternity Benefit Act, Gratuity Act, etc. |
| OSH & Working Conditions Code (2020) | Factories Act, Mines Act, Contract Labour Act, Building & Other Construction Workers Act, etc. |
Mains Key Points
Labour Codes aim to simplify, modernize, and unify India’s complex labour laws.
Balance between workers’ rights (minimum wage, social security, safety) and employer flexibility (ease of doing business).
Expands social security to gig workers and informal sector, a major step for inclusion.
Challenges: Effective implementation requires both Centre and States’ cooperation as labour is a concurrent subject.
Critics fear dilution of workers’ rights, particularly in Industrial Relations Code (strikes and retrenchment).
Prelims Strategy Tips
Labour Codes consolidate 29 laws into 4 codes.
Code on Wages applies to all employees, irrespective of wage limit.
Social Security Code extends benefits to gig and platform workers.
Floor wage introduced to remove regional disparity.
Labour is in the Concurrent List.
Code on Social Security, 2020 & Code on Occupational Safety, Health and Working Conditions, 2020
Key Point
The Social Security Code, 2020 consolidates 9 labour laws to provide comprehensive social security like insurance, pension, gratuity, maternity benefits, etc., especially extending coverage to unorganised, gig, and platform workers. The Occupational Safety, Health and Working Conditions Code, 2020 consolidates 13 laws to ensure safe, healthy, and fair working conditions, covering factories, mines, plantations, and contract workers.
The Social Security Code, 2020 consolidates 9 labour laws to provide comprehensive social security like insurance, pension, gratuity, maternity benefits, etc., especially extending coverage to unorganised, gig, and platform workers. The Occupational Safety, Health and Working Conditions Code, 2020 consolidates 13 laws to ensure safe, healthy, and fair working conditions, covering factories, mines, plantations, and contract workers.
Detailed Notes (34 points)
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Code on Social Security, 2020
Objective: To provide social security for all categories of workers (formal and informal).
Applicability: Can be applied to any establishment by notification of the Central Government, subject to thresholds.
Social Security Fund: Separate funds by Centre and States for unorganised, gig, and platform workers.
National Social Security Board: To recommend and monitor schemes for workers’ welfare.
Role of Aggregators: Ride-sharing, food delivery, e-marketplaces, etc., must contribute to social security of platform workers.
Expanded Definitions:
* 'Employee' includes contract workers.
* 'Inter-state migrants' now include self-employed workers from other states.
* 'Platform workers' expanded to new notified services.
* Audio-visual now includes films, web-series, reality shows, sports shows.
Pandemic Provisions: Centre may defer/reduce PF or ESI contributions for 3 months in epidemic/disaster.
Gratuity: Eligibility reduced from 5 to 3 years for journalists; no minimum service required for fixed-term employees.
Code on Occupational Safety, Health & Working Conditions (OSHWC), 2020
Objective: To ensure safe, secure, and healthy working conditions across sectors.
Factory Definition:
* Premises with 20+ workers using power.
* Premises with 40+ workers without power.
Hazardous Activities: All hazardous establishments covered regardless of worker number.
Employer Duties:
* General: Provide safe workplace, appointment letters, compliance.
* Specific: Mines, docks, plantations must provide risk-free work conditions.
* Inter-state migrants: Safe conditions, medical check-up, PF and ESI entitlements.
Contract Workers: Applicable to contractors with 50+ workers; core activities cannot use contract labour.
Work Hours: 8-hour daily work limit; overtime must be paid.
Age Restrictions: No work below 14 years; mines: minimum 18 years (16 for apprentices).
Women Employment: Allowed in all types of work, including night shifts (with consent and safety measures).
National Occupational Safety & Health Board: To advise government on safety standards.
Inter-state Migrant Workers:
* Definition: Workers earning up to ₹18,000/month working outside their home state.
* Benefits: PDS in home/employment state, construction cess benefits, insurance, PF.
* Migrants to be registered on a central portal using Aadhaar.
Health & Safety Measures: Separate washrooms, lockers, sitting facilities, first aid, cleanliness, potable water, adequate lighting, no overcrowding.
Exemption: States may exempt new factories to promote jobs and investment.
Comparison of Social Security Code and OSHWC Code
| Aspect | Social Security Code (2020) | OSHWC Code (2020) |
|---|---|---|
| Objective | Provide insurance, pension, gratuity, maternity benefit | Ensure safe and healthy working conditions |
| Workers Covered | Unorganised, gig, platform, formal workers | Factory, mine, plantation, contract, women, migrants |
| Special Provisions | Social security funds, reduced gratuity terms | 8-hour limit, women night shifts, migrant benefits |
| Institutions | National Social Security Board | National Safety & Health Advisory Board |
Mains Key Points
Social Security Code expands welfare coverage to informal, gig, and platform workers for the first time.
OSHWC Code introduces uniform safety and working condition standards across industries.
Simplifies compliance and reduces overlapping provisions from multiple old laws.
Criticism: Implementation depends heavily on state governments; risk of weaker enforcement.
Balancing workers’ rights with economic growth remains the key challenge.
Prelims Strategy Tips
Social Security Code, 2020 subsumes 9 laws including EPF, ESI, Maternity, Gratuity.
OSHWC Code, 2020 subsumes 13 laws including Factories and Mines Acts.
Gratuity eligibility reduced to 3 years for journalists.
Work hours capped at 8 hours/day in OSHWC Code.
Women allowed in all shifts with safety provisions.
Code on Industrial Relations, 2020
Key Point
The Industrial Relations Code, 2020 consolidates 3 labour laws into one framework to regulate trade unions, industrial disputes, closure, retrenchment, and employment contracts. It aims to balance worker rights with employer flexibility, reduce disputes, and promote industrial harmony.
The Industrial Relations Code, 2020 consolidates 3 labour laws into one framework to regulate trade unions, industrial disputes, closure, retrenchment, and employment contracts. It aims to balance worker rights with employer flexibility, reduce disputes, and promote industrial harmony.
Detailed Notes (20 points)
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Objective
Prevent industrial disputes and ensure smooth relations between employers and employees.
Provide legal clarity on strikes, lockouts, layoffs, retrenchment, and closure.
Strengthen role of trade unions in negotiations.
Major Features
Definition of Worker: Any person working for hire/reward, excluding those in managerial/administrative capacity or supervisory roles with wages above ₹18,000. Journalists included.
Closure, Lay-off, Retrenchment: Establishments with 300+ workers need prior government approval for closure, lay-off, or retrenchment (threshold may be raised by Centre).
Disputes on Termination: Disputes on dismissal, discharge, retrenchment of individual workers treated as industrial disputes. After 45 days of failed conciliation, worker can move Industrial Tribunal.
Strikes & Lockouts: 14-day prior notice mandatory. Prohibited:
* During and 7 days after conciliation.
* During and 60 days after tribunal proceedings.
Trade Unions:
* Union with 51%+ membership recognized as sole negotiating union.
* If no majority union, a negotiating council will be formed.
Industrial Tribunals: Consist of Judicial and Administrative members; decide disputes. National Industrial Tribunal also constituted.
Fixed-term Employment: Workers hired for a specified contract period. Entitled to same benefits as permanent workers (like PF, gratuity if service exceeds 1 year). No retrenchment notice required when contract ends.
Comparison of Employment Types
Fixed-term Employment: Direct contract with employer; limited duration; ends automatically without notice unless renewed.
Permanent Employment: On establishment’s payroll; ongoing; termination requires notice.
Contract Labour: Engaged via contractor; not on employer’s payroll; subject to contractor’s terms.
Comparison of Employment Types under Industrial Relations Code, 2020
| Feature | Fixed Term Employee | Permanent Employee | Contract Labour |
|---|---|---|---|
| Type of Employment | Direct contract, no contractor | On payroll of establishment | Through contractor/agency |
| Term | Ends after fixed term; no retrenchment notice | Ongoing; notice needed for termination | Based on contractor’s terms |
| Nature of Work | Routine or specialized tasks | Routine, ongoing work | Often prohibited in core activities |
Mains Key Points
Introduces balance between employer flexibility and worker protection.
Raises threshold for government approval in retrenchment, making it easier for industries to operate.
Provides legal recognition to fixed-term employment with benefits at par with permanent employees.
Potential concern: Higher threshold (300 workers) may reduce protection for workers in medium enterprises.
Strengthens trade union negotiation process, but may lead to dominance of a single union.
Prelims Strategy Tips
Industrial Relations Code, 2020 subsumes Trade Unions Act (1926), Standing Orders Act (1946), and Industrial Disputes Act (1947).
Threshold for closure/lay-off/ retrenchment raised from 100 to 300 workers.
14-day notice mandatory for strikes and lockouts.
Trade union with 51% workers recognized as sole negotiating union.
Impacts of Labour Codes
Key Point
The new labour codes simplify and unify labour laws but bring significant implications for employers and employees. Key impacts are related to the definition of worker, uniform definition of wages, gratuity, leave encashment, and provident fund contributions.
The new labour codes simplify and unify labour laws but bring significant implications for employers and employees. Key impacts are related to the definition of worker, uniform definition of wages, gratuity, leave encashment, and provident fund contributions.
Detailed Notes (23 points)
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Definition of Worker
Labour codes provide separate definitions for 'employee' and 'worker'.
All individuals employed in an organisation are employees, but only non-managerial and non-supervisory staff (earning below the threshold) may be considered workers.
Organisations must carefully classify who qualifies as workers, which may affect benefits and compliance obligations.
This is challenging because earlier definitions were vague and often led to court disputes.
Definition of Wages
A uniform definition of 'wages' has been introduced across all labour codes.
Earlier, 'wage' had different meanings under laws like PF, ESI, Gratuity, Bonus, etc.
New definition simplifies administration but increases costs for companies.
'Wages' now include salary, allowances, and other components except some exclusions (e.g., bonuses, travel allowance).
Exclusions cannot exceed 50% of gross salary, meaning at least 50% of salary will count as 'wages'.
This increases the base on which employee benefits (PF, gratuity, bonus) are calculated, leading to higher benefits for workers.
Gratuity and Leave Encashment
Gratuity: Payable at 15 days’ wages for every year of service after 5 years (3 years for journalists, no minimum for fixed-term employees).
Earlier, gratuity was based on basic salary; now it will be based on broader 'wages', increasing cost for employers.
Example: If an employee with 10 years’ service resigns, gratuity = 15 days × wages × 10 years.
Leave encashment: Workers entitled to payment for unused leave, calculated as per new wage definition. Many companies will need to update policies.
Provident Fund (PF)
Both employer and employee contributions will be calculated on 'wages'.
Likely to increase PF deductions, reducing net take-home pay for employees.
Employers will also face higher contribution costs.
However, existing EPF scheme rules (including wage ceiling of ₹15,000/month) will continue for one year after the new codes start.
This provides temporary relief but in future, more employees may fall under PF coverage.
Key Impacts of Labour Codes
| Aspect | Impact |
|---|---|
| Definition of Worker | Clearer classification but challenges in implementation. |
| Definition of Wages | Uniform definition; at least 50% of gross salary considered wages. |
| Gratuity | Payable on broader wage definition; increases cost for employers. |
| Leave Encashment | Now mandatory for workers based on wages, not just basic pay. |
| Provident Fund | Contributions on wages; higher deductions for employees and costs for employers. |
Mains Key Points
Uniform definition of wages will simplify compliance but increase financial burden on employers.
Employees benefit through higher PF, gratuity, and leave encashment payouts.
Challenge for employers in classifying workers vs employees; could lead to disputes.
Higher PF contributions may reduce net take-home salary for employees.
Overall, codes balance uniformity with higher employee welfare, but at the cost of increased employer liability.
Prelims Strategy Tips
Labour codes introduce a uniform definition of 'wages' (50% rule).
Gratuity eligibility reduced to 3 years for journalists, no limit for fixed-term employees.
Leave encashment to be calculated on wages, not basic pay.
PF contributions may rise due to broader wage definition.
Enabling Employment Opportunities under Labour Codes
Key Point
The new labour codes aim to expand employment opportunities, especially for women, and make laws more inclusive by covering modern forms of employment. They also ensure faster settlement of employee dues and encourage gender equality at workplaces.
The new labour codes aim to expand employment opportunities, especially for women, and make laws more inclusive by covering modern forms of employment. They also ensure faster settlement of employee dues and encourage gender equality at workplaces.
Detailed Notes (15 points)
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Enabling Employment Opportunities for Women
Labour codes include special provisions for women workers to ensure both greater participation and workplace safety.
Women can now be employed in night shifts (before 6 AM and after 7 PM) if safety and welfare measures are ensured, subject to state rules.
Codes also provide for flexible working arrangements, which can help women balance work and family responsibilities.
These changes are expected to boost female workforce participation in sectors like IT, healthcare, manufacturing, and hospitality.
Much Wider Coverage
Earlier labour laws had fragmented applicability based on type of work or salary thresholds.
New labour codes apply broadly to all employees, irrespective of wage levels or job category.
They extend coverage to new-age work models including contract labour, fixed-term employees, gig workers, and platform workers.
This makes the laws more forward-looking and inclusive of the 21st-century workforce.
Faster Full and Final (F&F) Settlements
Under the Code on Wages, all pending wages of an employee must be paid within 2 working days of removal, resignation, dismissal, or retrenchment.
This ensures employees do not face delays in receiving their dues during job transitions.
Employers and HR departments will need to update internal processes to comply with this strict timeline.
It will enhance trust and reduce disputes between employers and employees at the time of exit.
Key Provisions Encouraging Employment
| Aspect | Provisions under Labour Codes |
|---|---|
| Women’s Employment | Night shifts allowed with safety, flexible work options provided |
| Coverage | Applies to all employees including gig and platform workers |
| F&F Settlements | Wages must be cleared within 2 working days of exit |
Mains Key Points
Encourages female labour force participation through flexible work and night shift allowances.
Provides inclusive coverage for modern work arrangements such as gig and platform work.
Ensures faster F&F settlements, improving employee-employer relations.
Forward-looking approach aligns labour laws with evolving job markets.
Challenges include ensuring state-level safety measures for night shifts and readiness of HR systems.
Prelims Strategy Tips
Women can work night shifts under Labour Codes, subject to safety rules.
Coverage extended to gig and platform workers for the first time.
Code on Wages mandates F&F settlement within 2 working days.
Issues and Concerns with New Labour Codes
Key Point
While the new consolidated labour codes aim to simplify and modernize labour laws, several issues and concerns have been raised regarding jurisdiction, exemptions, workers' rights, Aadhaar linkage, and clarity of definitions.
While the new consolidated labour codes aim to simplify and modernize labour laws, several issues and concerns have been raised regarding jurisdiction, exemptions, workers' rights, Aadhaar linkage, and clarity of definitions.
Detailed Notes (21 points)
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Jurisdiction of Central Government
Under three major labour codes (Industrial Relations, Occupational Safety & Health, and Social Security), the central government will remain the 'appropriate government' for all central PSUs.
Even if the government’s ownership falls below 50% in such a PSU, it will still retain control.
Critics argue this is illogical since the central government should not control an enterprise where it no longer has a majority stake.
Power to Exempt Establishments
The Industrial Relations Code, 2020 allows the government to exempt new industrial establishments from its provisions if considered in 'public interest'.
Similarly, the Occupational Safety Code allows exemptions for new factories to promote economic activity and jobs.
However, 'public interest' is a vague term, and such wide discretionary powers could undermine worker rights.
Other Concerns
Restrictions on Strikes and Lockouts: The Industrial Relations Code makes strikes/lockouts difficult by prohibiting them during and up to 7 days after conciliation, and up to 60 days after tribunal proceedings. This curtails workers’ bargaining power.
Mandatory Aadhaar Linking: The Social Security Code requires Aadhaar linking for workers, which could violate the Supreme Court’s Puttaswamy-II judgement that restricts Aadhaar’s mandatory use.
Ease of Hiring and Firing: Codes give employers more liberty to hire and fire workers, raising fears of arbitrary employment conditions.
Free Hand to States: States have power to exempt certain establishments from provisions, which may weaken labour protections. The government justifies this on the basis of labour being a 'Concurrent List' subject.
Work Hours Rigidities: The codes maintain 8-hour daily work provisions with limited flexibility, which may not suit modern industries.
Lack of Clarity in Definitions: Overlaps exist between gig workers, platform workers, and unorganised workers, making implementation confusing.
Other Steps for Worker Welfare
Universal Account Number (UAN): Ensures portability of provident fund benefits across jobs.
Unified Shram Suvidha Portal: Provides single-point reporting for inspections and returns, improving transparency.
e-Shram Portal: A national database of unorganised workers linked with Aadhaar for extending social security benefits.
PM Shram Yogi Maan Dhan Yojana: Pension scheme guaranteeing ₹3000/month after 60 years for contributory workers.
Maternity Benefit (Amendment) Act, 2017: Increased paid maternity leave from 12 weeks to 26 weeks.
Issues in New Labour Codes
| Issue | Concern |
|---|---|
| Jurisdiction | Centre retains control over PSUs even without majority stake |
| Exemptions | Broad power to exempt establishments under 'public interest' |
| Strikes/Lockouts | Heavily restricted, reducing worker bargaining power |
| Aadhaar Linking | May violate Supreme Court judgement on privacy |
| Hire & Fire | Gives employers more liberty, risk of arbitrary conditions |
| Work Hours | Rigid 8-hour limit, lacks flexibility |
| Definitions | Overlap between gig, platform, and unorganised workers |
Mains Key Points
Wide powers to exempt establishments may dilute labour rights.
Restrictions on strikes limit workers’ collective bargaining.
Mandatory Aadhaar linkage could conflict with privacy rights.
Flexibility granted to states could lead to uneven implementation.
New codes are progressive in simplification, but concerns remain on worker protection.
Prelims Strategy Tips
Industrial Relations Code requires 14-day notice before strike.
Aadhaar linkage in Social Security Code controversial due to privacy concerns.
Centre remains 'appropriate government' for PSUs even after disinvestment.
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