- Government schemes are important for mains. There can either be a direct question on schemes or information about schemes can help in preparing filler material for answers. The article highlights the role played by PMRPY in increasing formalization in economy, which is a major gain and hence needs to be prepared.
- Here, the first demand of the answer is to bring out the problem being faced currently – that of informalization of the workforce and the issues faced along with it. Thereafter, we need to explain PMRPY and how it helps in tackling the issue of informalization of the workforce. Next, we have to explain the impact of PMRPY and suggestions as to how to make it more effective.
- In the introduction, highlight the findings of the Arjun Sengupta committee which highlighted the level of informalization of workforce in Indian economy.
- In the start of the main body, discuss the problems faced as a result of informalization of workforce
- Explain about PMRPY and how it helps in tackling the problem of informalization of the economy – by dealing with the burden of EPFO and ESI for companies and the advantages that it has had including preventing tax evasion.
- Thereafter, discuss the positive impact of this scheme and suggest ways of improvement
- In conclusion, highlight that the creation of formal jobs is one of the biggest challenges and the scheme does well in addressing some of the issues.
The National Commission for Enterprises in the Unorganised Sector (NCEUS) in its report on Social Security for Unorganised Workers had recommended legislation for the social security for unorganised workers. Countries across the world, including India, need to move towards formalisation of labour and generation of at least 600 million new quality jobs in the next 15 years to fulfil Sustainable Development Goals set by the United Nations by 2030.
Informalization of jobs in India:-
- Studies show that employees tend to be significantly more productive in formal employment when compared to informal employment. Also, the quantum of value added by a person in a formal job is almost double that of a person in an informal job.
- Informal workers also work under worse working conditions with little job security, no perks or protections and with low wages. The protections guaranteed to workers under different legislations are not complied with by the informal sector, and they also escape the purview of the authorities.
- A large informal sector also impacts the government in terms of revenue foregone because the units operating in the informal sector stay out of the government’s fiscal revenue net (This leads to low tax GDP ratio). Hence, the informal sector is detrimental to the interests of the working population, the government and in the long run, even to the employer.
Pradhan Mantri Rojgar Protsahan Yojana:
- In order to encourage formalisation of existing companies, as also to create new jobs in the formal sector, the government came up with the Pradhan Mantri Rojgar Protsahn Yojana (PMRPY).
- Under this Government of India will now be paying the complete employer share of 12%. Earlier, only 8.33% of the employer shares were borne by the Government of India.
- The Pradhan Mantri Rojgar Protsahan Yojana(PMRPY) Plan Scheme has been designed to incentivise employers for generation of new employment, where Government of India will be paying the full employer’s contribution towards EPF & EPS both w.e.f April 2018 (earlier benefit was applicable for employer’s contribution towards EPS only) for the new employment.
- All new employees enrolled on or after.2016 and under wage ceiling of Rs.15000 are eligible to avail the benefits of this scheme.
- This scheme has a dual benefit where on the one hand the employer is incentivised for increasing the employment base of workers in the establishment, and on the other hand, a large number of workers will find jobs in such establishments.
- A direct benefit is that these workers will have access to social security benefits of the organized sector
- Also, the burden on the part of employers has further reduced as he need not remit even 3.67% of employer share as per earlier norms.
- Over one lakh units are covered by this scheme today and have around 85 lakh employees.
- The scheme helped create more formal employment by lowering the monthly imposts on employees
- While these jobs aren’t necessarily new ones since even existing firms may have used the PMRPY to shift workers to formal contracts, it is a very sensible and low-cost way to encourage formalisation.