Evidence on trade union and EPF membership

The EPF rate hike benefits only 4 percent of India's working population, the bulk of whom belong to the top 25 percent of earners of the country.

The bulk of trade union members, who fight for higher EPF rates belong to the top 25 percent of Indian workers.

The Indian Retirement, Earnings and Savings (IRES) database, a survey of 41,000 earners from across the country, was recently released by PFRDA and ORG-ACNielsen. It has thrown up new evidence about the EPFO and about the support base of the trade unions. It shows that barely 4 percent of the country's workers have EPF accounts. It also shows that less than 3 percent of India's work force has trade union membership. It is now possible, for the first time, to get an insight into the income of these members.

First, let us see what does the aam aadmi earn?

If we look at the income of the working population, across sectors, regions and occupations, we find that as of late 2004, half of India's earning workers had an annual income below Rs.35,000 per year (the median), and half above it.

The bulk (50 %) of India's working population earned between Rs. 19,000 to Rs. 60,000 per year.

The bottom 25 percent earned below Rs. 19,000. Only the top 25 percent earned above Rs 60,000. Thus, the aam aadmi -- who makes up 50 percent of India's workers -- earns between Rs 19,000 and Rs 60,000 per year.

Turning to the EPF, we find that half of EPF members belong to the top income class, earning above Rs 60,000 a year. About one fourth are in the second income group earning between Rs 35,000 and Rs 60,000. Less than 20 percent of EPF members have below mid-income (i.e. below Rs.35,000 per year). In other words, the bulk of EPF membership does not represent the bulk of the working population, but the top income category.

Annual income % of total earners in India
EPF membersTrade Union
Below Rs.19,0000.4710.100
Rs.19,000 to Rs.35,0000.3300.372
Rs.35,000 to Rs.60,0001.3050.714
Greater than Rs.60,0001.9061.515

Trade union membership

The survey also shows that only 2.7% of workers belong to trade unions. Of these, over half fall in the top income class. Trade union members who are below median earners (i.e. those that earn less than Rs.35,000 per year) make up less than half of one percent ( 0.47%) of India's earners. This highlights the extent to which India's trade union movement is alienated from the interests of the very poor.

It also helps explain why Left parties have fought so hard for the 9.5% decision about EPF, which patently only benefits the top income categories, while they remain unconcerned about the need for the poor to have pensions. The trade union members (2.7% of India's earners) or EPF members (4% of India's earners) represent only a very narrow section of working India.

Now they have been given a higher share of the pie. They should not be allowed to block initiatives to offer old-age security to the others.

Ila Patnaik

Ila Patnaik