The resistance of workers and trade unions to pension
“reforms” rests on their contention that they are aimed at transferring
the responsibility of social security from the government to the market.
At the heart of the issue is the National Pension
System (NPS), the new over-arching framework for the new pension regime
that, since 2010, also includes the Swavalamban scheme for the vast mass of unorganised workers.
Redefining social security
Ever
since the National Democratic Alliance government initiated the
“reforms” in the pension sector, the trade unions have taken exception
to two key aspects of the new regime, which is being steered by the
Pension Fund Regulatory and Development Authority (PFRDA).
The first — and perhaps most contentious issue — pertains to the very nature of what a pension is.
The
unions regard the new system as one that marks a fundamental shift from
a “defined benefit” system to a “contributory” scheme.
Traditionally,
pensions in India were based on a system in which the worker could
predict with a fair degree of accuracy his/her income stream upon
retirement. Both contributions and the monthly income streams were
usually defined as a fraction of the workers’ salary under the “defined
benefit” system.
The unions argue that the changeover
to a “defined contribution” system is not merely a shift in the
methodology used to calculate pensions but is philosophically grounded
in the notion that the markets — not the government — ought to serve as
the vehicle for the delivery of this important social security benefit.
They
point to Supreme Court rulings, which stated that pensions were not a
bounty; that they are a reward for services rendered by a worker during
his productive span; and that they are an instrument of social welfare
and social justice, a worthy objective even if only a small fraction of
the Indian workers had access to it.
Market fundamentalism
The
second issue, which pertains to the government’s ‘abdication’ of its
responsibility to the working class, is the push of pension funds
governed by the PFRDA to a market-based system, says S. Prasanna Kumar,
general secretary, Karnataka State Committee of the Centre of Indian
Trade Unions (CITU). Workers who need to make a mandatory contribution
of 10 per cent of their salary to their own pensions are at the mercy of
fund managers, many of them in the private sector, he observes.
The
immediate implication of a market-based approach, which the Left
alleges is based on a Working Paper on pensions published by the
International Monetary Fund more than a decade ago, is that workers no
longer have a clear visibility of their likely income stream after they
retire.
Tales of scam
Mr. Prasanna Kumar
points out that the many tales of pension scams from across the world —
from the advanced countries such as the United States and the United
Kingdom to developing countries such as Chile and Argentina, which
embraced market-based pension ‘reforms’ — do not inspire confidence that
workers’ contributions will either be safe or yield a “decent return at
the end of their long working life.”
“The logic
that workers’ long-term committed contributions cannot be entitled to
any kind of assured returns is based on market fundamentalism,” he
argues. This strict no-no arises from the logic of not only delinking
the government from a critical component of social security, but is
premised on the misplaced but abiding faith in markets.
Unfair to workers
Even
if the notion that pensions are part of a government’s larger social
objective is jettisoned, the new system is unfair even in purely
financial terms because it fails to balance the interests of the workers
with those who manage the pensions. Critics of the NPS argue that while
workers are mandatorily required to commit savings throughout their
working life, the managers are not obliged to guarantee anything in
return. This implies that the workers bear the burden of uncertain
returns.
Trade unions argue that Swavalamban could
derail quickly for the same reason. The PFRDA prescribes several user
fees and charges, which are expected to account for a significant
proportion of the workers’ contribution, even under Swavalamban, which
is specifically targeted at the weakest segment of the working class.
These
fund managers are expected to function like Mutual Funds, which in
India have demonstrated a high mortality rate. No wonder, the trade
unions even have their own description for the NPS: the National
Pauperisation Scheme.
Source: http://www.thehindu.com/news/national/loading-the-dice-against-workers/article4564924.ece