Declining Joint Families Looming social security crisis

The Hindu Business Line Thursday, Nov 30, 2006

R. VAIDYANATHAN

With limited social-security and a large unorganised workforce, social capital the family and community linkages is the best safety net for the elderly in India. Only nurturing this capital can save the country from a societal crisis, says R. VAIDYANATHAN.

The population of India was 1090 million in 2004-2005 with an average life expectancy at birth of 64 years for males and 67 years for females. The annual growth rate of the population is 1.93 per cent (Economic Survey 2005-2006). The total population is expected to rise by 49 per cent between 1991and 2016 and the number of elderly persons (65 and above) is expected to increase to 78 million. The share of aged (above 65) in the total population will rise to 116 millions (8 per cent) by 2026. Males and females at age 60 today are expected to live beyond 75 years of age. Thus, on an average an Indian worker need to have adequate resources to support himself for nearly 15 years after retirement. The Table gives the projections given by the Registrar General of India. It says that the population above 65 is expected to be nearly 5 per cent by 2006 reaching 8 per cent by 2026. But as per the 2001 Census itself the number of persons above 65 has reached 4 per cent. This indicates that a substantial portion of elderly need to be taken care of even now. The share of the service sector consisting of construction, transport, communication and trade, finance, insurance and real-estate, community, social and personal services is nearly 60 per cent of the share of the economy in 2005. That is, this sector is playing a substantial role (around half of the national income) in the economy. Most of these activities are undertaken by self-employed persons, who are not covered by any social security schemes.

As per Census 2001, the total workforce was 403 million consisting of 311 milion rural and 92 million urban workers. Also, of the 403 million there were 168 million non-agricultural workers including 16 million industrial workers. The social security coverage of most of the agricultural and non-industrial workers is totally inadequate. Tradition and Change In the context of the decline in the joint family system this poses difficult choices for the elderly. This is one of the important areas where the policy planners need to focus. Caring for the aged is part of the Indian tradition. In the past, rich merchants and other donors would construct "old age homes" near pilgrimage centres where the senior citizens could spend their time in Godly pursuits. The traditional four-stage division of human lifetime Brahmacharya (bachelorhood; period of education), Grihasta (house-holder), Vanaprastha (retirement) and Sannyasa (renunciation). The explicit recognition of the "retirement stage" has given rise to actions by family and community to facilitate the same. Hence, caring for the aged is by and large taken care by the joint family and community. Some one-eighth of the world's elderly population lives in India. Most of them are not covered by a pension system, and have to rely on their own earnings or on the extended family. But with globalisation and migration, the joint family system is on a decline at least in the urban areas and to that extent the challenge of caring for the aged has become greater for society and government. The traditional and informal methods of old age income security are not able to cope with the trends of increased life-span and enhanced medical expenses during old age. Hence, there is a very pressing need to re-examine the existing formal and informal systems available to tackle the challenge of the "Age Quake". Pensions are expected to achieve the goals of minimising poverty in old age, smoothening intertemporal life consumption which has significant fluctuations and ensuring that retirees do not outlive their pension benefits/incomes. The three pillar structure talked about in literature facilitate in this process The first pillar is made up of publicly-funded schemes providing modest benefits, or social security schemes; The second pillar consists of occupational schemes sponsored by employers for the benefit of employees or private mandatory pension programmes;

The third pillar consists of additional voluntary contributions to meet retirement needs. Unlike other developed countries, the "first pillar" is not very relevant in the Indian context. From that point India is the most privatised economy in the world. The "second pillar" is substantially wider in terms of coverage but is still limited as it does not fully include self-employed professionals and workers, casual labourers and workers in the unorganised sector. This category of "unorganised" sector workers need to resort to the "third pillar", of voluntary and family based retirement schemes. This three-pillar scheme of the World Bank does not take into account the most important pillar family support systems. This is in decline and the government seems to be doing its best to hasten its demise by passing laws determental to the existence of family as a social system. The official pension system covers only those employed by Central and State governments and the mandatory system Employees Provident Fund and Employees Pension Schemes (EPF and EPS) covers only 41 million with a cumulative assets of Rs 190,000 crore as of March 2005 (Annual Report of the EPF Organisation). Hence the aggregate coverage by some schemes is not more than 15 per cent of the working population. Due to substantial savings by the households (it constitutes more than 80 per cent of the national savings) and the acquisition of gold as an insurance product, the elderly may be able to mange provided family is sustained. Government moves Relationship-based society as ours is trying to cope with changes through a rule-based AngloSaxon system. There is a move to pass a law on caring of the elderly by the children, revealing the level of the crisis. The government in the bedroom with all good intentions can destroy the family system as it assumes that courts are the best place to settle every dispute. It will be as disastrous as the government in the board room. The Western model of consumption-based/individual-centric model is not going to work in a society as ours. Last year a large number of elderly died in an European country during summer as they were left without care by their holidaying children. Sweden has enacted laws to facilitate helpers for the elderly, with the cost being tax deductible. But given the size of India's population such measures can at best be palliative. Instead institutions such as family and community support for elderly need to be strengthened. The old age home is not a new Western concept. Thousands of elderly visit and stay in pilgrimage centres in their old age. The change in lifestyle from renouncing mode to acquisition mode at old age is not in consonant with Indian ethos.

The social capital the family and extended family ties and community linkages is still strong in India. This must be enhanced and enriched instead of deriding it in the name of modernisation. Family is considered oppressive in some Western societies and there is a tendency to imitate them in India. They have moved from nuclear family to proton family (single- parent) and soon may have mason family (no parent) and it is going to be massive social security issue. India need not tread that path. Social thinkers and planners must encourage methods to protect and enhance social capital instead of encouraging the government to get into the bedroom. (The author is Professor of Finance and Control, Indian Institute of Management-Bangalore, and can be contacted at vaidya@iimb.ernet.in. The views are personal and do not reflect that of his organisation.)