Employment Growth Informalisation and Other Issues Introduction
Employment Growth Informalisation and Other Issues People do a variety of work. Some work on farms, in factories, banks, shops, and many other workplaces; yet a few others work at home. Work at home includes not only traditional work like weaving, lace making, or variety of handicrafts but also modern jobs like programming work in the IT industry.
Earlier factory work meant working in factories located in cities whereas now technology has enabled people to produce those factory-based goods at home in villages. During the COVID-19 pandemic in 2020–21, millions of workers delivered their products and services through work-from-home. Why do people work? Work plays an important role in our lives as individuals and as members of society.
People work for ‘earning’ a living. Some people get, or have, money by inheriting it, not working for it. This does not completely satisfy anybody. Being employed in work gives us a sense of self-worth and enables us to relate ourselves meaningfully with others. Every working person is actively contributing to national income and hence, the development of the country by engaging in various economic activities — that is the real meaning of ‘earning’ a living. We do not work only.
Workers and Employment
Employment Growth Informalisation and Other Issues What is employment? Who is a worker? When a farmer works in fields, he or she produces food grains and raw materials for industries. Cotton becomes cloth in textile mills and in power looms. Lorries transport goods from one place to another.
We know that the total money value of all such final goods and services produced in a country in a year is called its gross domestic product for that year. When we also consider what we pay for our imports and get from our exports we find that there is a net earning for the country which may be positive (if we have exported more in value terms than imported) or negative
(if imports exceeded exports in value terms) or zero (if exports and imports were of the same value). When we add this earning (plus or minus) from foreign transactions, what we get is called the country’s gross national product for that year. Those activities which contribute to the gross national product are called economic activities.
All those who are engaged in economic activities, in whatever capacity — high or low, are workers. Even if some of them temporarily abstain from work due to illness, injury, or other physical disability, bad weather, festivals, or social or religious functions, they are also workers.
Workers also include all those who help the main workers in these activities. We generally think of only those who are paid by an employer for their work as workers. This is not so. Those who are self-employed are also workers.
Employment Growth Informalisation and Other Issues Notes
- Employment Growth: This refers to the increase in the number of people who are employed in a country or region. It’s a positive sign for the economy because it means more people are working and contributing to production and consumption.
- Informalization: This term describes the trend where more jobs are becoming informal rather than formal. Informal jobs lack legal protections, such as minimum wage guarantees, job security, and benefits like health insurance and retirement plans. They often involve work in the informal sector, such as street vending, small-scale agriculture, or domestic work.
- Challenges of Informalization: When jobs become more informal, it can pose several challenges:
- Lack of stability: Informal workers often have irregular incomes and little job security.
- Limited rights: They may not have access to basic labor rights, like minimum wage or safe working conditions.
- Vulnerability: Informal workers are often more vulnerable to exploitation and abuse by employers.
- Economic insecurity: Informal jobs usually offer lower pay and fewer benefits, leading to economic insecurity for workers and their families.
- Policy Implications: Policymakers need to address in formalization through various measures:
- Legal reforms: Implementing laws to protect informal workers’ rights and ensure fair wages and working conditions.
- Social protection: Establishing social safety nets to support informal workers during times of unemployment or economic hardship.
- Skill development: Investing in training and education programs to enhance the skills of informal workers and improve their access to formal employment opportunities.
- Promoting entrepreneurship: Encouraging the formalization of informal enterprises through support programs and incentives.
- Global Perspective: Informalization is not unique to any single country but is a global phenomenon. It often intersects with other socio-economic issues such as poverty, inequality, and urbanization.
Participation of People in Employment
The worker-population ratio is an indicator used for analyzing the employment situation in the country. This ratio is useful in knowing the proportion of the population that is actively contributing to the production of goods and services of a country.
If the ratio is higher, it means that the engagement of people is greater; if the ratio for a country is medium or low, it means that a very high proportion of its population is not involved directly in economic activities.
You might have already studied, in lower classes, the meaning of the term ‘population’. Population is defined as the total number of people who reside in a particular locality at
A particular point of time. If you want to know the worker-population ratio for India, divide the total number of workers in India by the population in India and multiply it by 100, you will get the worker-population ratio for India.
If you look at Table 6.1, it shows the different levels of participation of people in economic activities. For every 100 persons, about 35 (by rounding off 34.7) are workers in India. In urban areas, the proportion is about 34, whereas in rural India, the ratio is about 35.
Why is there such a difference? People in rural areas have limited resources to earn a higher income and participate more in the employment market. Many do not go to schools, colleges, and other training institutions.
Even if some go, they discontinue in the middle to join the workforce; whereas, in urban areas, a considerable section is able to study in various educational institutions. Urban people have a variety of employment opportunities. They look for the appropriate job to suit their qualifications and skills. In rural areas, people cannot stay at home as their economic condition may not allow them.
Self Employed and hired workers
Does the worker-population ratio say anything about workers’ status in society or about the working conditions? By knowing the status with which a worker is placed in an enterprise, it may be possible to know one dimension — the quality of employment in a country. It also
Compared to females, more males are found to be working. The difference in participation rates is very large in urban areas: for every 100 urban females, only about 14 are engaged in some economic activities. In rural areas, for every 100 rural women about 18 participate in the employment market.
Why are women, in general, and urban women, in particular, not working? It is common to find that where men are able to earn high incomes, families discourage female members from taking up jobs. Going back to what has already been mentioned above, many household activities done by women are not recognized as productive work. This narrow define
Employment in firm factories and offices
In the course of the economic development of a country, labor flows from agriculture and other related activities to industry and services. In this process, workers migrate from rural to urban areas. Eventually, at a much later stage, the industrial sector begins to lose its share of total employment as the service sector enters a period of rapid expansion.
This shift can be understood by looking at the distribution of workers by industry. Generally, we divide all economic activities into eight different industrial divisions. They are (i) Agriculture (ii) Mining and Quarrying (iii) Manufacturing (iv) Electricity, Gas, and Water Supply (v) Construction (vi) Trade (vii) Transport and Storage and
viii) Services. For simplicity, all the working persons engaged in these divisions can be clubbed into three major sectors viz., (a) primary sector which includes (i) and (ii), (b) secondary sector which includes (iii), (iv) and (v) and (c) service sector which includes divisions (vi), (vii) and (viii). Table 6.2 shows the distribution of working persons in different industries during the year 2017-18.
The primary sector is the main source of employment for the majority of workers
Growth and Changing structure of employment
In Chapters 2 and 3, you might have studied about the planning strategies in detail. Here we will look at two developmental indicators — growth of employment and GDP. Nearly seventy years of planned development have been aimed at the expansion of the economy through an increase in national output and employment.
During the period 1950–2010, Gross Domestic Product (GDP) of India grew positively and was higher than the employment growth. However, there was always fluctuation in the growth of GDP. During this period, employment grew at a rate of not more than 2 percent.
Chart 6.3 also points at another disheartening development in the late 1990s: employment growth started declining and reached the level of growth that India had in the early stages of planning. During these years, we also find a widening gap between the growth of GDP and employment. This means that in the Indian economy, without generating employment, we have been able to
Developmental strategies in many countries, including India, have aimed at reducing the proportion of people depending on agriculture. Distribution of the workforce by industrial sectors shows a substantial shift from farm work to non-farm work (see Table 6.3). In 1972-73, about 74 percent of
the workforce was engaged in the primary sector, and in 2011-12, this proportion declined to about 50 percent. Secondary and service sectors are showing promising futures for the Indian workforce. You may notice that the shares of these sectors have increased from 11 to 24 percent and 15 to 27 percent, respectively. The distribution of the workforce in different statuses indicates that over the
Informatization of Indian Workforce
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 industrialization strategy would bring surplus workers from agriculture to industry with a better standard of living than 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 benefits, provident fund, gratuity, and pension? Why does a person working in the private sector get a lower salary compared to another person doing the same work in the public sector? You may find that a small section of the Indian workforce is getting regular income. The government, through its
Labour laws enable workers 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 the workforce into two categories: workers in formal and informal sectors, which are also referred to as organized and unorganized 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, the informal sector includes millions of farmers, agricultural laborers, owners of small enterprises, and people working in those enterprises as well as the self-employed who do not have any hired workers.
It also includes all non-farm casual wage laborers 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.
Government and employment generation
You may recall the Mahatma Gandhi National Rural Employment Guarantee Act 2005. It promises 100 days of guaranteed wage employment to all rural households who volunteer to do unskilled manual work. The scheme based on this Act is one of the many measures the government has implemented to generate employment for those who are in need of jobs in rural areas.
Since Independence, the Union and State governments have played an important role in generating employment or creating opportunities for employment generation. Their efforts can be broadly categorized into two — direct and indirect.
Employment Growth Informalisation and Other Issues In the first category, as you have seen in the preceding section, the government employs people in various departments for administrative purposes. It also runs industries, hotels, and transport companies, and hence, provides employment directly to workers.
When the output of goods and services from government enterprises increases, then private enterprises that receive raw materials from government enterprises will also raise their output and hence increase the number of employment opportunities in the economy. For example, when a government-owned
Employment Growth Informalisation and Other Issues Question and Answer
Question:1 What are the causes of informalisation of workforce?
Answer:
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 industrialization strategy would bring surplus workers from agriculture to industry with a better standard of living than 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.
Question:2 What is informalisation of employment?
Answer:
What is employment? Who is a worker? When a farmer works in fields, he or she produces food grains and raw materials for industries. Cotton becomes cloth in textile mills and in power looms. Lorries transport goods from one place to another.
We know that the total money value of all such final goods and services produced in a country in a year is called its gross domestic product for that year. When we also consider what we pay for our imports and get from our exports we find that there is a net earning for the country which may be positive (if we have exported more in value terms than imported) or negative
Question:3 Why is informal employment important?
Answer: Informal employment is important because it provides livelihoods for millions, especially in developing countries, offering flexibility and opportunities for those excluded from formal job markets.