Informalisation of Indian Workforce

The deteriorating quality of employment

In the previous section we saw that the proportion of hired-work jobs — working for others — has been increasing. One of the objectives of development planning in India, since Independence, has been to provide decent livelihoods to its people; it was envisaged that the industrialisation strategy would draw surplus workers from agriculture into industry, with a better standard of living, as happened in developed countries. Yet even after 70 years of planned development, more than half of India's workforce still depends on farming as its main source of livelihood.

Economists argue that the quality of employment has actually been deteriorating over the years. Even after working for 10-20 years, why do some workers still get no maternity benefit, provident fund, gratuity or pension? Why does someone doing the same work in the private sector often earn a lower salary than a person in the public sector? Only a small section of India's workforce gets a regular income; the government protects their rights through labour laws, and this section of the workforce forms trade unions and bargains with employers for better wages and social security.

Formal and informal sectors

To identify who these protected workers are, the workforce is classified into two categories — formal and informal sectors, also called organised and unorganised sectors. All public sector establishments, and those private sector establishments that employ 10 hired workers or more, are called formal sector establishments, and those who work in them are formal sector workers. All other enterprises and the workers in them make up the informal sector — millions of farmers, agricultural labourers, owners of small enterprises and the people working in them, the self-employed who hire no one, and non-farm casual wage labourers (such as construction and headload workers) who work for more than one employer. This is only one way of classifying workers; there could be others — worth discussing in class.

Those working in the formal sector enjoy social security benefits and earn more than those in the informal sector. Development planning had assumed that as the economy grew, more and more workers would become formal sector workers and the informal sector's share would shrink. But that is not what happened: in 2011-12, India had about 473 million workers in all, of whom only about 30 million — roughly six per cent (30/473 x 100) — were in the formal sector, leaving the remaining 94 per cent in the informal sector. In 2011-12, the year for which gender-wise data on formal-informal employment is available, about 20 per cent of formal sector workers and about 30 per cent of informal sector workers were women.