[India] Employment creation and construction workers’ welfare

Of the nearly 900 million adults of working age in India, only 45 per cent are either employed or seeking jobs. This makes India’s labour force participation rate (LFPR) one of the world’s lowest. For female LFPR, the ratio is barely 18 per cent and has been falling, Mint reports.

The proportion of workers in the informal sector is as high as 90 per cent. These workers do not have any health or retirement benefits and typically do not have enforceable employment contracts. For them, wage and payment delays are not uncommon and these get worse during downturns and recourse for non-payment is non-existent. Unemployment rates are high, especially among the educated youth. 

According to a recent survey of all states, Rajasthan’s unemployment rate for graduates was 51 per cent. Another stark indicator of this jobs drought was revealed in an answer in Parliament, where it was reportedly said that 220 million Indians had applied for about 700,000 government jobs in the last seven years; a success rate of 0.33 per cent. 

Large-scale employment creation potential exists in labour-intensive sectors such as construction, textiles, retail, tourism and agro-processing. The construction sector was proven to be a huge job creator during the infrastructure boom of recent years. It can be a blessing for unskilled and semi-skilled workers. If the sector sees another upswing, there is potential for large-scale employment creation, albeit informal.

However, one policy step that affects construction workers reportedly needs urgent attention. It relates to the non-performance of a landmark legislative move of 1996. Called the Building and Other Construction Workers Regulation Act, it was a national law to regulate their employment and working conditions. 

Welfare Boards were established by all states to provide for schemes that cover health and pension benefits, maternity leave, education for children and compensation for accidents and death. The actual benefits could vary from state to state. For example, Delhi used the funds to provide unemployment benefits during the COVID lockdown. Some states have enlightened schemes for workers’ children’s scholarships. 

The schemes are financed by a mandatory 1 per cent cess on the value of construction projects that has to be paid before the contractor or employer can begin a project. The cess cannot be used for any purpose other than worker welfare. The data on its usage, however, is extremely disappointing. In the past 25 years, states have collected nearly ₹80,000 crore, but more than half remains unspent. 

The Comptroller and Auditor General of India reported that only 1.7 per cent of Delhi’s 1 million construction workers were registered with the Welfare Board as of March 2019. Between 2002 to 2019, the Delhi government had spent only 5.6 per cent of the cess collected. The story is similar across all states. Because construction workers migrate seasonally, their names get deleted meaning contractors and employers pay the cess but are not liable to register workers. Many cash-strapped states are now reportedly eyeing these unspent funds. 

The central government has registered 280 million informal sector workers on its e-Shram portal, which is a positive step, but the plight of unregistered construction workers remains unaddressed. Critics say states and the Centre should tighten the Welfare Board’s registration process and enlist the help of civil society watchdogs to ensure that construction workers are registered and receive their rightful benefits.

Of the nearly 900 million adults of working age in India, only 45 per cent are either employed or seeking jobs. This makes India’s labour force participation rate (LFPR) one of the world’s lowest. For female LFPR, the ratio is barely 18 per cent and has been falling, Mint reports.

The proportion of workers in the informal sector is as high as 90 per cent. These workers do not have any health or retirement benefits and typically do not have enforceable employment contracts. For them, wage and payment delays are not uncommon and these get worse during downturns and recourse for non-payment is non-existent. Unemployment rates are high, especially among the educated youth. 

According to a recent survey of all states, Rajasthan’s unemployment rate for graduates was 51 per cent. Another stark indicator of this jobs drought was revealed in an answer in Parliament, where it was reportedly said that 220 million Indians had applied for about 700,000 government jobs in the last seven years; a success rate of 0.33 per cent. 

Large-scale employment creation potential exists in labour-intensive sectors such as construction, textiles, retail, tourism and agro-processing. The construction sector was proven to be a huge job creator during the infrastructure boom of recent years. It can be a blessing for unskilled and semi-skilled workers. If the sector sees another upswing, there is potential for large-scale employment creation, albeit informal.

However, one policy step that affects construction workers reportedly needs urgent attention. It relates to the non-performance of a landmark legislative move of 1996. Called the Building and Other Construction Workers Regulation Act, it was a national law to regulate their employment and working conditions. 

Welfare Boards were established by all states to provide for schemes that cover health and pension benefits, maternity leave, education for children and compensation for accidents and death. The actual benefits could vary from state to state. For example, Delhi used the funds to provide unemployment benefits during the COVID lockdown. Some states have enlightened schemes for workers’ children’s scholarships. 

The schemes are financed by a mandatory 1 per cent cess on the value of construction projects that has to be paid before the contractor or employer can begin a project. The cess cannot be used for any purpose other than worker welfare. The data on its usage, however, is extremely disappointing. In the past 25 years, states have collected nearly ₹80,000 crore, but more than half remains unspent. 

The Comptroller and Auditor General of India reported that only 1.7 per cent of Delhi’s 1 million construction workers were registered with the Welfare Board as of March 2019. Between 2002 to 2019, the Delhi government had spent only 5.6 per cent of the cess collected. The story is similar across all states. Because construction workers migrate seasonally, their names get deleted meaning contractors and employers pay the cess but are not liable to register workers. Many cash-strapped states are now reportedly eyeing these unspent funds. 

The central government has registered 280 million informal sector workers on its e-Shram portal, which is a positive step, but the plight of unregistered construction workers remains unaddressed. Critics say states and the Centre should tighten the Welfare Board’s registration process and enlist the help of civil society watchdogs to ensure that construction workers are registered and receive their rightful benefits.