India’s workforce is predominantly informal, with the Periodic Labour Force Survey (PLFS) 2019-20 estimating nearly 90% of workers engaged in informal employment. Despite constitutional mandates and recent legislative reforms, this vast segment remains inadequately protected by labour laws and social security mechanisms. On May Day 2024, the spotlight falls on this “workforce without a floor” — workers lacking guaranteed minimum wages, social security, and formal employment rights — which undermines inclusive economic growth and social justice.

Constitutional and Legal Framework for Labour Protection

Article 43 of the Directive Principles of State Policy directs the State to secure a living wage and humane conditions of work for all workers. The legal architecture has been recently consolidated into four labour codes, notably the Code on Wages, 2019 and the Code on Social Security, 2020. Sections 6 and 7 of the Code on Wages unify minimum wage provisions across sectors, aiming to simplify enforcement. The Code on Social Security extends coverage to all workers, including informal and gig workers, under Sections 2 and 3, proposing schemes like health insurance, maternity benefits, and pensions.

• The Supreme Court in Olga Tellis v. Bombay Municipal Corporation (1985) recognized the right to livelihood as integral to Article 21, reinforcing the State’s obligation to protect informal workers.
• Despite these provisions, enforcement remains weak due to fragmented jurisdiction, lack of universal minimum wage mandates, and inadequate inspection mechanisms.
• Labour codes do not yet mandate social security contributions for all informal workers, leaving a large coverage gap.

Economic Realities of India’s Informal Workforce

The informal sector contributes approximately 45% to India’s GDP (Economic Survey 2023-24) but employs 90% of the workforce, indicating low productivity and poor labour standards. Minimum wage coverage is limited to about 17% of workers (Labour Bureau, 2022), reflecting widespread wage insecurity. Social security coverage is even lower, below 10% for informal workers (ILO Report 2023), exposing them to risks like illness, old age, and unemployment.

• The government allocated ₹7,500 crore under the Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) pension scheme in FY 2023-24 to provide old-age income security for informal workers.
• Unemployment rate stood at 7.2% in 2023 (CMIE data), disproportionately affecting informal workers who lack unemployment benefits.
• Informal workers often face wage theft, unsafe working conditions, and absence of grievance redressal mechanisms.

Key Institutions Governing Labour and Social Security

The Ministry of Labour and Employment (MoLE) formulates labour policies and oversees implementation of the labour codes. The Labour Bureau collects wage and employment data critical for policy calibration. The Employees’ Provident Fund Organisation (EPFO) manages social security funds but primarily for formal sector workers. The International Labour Organization (ILO) provides technical assistance and promotes global labour standards. The Central Statistics Office (CSO) conducts the PLFS, the primary source of labour market data.

• Coordination deficits between MoLE and state labour departments hinder effective enforcement.
• EPFO’s limited reach excludes most informal workers, necessitating alternative social security delivery mechanisms.
• Data gaps and underreporting in informal employment impede evidence-based policymaking.

Comparative Insights: Brazil’s Bolsa Familia and Formalization Incentives

Brazil’s Bolsa Familia conditional cash transfer program, combined with incentives for formal employment, expanded social security coverage from 20% to 60% over a decade (World Bank Report 2022). This integrated approach reduced poverty and informal employment substantially.

Critical Gaps in India’s Labour Protection Framework

India’s labour codes lack robust enforcement mechanisms and do not mandate universal minimum wages or comprehensive social security for informal workers. The multiplicity of labour laws and poor coordination between Centre and States exacerbate implementation gaps. Informal workers remain outside the ambit of most social security schemes, and wage theft or unsafe work conditions go unaddressed.

• Absence of universal minimum wage leaves wage floors undefined for many sectors.
• Social security schemes like PM-SYM have limited enrolment due to awareness and administrative challenges.
• Labour inspections are inadequate, with low inspection-to-firm ratios and weak penalties.

Way Forward: Strengthening the Workforce Floor

• Mandate a universal minimum wage indexed to inflation and regional cost of living.
• Expand social security coverage by integrating informal workers into contributory and non-contributory schemes.
• Enhance institutional coordination between MoLE, States, and social security bodies for better enforcement.
• Leverage technology for worker registration, grievance redressal, and benefit delivery.
• Promote formalization through incentives and awareness campaigns targeting informal enterprises.

Jharkhand & JPSC Relevance

• JPSC Paper: Paper 2 – Social Issues and Labour Welfare
• Jharkhand Angle: Jharkhand’s large informal mining and construction workforce faces acute social security deficits and wage irregularities.
• Mains Pointer: Highlight state-specific labour challenges, implementation gaps in social security schemes like PM-SYM, and propose state-level reforms aligned with central codes.