Most kids at our job fairs respond to the salary offered with the question “Haathwaali ya Chitthiwaali salary?” The narrative that the huge gap between gross and net salary is toxic is hardly unfounded or unfair; the 45%+ mandatory salary deduction for low wage employees is not only too high but it goes to poor value-for-money programmes like the Employee’s Provident Fund Organization (EPFO is the world’s most expensive government securities mutual fund) and Employee State Insurance Corporation (ESIC is India’s worst health insurance programme with a claims ratio of 45%). The alphabet soup of mandatory deductions that create the huge gap between gross and net salary (EPFO, EPS, ESI, EDFLI, LWF, bonus, gratuity, etc.) originated in noble intentions but have become toxic in a cost-to-company world where there is only one pocket to park employee costs and all benefits are monetised. A review of India’s mandatory benefits regime will not only increase formal employment but give employees control over their money.
Our demographic dividend—10 lakh kids joining the labour force every month for the next 20 years —does not mean people but productive people. India’s youth need formal jobs and are becoming a formidable political force; there were 100 million new voters in the last national election and there will be 100 million new ones in the next one. Children born after liberalisation in 1991 (reform babies) not only think very differently than people who experienced the post-Independence years (midnight’s children) but they face a considerably different labour market than their parents; employment has shifted from being a lifetime contract to a taxicab relationship and companies don’t last forever (the life expectancy of a Fortune 500 company has come down from 65 in 1935 to 15 now). Organisation men, who gave loyalty for job security and defined benefit pension plans, are being replaced but with what is still emerging.
