Contributions From Employees And Employer Economics Essay Issues pertaining to social security [1] have been the centre of attention whenever the world order has been subject to turmoil and change. It is significant that the issue of social security has re-emerged in full strength around the 1990s when several countries initiated economic reforms comprising stabilisation, structural adjustment, privatisation and globalisation. Globalisation has both benefits and costs. By analyzing globalisation from such a perspective new insights can be gained in whether social security benefits and in turn social welfare has been enhanced or undersized by this process. It is in the above context, in this chapter, the process of globalisation and its impact on Social Security and welfare of PBOR is analysed from a welfare economics perspective by adopting Kaldor-Hicks compensation criterion [2] . The chapter is organized as follows: Section 3.1 introduces the concept of social security. Section 3.2 gives definition of social security. Section 3.3 analyses need for Government intervention in the provision of social security. Section 3.4 discuss about the Ministry of Labour & Employment and social security policy in India for organised sector. Section 3.5 determines the social security needs of PBOR. Section 3.6 relates globalisation, social security & welfare of PBOR. Section 3.7 determines the impact of globalisation on social security and welfare of PBOR through Kaldor-Hicks principle. Section 3.8 concludes the chapter. This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. Essay Writing Service Dissertation Writing Service Who wrote this essay Place an Order 3.1 CONCEPT OF SOCIAL SECURITY-: The concept of Social Security is multi-dimensional in its contents and complexion. It emerged through a long period of evolution. It varies from country to country and time to time. Indeed it has different meaning not only in different countries rather different categories of persons as well as even within the same country. In USA, the term is used first in 1935 to denote old age, survivors, invalidity and health insurance schemes which function under the control of Federal governments. In New Zealand the term social security is used in reference to the functions of department of social security and a comprehensive scheme of benefits and health care services for the workers regulated and governed by the relevant provisions of social security act of 1938. While in Britain the term social security includes social assistance and social insurance schemes and it is inclusive of national insurance schemes, industrial injury scheme and also social assistance schemes, under which even supplementary benefits are provided to the workers. It also includes the scheme of family allowance under which children’s allowances are provided to survivors and dependents of deceased workers. In Austria instead of term social security the term social service has been coined under which all schemes maintaining income of the workers in case of invalidity, old age etc. excepting the scheme of workmen compensation are covered. Notwithstanding the fact that the schemes of social security differ from country to country, there are certain common features which are embodied in the enactments of various countries enacted to establish welfare state. Those common features are – The social security programmes are implemented under the authority of the law Some sort of cash benefits are provided to the individuals to compensate the loss of the income which may take place due to old age invalidity, sickness, employment injury, maternity, unemployment etc. Schemes under which cash allowance is provided to the families for the financial assistance of children and dependants are also covered within the definition of social security Medical care expenditure incurred of the individuals and their families are also covered within four corners of social security The benefits or services are provided through two major schemes, namely, social insurance, social Assistance or public service. Social Security Social Assistance Contributions from one side G / C/ R / N Contributions from Employees and Employer Social Insurance Note – G – Government, C – Charitable, R – Religious Trust, N – Non-Government Organization Figure 3.1 – Approaches / Methods of social security However, the social security schemes are basically income maintenance measures [3] . These schemes are intended to provide a minimum living to the people when they are deprived of the same due to invalidity, unemployment or old age. Several social security schemes also provide various welfare services to persons protected by them. Such services include rehabilitation of disabled persons, vocational training and retraining of unemployed workers etc. 3.2 DEFINITION OF SOCIAL SECURITY: Social security has different meanings in different economies. There is no commonly accepted definition of social security. The western concept [4] of social security has greatly influenced the discourse about social security. International Labour Organisation (ILO) has defined social security [5] in the following words, ” The expression has acquired a wider interpretation in some countries than in other but basically it can be taken to mean the protection which society provides for its members, through a series of public measures, against the economic distress that otherwise would be caused by the stoppage or substantial reduction in earnings resulting from sickness, maternity, employment injury, unemployment, invalidity, old age and death; the provision of medical care, and the provisions of subsidies for families with children.” The above definition led to considerable degree of questioning in developing countries. It is inadequate and narrow for developing countries. This definition assumes that most persons are generally in a state of employment, and that the employment ensures them enough earning to meet their basic needs. In most of developing countries, this view is unjustified. Another inadequacy stems from the fact that the components of social security listed in the definition are based on the experience of developed countries. Thus, there is a need to redefine the concept of social security in a broader way to adequately capture the true situation of societies in developing countries, thereby paving the way to more realistic analyses of their social security problems and the various ways in which these could be addressed. Further, the search for a more comprehensive notion of social security arose simultaneously with the increasing globalisation of the world [6] . The following definitions define the social security in a wider way. This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. Essay Writing Service Dissertation Writing Service Who wrote this essay Place an Order Ehtisham, Ahmad defines it as follows: “Social security is viewed neither exclusively in terms of means, nor exclusively in terms of objectives. Broadly speaking, our concern is with the direct role that public action can play in reducing human deprivation and eliminating vulnerability in developing countries. The focus is on the use of a class of means (public action) to pursue a category of objectives (reduction of deprivation and vulnerability)”. Burgees, Robin and Nicholas Stern have given a broader perspective for social security and defined its objective as “to prevent, by social means, the very low standards of living irrespective of whether these are the results of chronic deprivation or temporary adversity.” Dreze, Jean and Amartya Sen, “the basic idea of social security is to use social means to prevent deprivation and vulnerability to deprivation.” According to them, income is one of the most visible and crucial factors restricting the basic capabilities of many people. In addition to the problem of persistent deprivation, there is also the issue of vulnerability. They distinguish between two different aspects of social security, namely, protection and promotion. “The former is concerned with the task of preventing a decline in the living standards as might occur, in say, an economic recession, or mostly drastically a famine. The latter refers to the enhancement of general standards and to the expansion of basic capabilities of the population, and will primarily have to be seen as a long term challenge”. Widening the scope of social security Subrahmanya, R.K.A. defined “Social security represents a guarantee, by the whole community to all its members, of the maintenance of their standard of living or at least of tolerable living conditions by means of redistribution of income based on national solidarity.” This definition stresses the obligation of society to maintain all its members in tolerable living conditions. A similar broadening occurs in the definition of Getubig, I.P. with an expansion of the elements of social security: Any kind of collective measures or activities designed to ensure that members of a society meet their basic needs (such as adequate nutrition, shelter, health care and clean water supply), as well as being protected from contingencies (such as illness, disability, death, unemployment, and old age) to enable them to maintain a standard of living consistent with social norms”. This definition of social security is further qualified by the protective aspects of preventing a decline in living standards; and promotive aspects of enhancing normal living conditions and by the requirement for income maintenance and income support. As the definitions broaden and move away from the ILO stand, there is a general recognition that social security must be expanded to include not only new elements such as housing but also income and employment. According to Hirway, Indira “The concept of social security therefore implies a broad pro-poor approach which has three components, namely, promotional component that aims at improving endowments, exchange entitlements, real income and social consumption; preventive component that seeks to avert deprivation in more specific ways; and protective component (also termed as safety net measures) that is yet more specific in generating relief against deprivation”. The above definition has broadened the scope of social security and it concentrates on employment and income. Programmes and activities connected with the provision of employment and income be termed as ‘economic security’ and those connected with other basic needs such as health, pensions, etc. to be termed as ‘social security’. Economic security and social security are intimately connected. Economic security is the primary means by which persons are able to obtain their social security needs. On the other hand, social security is a means to increase and maintain the productivity of the worker, so as to increase the economic security. Social security in developing countries like India [7] should mean a comprehensive system not only for income maintenance but also promoting welfare of the people through provisions of gainful employment, health services, and provisions of housing, etc. so that a minimum standard of living is ensured to the people. As, the concept of social security is multi-dimensional; therefore all the aspects of social security cannot be taken in the study. Hence, the present study is confined to the socio-economic social security [8] . Thus, programs for enhancing education, health, housing, provisions of social security measures, provision of measures to enhance the income levels of army PBOR through employment programmes and assistance programmes, constitute the elements of our concept of socio-economic security. Among all the components of social security, we will be focusing more on employment and income i.e., economic security. The income and employment (economic security) of the retired army PBOR is usually uncertain and varying, leading to greater insecurity after retirement. This uncertainty after the retirement is aggravated by uncertainty of markets, the fluctuations in the economy, changing policies etc. In short, their economic security is dependent on variety of factors on which they have no control. For retired army PBOR economic security that is continuity of work and reasonable income is what first sought by them after the retirement? Besides, the need of employment and adequate income, a retired army PBOR has to meet many personal, social and family needs. These needs included health care, housing, etc. Social security is a system which would take care of these needs. This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. Essay Writing Service Dissertation Writing Service Who wrote this essay Place an Order As individuals are not the best decision makers, therefore, in a mixed economy like India, State (welfare state [9] ) is assigned the role of regulator and controller of all economic activities within its jurisdiction and it intervenes with a view to assure the welfare of the community. 3.3 GOVERNMENT INTERVENTION TO PROVIDE SOCIAL SECURITY – The need for government intervention in the provision of social security is more significant during globalization in the case of labour surplus developing economies like India because of highly imperfect character of the labour market. In such economies, unemployment and under-employment are regular features, and hence there is an urgent need to ‘protect’ the workers. Why should governments involve themselves in social security? In the framework of welfare economics, each individual is assumed to be able to compare and rank economic states which are defined in terms of his own consumption and supplies and those of other agents (say households and firms). Individuals are then assumed to act in their own self-interest as defined by this ranking, finding the best outcome for themselves subject to whatever constraints they may face. The theory of economic policy is usually based on the idea that individuals consistently pursue well-defined objectives which can also be interpreted as their own well-being. There are essentially two reasons why government should involve themselves in Social Security which arise within the framework of welfare economics. The first is that the markets in which individual’s trade may not work efficiently in the sense made precise in the theorems of welfare economics. Some markets may not exist, markets which do exist may not be competitive, and there may be externalities. For these reasons equilibrium (if one exists) may not be Pareto-efficient [10] . The second reason for governments to involve themselves in social security within this framework is the improvement of the distribution of welfare. Whether or not equilibrium is Pareto-efficient, the government might regard the distribution of welfare as unsatisfactory and may see scope for improving it, and a responsibility to do so. It can be done through redistribution of income under social security by transferring income to beneficiaries in the form of income transfers through means of social insurance or social assistance. The reasons for government involvement in social security which lie outside the standard framework of welfare economics is – first, a government may believe that individuals are not the best judges of their own self-interest. Actually, the government is in a better position to act for the individuals. Second, the public, or at least sections of the public, may desire the provision of social security. One can then take the view that the provision of social security has some justification from the viewpoint of democracy. In case of the PBOR, most of them are retiring in early age and burdened with the fulfilling their personal and financial commitments. Therefore, MOD has taken a number of measures like resettlement training and welfare programs as a compensatory measure to protect them from the negative impact of globalisation in civil life in the form of providing re-employment as well as self-employment opportunities. These schemes serve not only for the deprivations suffered by PBOR but also in protecting them from the vulnerability caused by globalisation. 3.4 MINISTRY OF LABOUR &EMPLOYMENT AND SOCIAL SECURITY POLICY IN INDIA FOR ORGANISED SECTOR-: Social security provisions have been enshrined in the Constitution of India [11] and subsequently in the legislation that the central and various State governments have enacted. In 1964, for devoting greater attention to the welfare activities an independent department known as the Department of social security was created. General social welfare, welfare of backward classes and labour welfare subjects placed under this department. However, in 1966 the subjects relating to social security and labour welfare transferred to the Ministry of Labour and Employment. The department of social security was re-designated as department of social welfare and was made responsible for the welfare of women, children, handicapped and under privileged classes of the society. The Ministry of Labour and Employment runs a variety of schemes/legislations relating to social security and welfare for organized sector which consists of the government sector, the public sector and the private organized sector has access to the above mentioned conventional types of social security schemes/benefits (protective social security schemes). These schemes [12] of social security for the organized sector can be divided into three types: This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. Essay Writing Service Dissertation Writing Service Who wrote this essay Place an Order (a) Employer’s Liability schemes – Employees of the Central and State governments are governed mainly by employers’ liability schemes whereby they are entitled to a variety of benefits at the cost of the State as the employer. (b) Social Insurance schemes – Employees of the Public Sector and the organized private sector are covered under the following social insurance [13] as well as employers’ liability schemes: Employee State Insurance Scheme [14]  Schemes framed under the EPF Act [15]  Workmen’s Compensation Act, 1923 [16]  Maternity Benefit Act, 1961 [17]  Payment of Gratuity Act, 1971 [18]  Industrial Dispute Act, 1947 [19]  (c) Provident funds These above schemes are not the social security schemes but they are providing social security types benefits of protection, and lacking any clearly articulated goals or objectives. However, these schemes and acts aim at social security to workers in the organised sector in India for private as well as for state and Central government sector employees. As a part of organised sector workforce, the needs of Defence personnel i.e., personnel from army, navy and air force are also covered by the same umbrella law/acts which protects the social security interests of other central government employee. In the changed economy, it’s become a challenge for the retired army PBOR to find a job and earn adequate income. Hence, the present social security benefits prove to be insufficient and therefore fulfilling their social security needs attention. 3.5 SOCIAL SECURITY NEEDS: Social security is required for meeting certain needs arising out of a contingency, risk or danger. Basically all these needs are rooted in lack, loss or inadequacy of income or assets due to unemployment, enlargement of the family, sickness, accident, maternity, disability, old age or death. They are called core contingencies. These incidents may affect an individual or a community as a whole. Therefore, the entire workforce either employed in organised or in unorganized sectors are in need of social security to deal with the contingencies. However, the changing economic environment since 1991 has affected the social security needs of Defence personnel especially retired army PBOR. Due to globalisation, there is a rise in insecurities faced by army PBOR. It means globalisation is impacting social security needs of army PBOR. To assess the impact of globalisation on the social security of PBOR, it is useful to first to divide social security into different components to develop conceptual framework. Components of social security for PBOR – We are considering seven components (needs) of social security for army PBOR namely – housing, medical, education, pension/income, insurance, re-employment and skills. The social security needs [20] of army PBOR can be understood with the following framework – CONCEPTUAL FRAMEWORK FOR SOCIAL SECURITY OF PBOR IN INDIA Institutional Mechanism/involved for Social Security of PBOR (MOD, Dept. of ESM Welfare, DGR, KSB, RSB, ZSWO Figure 3.2 conceptual framework for social security of PBOR in India Source- Adapted from Unni, Jeemol and Uma Rani (2001), Social Protection for Informal Workers, The Indian Journal of Labour Economics, Vol.44, No.4. A two-fold approach to social security – basic and economic (it implies that adequate provision has been made to supply at least the basic material needs of an individual family or community, for both a certain and a contingent future.) is useful for the analysis to demarcate insecurities faced by retired army PBOR. It helps visualize the different kinds of core needs of social security. It is also useful to highlight the fact that the root cause of the insecurity instruments of social protection need to be devised taking into account the nature and the cause of the insecurity. The sources of insecurity faced by army PBOR are of structural in nature. This includes – early retirement age, income, low educational levels, mismatch skill sets and the resettlement training. The existing social security measures/instruments were geared to address this form of insecurity but it is proving insufficient in the time of globalisation. Given the sources of social insecurities faced by the army PBOR, there arise certain core needs for social protection, which can be separated into basic and economic. The basic needs relate to housing, medical facilities, educational up gradation opportunities during the service and after, skills and insurance. Economic needs are re-employment after the retirement and adequate income. Instruments of social security (retirement benefits, resettlement training and welfare schemes for army PBOR) need to be designed to meet all these basic and economic needs of the PBOR. The basic and economic needs of social security of army PBOR are addressed by the institutional mechanism which includes Ministry of Defence, Department of Ex-servicemen welfare, Directorate General of resettlement, Kendriya Sainik Board, Rajya Sainik Board and Zila Sainik Welfare Office (discussed in detail in chapter-4, section 4.3). This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. Essay Writing Service Dissertation Writing Service Who wrote this essay Place an Order 3.6 GLOBALISATION, SOCIAL SECURITY & WELFARE OF PBOR – The term ‘globalisation’ refers to integration of economies and societies through cross country flows of information, ideas, technologies, goods, services, capital, finance and people. Globalisation has created both winners and losers both within countries and among countries. The supporters of globalisation argue that globalisation as the engine of growth, technical advancement, access to international resources and their optimal use, raising productivity, enlarging employment, increasing choice on commodities, lowering of costs, improving standard of living, and bringing out poverty reduction along with modernisation. Whereas, the critics argue that it widens the gap within and between nations, exploitation of resources, and loss of national sovereignty. It is the challenge for every nation to take efforts towards maximising the benefits of globalization and minimizing the evils of globalisation. As such, in the era of globalization social security and welfare programmes are under strain almost everywhere. Therefore, globalisation is an important issue for evaluating social security coverage in a nation. However, whereas most industrialized countries have achieved almost complete coverage, social security systems in low-income countries cover only a small minority of population for a more restricted range of contingences. The majority of the population is excluded from formal social security coverage and has to seek protection through alternative institutions outside the state. To make matter worse, the process of globalization is said to undermine the capacity of welfare state to provide adequate social security. But, the proponents of the compensation hypothesis [21] argue that governments expand the welfare state in an effort to insure the citizens in open economies against the risks associated with globalization. Increased integration in the global economy is argued to lead to more insecurity among citizens, either because of increased domestic economic volatility or because of globalization-induced structural adjustment. Therefore, these individuals (retired army PBOR) want more social protection from the state. When this demand is translated into the policy-making arena, globalization leads to an expansion—or at least to no retrenchment—of the welfare state at the macro level. The individual-level causal chain of the compensation argument thus comprises two causal links: (i) the link between an individual’s position in the globalized economy and his feelings of economic security; (ii) the link between feelings of economic insecurity and policy preferences for more social security. Figure 3.3 summarizes the causal chain linking globalization with welfare state expansion, which is discussed in more detail below. The chain begins with the link between globalization and feelings of economic insecurity (link 1), then links insecurity and demands for compensation (link 2). Figure 1 also includes direct link that associate the individual effect of globalization with an individual’s compensation. Welfare State Expansion Globalization affects Direct Link Link 1 Demand for compensation Economic Insecurity of PBOR Link 2 Figure 3.3 Globalization and Welfare State Expansion: The Causal Chain Link 1: Globalization and Economic Insecurity The starting point for the individual-level causal chain between globalization and public spending is concerned with the relationship between an individual’s position (retired army PBOR) in the global economy and his perception of economic insecurity. The compensation hypothesis implies that globalization increases individuals’ (retired army PBOR) feeling of economic risk. Even though it could be argued that this effect should apply to all citizens of an open economy, because of the higher volatility associated with an open economy, it seems more plausible to assume that the effect varies among individuals. Globalization losers are likely to be much more negatively affected by economic openness than globalization winners, because they face higher risks to receive low wages or to lose their job altogether. Consequently, the effect of economic openness on the individual feeling of economic security should be particularly pronounced for globalization losers, whereas globalization winners should feel least insecure. Link 2: Economic Insecurity and Welfare State Preferences The next step in the compensation argument is the link between an individual’s feeling of economic insecurity and his preference for welfare state expansion. Individuals who believe that they would have a hard time finding a new job if they were looking for one, are more supportive of social spending. Following this logic, the compensation hypothesis implies that individuals facing globalization-induced risks turn to the state to provide them with cover against loss of income and similar risks caused by increased economic integration. This argument suggests a connection between an individual’s feeling of economic insecurity and his social policy preferences: more insecure individuals should prefer more social security. This logic also implies a direct relationship between individuals’ exposure to global competition and social policy preferences: globalization losers should be more strongly in favour of social security than globalization winners. This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. Essay Writing Service Dissertation Writing Service Who wrote this essay Place an Order A higher level of risk exposure will increase individuals’ economic insecurity. It shows that individuals who are confronted with higher risks are generally more likely to express a preference for more social security. As mentioned earlier, the existing social security measures to address the economic insecurities (employment and income) faced by retired army PBOR is insufficient in the time of globalisation. Therefore, it is necessary to understand the impact of globalisation as a component of new economic policy of 1991 on the social security of retired army PBOR. The conceptual model governing our analysis is set in figure 3.4. Economic Policy Social Policy SOCIAL SECURITY OF RETIRED ARMY PBOR SOCIAL SECURITY ECONOMIC SECURITY Skills Insurance Medical Education Housing Income Employment Figure 3.4 Conceptual model on globalization and its impact on social security of retired army PBOR Source – Author The increasing globalization over the last decade is modifying the role of the State. The institutional mechanism providing social security to army PBOR is affected by the globalization. The Government (State) is considered to be an important provider of social security in our framework. Due to the globalisation, the role of the State in the provision of social security has been diminishing. However, it remains an important institutional mechanism to deliver social security. The government’s policy has two main strands, economic policy and social policy. Economic policy comprises monetary, fiscal and such other policies, though our attention here is only on fiscal policy. Social policy influences fiscal policy through its impact on level and pattern of social security expenditure. Additionally, social policy includes in its ambit and the creation and nurturing of the institutions that facilitate provision of Social Security. The Ministry of Defence in India is the apex organization formulating social security policies for army PBOR. The Department of Ex-servicemen welfare has been created in 2004 to give focused attention to the social security needs of ESM (PBOR). Market/Firms – The process of globalization is said to undermine the capacity of both state and non-state based systems to provide adequate protection against social security. The market/firms is one of them. Firms in developing countries may be classified into two categories; viz., those that are within the formal sector and those that are in the informal sector. The firms in the formal sector provide social protection in tune with statutory requirements. Firms in the informal sector are covered neither by safety provisions nor by the provision of social security benefits to workers. Various public sector units such as nationalised banks, department of post and telegraph are offering employment to retired army PBOR. But after 1991, due to opening up of economy and further downsizing of government sectors has reduced the job opportunities in these organisations for retired army PBOR (explained in the chapter-4, section 4.5). On the other hand, in the case of private sector, due to rise in competition, use of capital intensive methods of production in industries and rise of service sector jobs in the economy etc. Hence, the current economic scenario has reduced the job prospects of retired army PBOR significantly. Hence, globalisation has intensified the problems of retired army PBOR by affecting the employment and income prospects. PBOR Households – However, besides the States and markets, there is a third form of institutional mechanism, the retired army PBOR households. The role of the households/community assumes importance in the provision of social security in instances when there are (a) structural factors that impede the access to social security and (b) the reach of the formal systems of social security is inadequate or ineffective. Non-Official Welfare organisations – The Army Welfare Housing Organisation (AWHO), Army Welfare Education Society (AWES), Army Women Welfare Organisation (AWWA), Indian Ex-service League (IESL), All India Gorkha Ex-Servicemen’s Welfare Association, War Widow’s Association are the various non-official member organisations which provides social security instruments to the retired army PBOR. Globalisation and Social Security of army PBOR – The social security benefits provided by MOD, market, PBOR households and non-official organisations are affected by globalisation which in turn will affect social security benefits and welfare level of army PBOR as shown in the figure 3.4. It’s the responsibility of the Government (MOD) of safeguard the interests of the retired army PBOR. After dealing with the globalisation impacts the social security and in turn social welfare of retired army PBOR, we turn our focus on how social welfare of army PBOR can be measured to apply the Kaldor-Hicks compensation criteria. This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. Essay Writing Service Dissertation Writing Service Who wrote this essay Place an Order 3.7 MEASUREMENT OF SOCIAL WELFARE A welfare criterion measuring social welfare will be useful in analyzing the impact of globalisation on social security and the social welfare of retired army PBOR. But, the measurement of social welfare has long been a controversial subject. Economists, social scientists and politicians all wish to measure whether individuals or society are better or worse off as a result of economic or social interventions. Therefore, a number of well known social welfare measurement methods were developed which include the growth of gross national product, Bentham’s Criterion, Cardinalist criterion, Pareto efficiency and optimality, Kaldor – Hicks criterion, Scitovsky, Samuelson criterion etc. In our study, we will use the Kador-Hick compensation criteria to understand the impact of globalisation on social security and welfare of retired army PBOR. First we will explore the relationship between globalization, social security and welfare of retired army PBOR through the following equations – The Department of Ex-servicemen under the Ministry of Defence offers various social security benefits during retirement and post retirement. It can be shown as – Socio-economic security benefits of army PBOR = f (Training and skill development, Opportunities for upgradation of educational qualifications, Housing provision after retirement, Medical facilities, Life insurance, Re-employment assistance and Pension) (i) The resettlement and welfare policy of army PBOR is framed by the apex organisation i.e., the Ministry of Defence and implemented through various agencies as shown – Resettlement and welfare policy of army PBOR = f (Ministry of Defence – Department of Ex-servicemen for social security, Directorate General of Re-settlement, Kendriya Sainik Board, Rajya Sainik Board, Zila Sainik Board) (ii) The policy of globalization has affected the various sectors and their policies. Defence is one of them. Therefore, it can be stated as – Ministry of Defence – Department of Ex-servicemen for social security = f (Globalization) (iii) In turn, the globalisation has also impacted the social security of retired army PBOR – Social security benefits of retired army PBOR = f (Globalization) (iv) Assuming social security benefits of retired army PBOR is inversely related with globalization, as economy will become more globalised; there will be decline in the social security benefits of retired army PBOR. From equation (iii) and (iv), we can infer that – Social Security benefits of retired army PBOR = f (Ministry of Defence – Department of Ex-servicemen for social security) (v) Welfare of retired army PBOR = f (Social Security benefits) (vi) Assuming welfare of retired army PBOR is directly related with the social security benefits, as the social security benefits will increase, the welfare of retired army PBOR will also increase. From equation (iv) and (vi), we can conclude that – The social security benefits of retired army PBOR will be negatively affected by the globalisation which will ultimately affect the welfare received from the social security benefits. From welfare economics perspective, to find the impact of globalisation on social security and welfare of retired army PBOR, Kaldor-Hicks compensation principle can be applied for the present study. 3.7.1 ANALYSIS OF IMPACT OF GLOBALISATION ON SOCIAL SECURITY & WELFARE OF PBOR APPLYING KALDOR-HICKS COMPENSATION PRINCIPLE – It is the responsibility of the government to ensure that the benefits of globalisation are evenly and fairly distributed. But any new economic policy will benefit some and affect others. To overcome this problem, Kaldor-Hicks compensation criteria can be used for the study. According to the compensation criteria, when a change in policy benefit some (gainers) and hurt others (losers), so the gainers must pay compensation to losers. In the above analysis, due to globalisation the gainers i.e., Government of India (in terms of rise in economic growth, increase in trade, rise in output incorporating modern technology, rise in investment etc.) would be prepared to pay in order to have the change i.e., globalisation and the losers i.e., retired army PBOR must be compensated for the negative impact (deprivations and vulnerability) of globalisation on social security benefits such as shrinking job opportunities in the government and private sector, mismatch of skills for civilian jobs, low and outdated educational qualifications in the capital intensive and knowledge driven industry, lesser income etc.. The resettlement training by MOD acts as a compensation for the deprivations incurred to army PBOR due to globalisation. But, the resettlement training and welfare measures are not adequate to protect the army PBOR from the vulnerability due to globalisation. Therefore, the resettlement training, social security and welfare programme for retired army PBOR requires modification. This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. Essay Writing Service Dissertation Writing Service Who wrote this essay Place an Order The criteria also suggests, if the benefits of globalization to the Government of India are greater than the amount of loss to retired army PBOR, it constitutes an improvement in social welfare, because the gainers could compensate the losers and still have some net gain. Further, it will increase the overall social welfare in the country. But, economic theory suggests that to maximize social welfare of retired army PBOR equitable distribution of income is necessary. Let us understand how and when the equitable distribution of income in an economy can maximize social welfare of retired army PBOR. a b Utility/Welfare b’ b b’ a A C D B Income Figure 3.5 Distribution of income and welfare of retired army PBOR In the figure 3.5, total income to be distributed is AB. Individual A’s marginal utility of money (left to right) is shown by the line aa, and is assumed as his income rises. Individuals B’s (retired army PBOR in our analysis) marginal utility of money, which declines from right to left, is shown by the line bb. Total utility/welfare is maximized when income shared equally: A’s income is AC, and B’s is BC. Suppose a reform (globalisation) in the economy is introduced which makes A better off and B worsen off. Due to change in policy, if B’s marginal utility shifts to b’b’ then the distribution that maximizes total welfare is unequal, since A now has an income of AD. Here, the PBOR requires compensation in the form of social security benefits to maximize the social welfare. 3.8 CONCLUSION -: This study discussed and applied the concept of social security in a broader way i.e., socio-economic security focusing more on economic security i.e., employment and income. It is the core economic need for the retired army PBOR. The transition to market economy and increased globalization in India have no doubt benefited certain categories of population in terms of expanding employment opportunities and income, thus, there are winners and losers within country. The retired army PBOR as a loser is negatively affected by globalisation. In this scenario, looking at the existing institutional mechanism for resettlement and social security of army PBOR, globalisation becomes an important issue for evaluating the social security benefits, resettlement and welfare of retired army PBOR. The social security system needs to be redesigned for the effective resettlement of retired army PBOR to offset the negative effects of globalisation on retired army PBOR. The next chapter – 4 deals with the present social security, resettlement management, welfare policy for retired army PBOR. 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