Informalisation of Indian workforce


By Aman Kayal, Academic Content Writer for Economics

In the previous section we have found that the proportion of hired work jobs – working for others has been increasing. One of the objectives of development planning in India, since India’s independence, has been to provide decent livelihood to its people. It has been envisaged that the industrialisation strategy would bring surplus workers from agriculture to industry with better standard of living as in developed countries. We have seen in the preceding section, that even after 70 years of planned development, more than half of the Indian workforce depends on farming as the major source of livelihood. Economists argue that, over the years, the quality of employment has been deteriorating. Even after working for more than 10-20 years, why do some workers not get maternity benefit, provident fund, gratuity and pension? Why does a person working in the private sector get a lower salary as compared to another person doing the same work but in the public sector? You may find that a small section of Indian workforce is getting regular income. The government, through its labour laws, enable them to protect their rights in various ways. This section of the workforce forms trade unions, bargains with employers for better wages and other social security measures. Who are they? To know this we classify workforce into two categories: workers in formal and informal sectors, which are also referred to as organised and unorganised sectors. All the public sector establishments and those private sector establishments which employ 10 hired workers or more are called formal sector establishments and those who work in such establishments are formal sector workers. All other enterprises and workers working in those enterprises form the informal sector. Thus, informal sector includes millions of farmers, agricultural labourers, owners of small enterprises and people working in those enterprises as also the self-employed who do not have any hired workers. It also includes all nonfarm casual wage labourers who work for more than one employer such as construction workers and headload workers. You may note that this is one of the ways of classifying workers. There could be other ways of classification as well. Discuss the possible ways in the class. Those who are working in the formal sector enjoy social security benefits. They earn more than those in the informal sector. Developmental planning envisaged that as the economy grows, more and more workers would become formal sector workers and the proportion of workers engaged in the informal sector would dwindle. But what has happened in India? Look at the following chart which gives the distribution of workforce in formal and informal sectors. In Section 7.2, we learnt that in 2011-12 there were about 473 million workers in India. There were about 30 million workers in the formal sector. Can you estimate the percentage of people employed in the formal sectors in the country? About only six per cent (30/473×100)! Thus, the rest 94 per cent are in the informal sector. In 2011-12, the year for which gender wise data on formal-informal sector employment is available (Chart 7.4). About 20 per cent of formal sector and 30 per cent of informal sector workers are women. Since the late 1970s, many developing countries, including India, started paying attention to enterprises and workers in the informal sector as employment in the formal sector is not growing. Workers and enterprises in the informal sector do not get regular income; they do not have any protection or regulation from the government. Workers are dismissed without any compensation. Technology used in the informal sector enterprises is outdated; they also do not maintain any accounts. Workers of this sector live in slums and are squatters. Of late, owing to the efforts of the International Labour Organisation (ILO), the Indian government has initiated the modernisation of informal sector enterprises and provision of social security measures to informal sector workers. 

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