The unorganised sector in India

Brief history
In the mid 1950s, W.Arthur Lewis developed a theoretical model
of economic development based on the assumption that there
was an unlimited supply of labour in most developin countries
and that this vast pool of surplus labour would be absorbed as
the modern industrial sector in these countries rew. It was
therefore assumed that the traditional sector comprised of petty
traders, small producers and a rane of casual !obs would
eventually be absorbed into the formal economy and disappear.
"his arument became less convincin since the 19#0s when
case studies on informal sector in various parts of the world
bean to reveal the hihly active e$istence of men, women and
children crowdin at the bottom of the urban economy in "hird
World countries. %o many studies have revealed the vast number
of wor&ers, in the "hird World, strivin hard to survive on the
fruits of their labours outside the formal sector of the economy.
"he formal 'informal dichotomy can be rearded as a new
variation on the dualism theories of the past. In the colonial era
a contrast was constructed between an invasive western
capitalist sector and an opposin eastern non(capitalist people)s
economy. In post(colonial development theory the concept of
dualism was applied to the dichotomy of traditional and modern.
Accordin to this view, the rural aricultural order was still
predominantly pre(capitalist while the urban(based industrial
economy was described as capitalist. In the most recent phase of
the dualism doctrine capitalism is the label of only the advanced
sement of the urban milieu* the formal sector. "he modes of
production in the lower economic terrain, rather +uestionably
labeled as non(capitalist, are characteri,ed as the informal
sector.
In operationali,in these variations on dualism, the contrasts are
more sini-cant than the speci-c characteristics of each
sement. .or instance, it)s entirely normal to describe the
informal sector by summin up the absence of elements found in
the formal sector. In the absence of a more analytical de-nition,
the landscape of the informal sector becomes synonymous with
the &aleidoscope of unreulated, poorly s&illed and low(paid
wor&ers. /ihlihtin this chaotic assortment 0eith /art coined
the term 1informal economy) in 19#1.
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"here are di2erent terminoloies used so interchaneably to
sinify the unorani,ed sector li&e informal sector, informal
economy, and even informal labour which often hihlihts the
most a2ected part of the sector, namely, the labour. 3 Informal
labour is a labour whose use is not overned either by state
reulations or by collective areements between wor&ers and
employers.4
Informal labour has, in di2erent instances, been viewed as
labour enaed in urban small scale enterprises, as self
employment, as labour enaed in 3traditional activities4, as
wholly uns&illed labour, and as labour whose use is not sub!ect
to any rules or norms. 5ut none of this has any sound conceptual
or empirical foundation. Informality does not imply a particular
mode or location of labour use6 informal labour can be in self(
employment, in casual wae employment, and in reular wae
employment, !ust as it can be in urban as well as in rural areas.
"here is little reason to thin& that informal labour must be
con-ned to 1traditional) and 1modern) activities.
We do not need to assume that informal labour is uns&illed6 only
need to reconi,e that its s&ills are ac+uired outside the formal
education system. And all the more in the conte$t of the neo(
liberal economic policies of hire and -re where the orani,ed
sector itself is ettin informalised throuh contractualisation,
casualisation, and outsourcin of labour, there are wor&ers who
are e+ually or even more educated and s&illed, wor& better and
even loner in so many of the orani,ed sectors6 but for no
labour rihts, wae, !ob or social security protection and for very
dismal waes. "he casual and contract labourers are under the
wor&in and livin conditions that prevailed in the nineteenth
century 7urope.
%ince the introduction of the informal sector concept, opinion
has been divided as to its socio(economic impact. "here are
authors who positively point out the accelerated shift in
livelihood patterns away from ariculture and villaes to cities
and towns in the "hird World since the mid(twentieth century.
5ut even if the masses of mirants 8oodin into urban areas
were fortunate enouh to establish a foothold, the vast ma!ority
of them could ain no access to the formal sector. It was still too
small to cope with the continuous in8u$ of newcomers.
"he more critical analysis of researchers, who have observed
that the formal sector remained inaccessible for reasons other
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than the inferior +uality of the new urbanites) labour, and their
other defects, re!ects such an optimistic view. "he failure of the
newcomers) e2orts to -nd stable, decently paid and dini-ed
wor& is in this alternative perception due mainly to a
development stratey that, in the face of e$cess supply, see&s to
&eep the price of labour as low as possible, allows no room for
collective action to reduce these people)s vulnerability and
refuses to provide this footloose wor&force with public
representation. In short, the lac& of reistration, orani,ation
and protection does not have its oriin in the free play of social
forces, but it)s the deliberate product of economic interests that
bene-t from the state of informality in which a wide rane of
activities in all branches of the economy are &ept, systematically
and on a lare scale, throuh evasion of labour laws and
ta$ation.
Indeed, the informal sector is not a separate and closed circuit
of wor& and labour. "here is the interaction, between the formal
and informal sectors, and dependence of the latter on the former
and even its subordination to it. 9ow with the neo(liberal
economic policies there is the widespread informali,ation of the
formal sector throuh down si,in, casualisation and
contractualisation. In short the capitalist leaches become richer
and richer by s+uee,in the life blood of the wor&in force.
The Indian Scenario
"he Indian 7conomy is characteri,ed by the e$istence of a vast
ma!ority of informal or unorani,ed labour employment. As per
the 7conomic %urvey :00#(0;, 9<= of India)s wor&force include
the self employed and employed in unorani,ed sector. "he
>inistry of Labour, ?overnment of India, has cateori,ed the
unorani,ed labour force under four roups in terms of
@ccupation, nature of employment, specially distressed
cateories and service cateories.
1. In terms of @ccupation*
%mall and marinal farmers, landless aricultural
labourers, share croppers, -shermen, those enaed in
animal husbandry, beedi rollin, labelin and pac&in,
buildin and construction wor&ers, leather wor&ers,
weavers, artisans, salt wor&ers, wor&ers in bric& &ilns and
stone +uarries, wor&ers in saw mills, oil mills etc. come
under this cateory.
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:. In terms of 9ature of 7mployment*
Attached aricultural labourers, bonded labourers, mirant
wor&ers, contract and casual labourers come under this.
<. In terms of %pecially distressed cateories*
"oddy tappers, %caveners, Aarriers of head loads, Brivers
of animal driven vehicles, Loaders and unloaders come
under this cateory.
C. In terms of %ervice cateories*
>idwives, Bomestic wor&ers, .ishermen and women,
5arbers, Deetable and fruit vendors, 9ews paper vendors
etc. belon to this cateory.
In addition to these four cateories, there e$ists a lare section
of unorani,ed labour force such as cobblers, /amals,
/andicraft artisans, /andloom weavers, Lady tailors, Ehysically
handicapped self employed persons, Fi&shaw pullers, Auto
drivers, %ericulture wor&ers, Aarpenters, "annery wor&ers,
Eower loom wor&ers and Grban poor.
"houh the availability of statistical information on intensity and
accuracy vary sini-cantly, the e$tent of unorani,ed wor&ers is
sini-cantly hih amon aricultural wor&ers, buildin and
other construction wor&ers and amon home based wor&ers.
Accordin to the 7conomic %urvey :00#(0; aricultural wor&ers
constitute the larest sement of wor&ers in the unorani,ed
sector Hie. 5:= of the total wor&ersI.
As per the 9ational %ample %urvey @rani,ation H9%%@I, <0
million wor&ers in India are constantly on the move Hmirant
labourI and :5.9C million women wor&force has been added in
the labour mar&et from the year :000 onwards. All the more
every day 1<000 Indians turn J0 years and they are e$pected to
live another averae of 1#years. Gnfortunately only 10= of the
Indians save for old ae. "he traedy is that the e$istin social
security leislations cover only ;= of the total wor& force of C59
million in India.
"he latest report of the 9%%@ uploaded by the close of >ay :011
about the casual wor&ers in India between :00C(05 and :009(10
compared to that of the period between 1999 ' :000 and :00C(
05 very clearly shows that there is sini-cant increase in the
number of casual wor&ers and decline in the number of reular
wor&ers.
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"his report shows a substantial shift between 1999(00 and :009(
10 in the structure of the labour force which can be broadly
divided in to self employed, reular, and casual wor&ers. Hcasual
wor&ers are employees who do not en!oy the same bene-ts and
security as tenured employees. All daily wae employees and
some cateories of contract employees are casual labourers.I
All these 9%%@ reports are clear evidences to prove that the
labour mar&et of India has been underoin tremendous
transformations, includin rowth of informal sector activities,
deterioration in the +uality of employment Hin terms of !ob
security, terms and conditions at wor&I, Wea&enin of wor&er
orani,ations and collective barainin institutions, mar&ed
decline in social security etc. "o a reater e$tent, these
transformation could be related to the onoin lobali,ation
process and the resultant e2orts on the part of employers to
minimi,e the cost of production to the lowest levels. It is also
evident that most of these outcomes are hihly correlated and
mutually reinforcin. A closer analysis suests that the rowin
informalisation of labour mar&et has been central to most of
these transformations, which inter alia hihlihts the utility of
understandin the rowth of unorani,ed sector in India and its
implications.
>any thouht that India)s rowth could do no wron, and too&
the administrative versions and interpretations for ranted. 9ow
it comes to a point that none of these can be ta&en for ranted.
?rowth is slow, in8ation is structural and structure of
employment is not enouh to cater to the rowin labour force.
Growing prominence of unorganized sector in India
Eredominance of informal employment has been one of the
central features of the labour mar&et scenario in India. While the
sector contributes around half of the ?BE of the county, its
dominance in the employment front is such that more than 90=
of the total wor&force has been enaed in the informal
economy. As per the latest estimation of a %ub(committee of the
9ational Aommission for 7nterprises in the Gnorani,ed %ector
H9A7G%I, the contribution of unorani,ed sector to ?BE is about
50= H9A7G% :00;I.
"his national level pattern of informal wor&ers occupyin around
90= of the wor&force is more or less similar in the case of most
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of the prominent states in the country. Amon the unorani,ed
sector wor&ers, a considerable proportion Habout J5=I is
enaed in aricultural sector, which in turn indicates the
prominence of rural sement in the informal economy.
"he rowth of formal employment in the country has always
been less than that of total employment, indicatin a faster
rowth of employment in the informal sector. Available data
suests that within the formal sector also the proportion of
informal K unorani,ed wor&ers are on the increase. .or
instance, by providin a comparison of the 9%%@ 7mployment
Bata for 55
th
and J1
st
Founds Hfor 1999(:000 and :00C(05
respectivelyI the 9A7G% H:00#I e$plains that the country is
currently in a state of 3informalisation of the formal sector4,
where the entire increase in the employment in the orani,ed
sector over this period has been informal in nature.
It is widely ac&nowleded that the informal sector in India
su2ers from a low productivity syndrome, compared to the
formal sector. "he prominent features of the sector are lower
real waes and poor wor&in K livin conditions.
.urther, the sector is characteri,ed by e$cessive seasonality of
employment Hespecially in the farm sectorI, preponderance of
casual and contractual employment, atypical production
orani,ations and wor& relations, absence of social security
measures and welfare leislations, neation of social standards
and wor&er rihts, denial of minimum waes and so on. Eoor
human capital base Hin terms of education, s&ill and traininI as
well as lower mobili,ation status of the wor& force further add to
the vulnerability and wea&en the barainin strenth of wor&ers
in the informal sector. "hus, the sector has become a competitive
and low cost device to absorb labour, which cannot be absorbed
elsewhere, whereas any attempt to reulate and brin it into
more e2ective leal and institutional framewor& is perceived to
be impairin the labour absorbin capacity of the sector.
With the advent of lobali,ation and resultant reorani,ation of
production chains led to a situation where production systems
are becomin increasinly atypical and non(standard, involvin
8e$ible wor&force, enaed in temporary and part(time
employment, which is seen larely as a measure adopted by the
employers to reduce labour cost in the face of sti2 competition.
9o doubt, it obviously indicates that these 8e$ible wor&ers in the
new informal economy are hihly vulnerable in terms of !ob
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security and social protection, as they are not derivin any of the
social protection measures stipulated in the e$istin labour
leislations. "he insecurities and vulnerabilities of these modern
informal sector labour are on the rise, as there is a visible
absence of wor&er mobili,ation and orani,ed collective
barainin in these sements owin to a multitude of reasons.
"he alarmin e$pansion of informal sector, in recent times, has
adversely a2ected employment and income security for the
larer ma!ority of the wor&force, alon with a mar&ed reduction
in the scale of social welfare K security proramme.
In our 3lobal4 cities such as 5analore, which are bein show(
cased as the new faces of an aLuent and vibrant India, there are
la&hs of people who rely on manual labour for their own
livelihood. "he housemaids, security uards, construction
wor&ers, arment wor&ers, cobblers, beedi wor&ers, aarbati
wor&ers, drivers and many others have a very di2erent story to
tell. "heir incomes have not rown at the staerin rate of their
employers6 indeed ad!usted for in8ation their incomes have often
fallen over the last two and half decades, drivin them into
deeper poverty.
The major characteristics of the unorganized workers:
"he unorani,ed labour is overwhelmin in terms of its
number rane and therefore they are omnipresent
throuhout India.
As the unorani,ed sector su2ers from cycles of e$cessive
seasonality of employment, ma!ority of the unorani,ed
wor&ers does not have stable durable avenues of
employment. 7ven those who appear to be visibly employed
are not ainfully and substantially employed, indicatin the
e$istence of disuised unemployment.
"he wor&place is scattered and framented.
"here is no formal employer ' employee relationship
In rural areas, the unorani,ed labour force is hihly
strati-ed on caste and community considerations. In urban
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areas while such considerations are much less, it cannot be
said that it is altoether absent as the bul& of the
unorani,ed wor&ers in urban areas are basically mirant
wor&ers from rural areas.
Wor&ers in the unorani,ed sector are usually sub!ect to
indebtedness and bondae as their meaer income cannot
meet with their livelihood needs.
"he unorani,ed wor&ers are sub!ect to e$ploitation
sini-cantly by the rest of the society. "hey receive poor
wor&in conditions especially waes much below that in
the formal sector, even for closely comparable !obs, ie,
where labour productivity are no di2erent. "he wor& status
is of inferior +uality of wor& and inferior terms of
employment, both remuneration and employment.
Erimitive production technoloies and feudal production
relations are rampant in the unorani,ed sector, and they
do not permit or encourae the wor&men to imbibe and
assimilate hiher technoloies and better production
relations. Lare scale inorance and illiteracy and limited
e$posure to the outside world are also responsible for such
poor absorption.
"he unorani,ed wor&ers do not receive su2icient
attention from the trade unions.
Inade+uate and ine2ective labour laws and standards
relatin to the unorani,ed sector.
Social security measures:
It is rihtly true that when independent India)s constitution was
drafted, social security was specially included in List III to
%chedule DII of the constitution and it was made as the
concurrent responsibility of the central and state overnments.
A number of directive principles of state policy relatin to
aspects of social security were incorporated in the Indian
constitution. "he initiatives in the form of Acts such as the
Wor&men)s Aompensation Act H19:<I, the Industrial Bisputes Act
H19C#I, the 7mployees %tate Insurance Act H19C;I, the >inimum
Waes Act H19C;I, the Aoal >ines Erovident .unds and
>iscellaneous Erovisions Act H19C;I, "he 7mployees Erovident
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.und and >iscellaneous Erovisions Act H195:I, the >aternity
5ene-t Act H19J1I, the %eamen)s Erovident .und Act H19JJI, the
Aontract Labour Act H19#0I,
the Eayment of ?ratuity Act H19#:I, the 5uildin and
Aonstruction Wor&ers Act H199JI etc. reveal the attention iven
to the orani,ed wor&ers to attain di2erent &inds of social
security and welfare bene-ts. "houh it has been arued that
the above Acts are directly and indirectly applicable to the
wor&ers in the unorani,ed sector also, their contribution is very
neliible to the unorani,ed wor&ers.
Inspite of the fact that not much has been done in providin
social security cover to the rural poor and the unorani,ed
labour force, the country has made some beinnin in that
direction. 5oth the central and state overnments have
formulated certain speci-c schemes to support unorani,ed
wor&ers which fails in meetin with the real needs and
re+uirements of the unorani,ed sector labour force.
"his becomes clear even when the hihly proclaimed 9ational
Fural 7mployment ?uarantee Act (:005 H9F7?AI, thouh it is a
brea&throuh, doesn)t have common wae in di2erent states and
limits itself only to hundred day)s wor& for those reistered
wor&er under the Act. What about the rest of the days in an
yearM As per this Act, the wor& uarantee applies in rural areas
only, what about the urban poorM
And loo&in at the recent Gnorani,ed %ectors) %ocial %ecurity
Act H:00;I , one really wonders if there is any provision for an
unorani,ed wor&er in this Act other than some uidelines about
the available social security schemes in the country. /ow can it
be called an Act unless it has the leal bindin and provisions of
rihts to wor& and entitlements under itM /ere as per the Act
nothin is mentioned about what constitutes appropriate and
ade+uate social security for the vast mass of unorani,ed
wor&ers and their dependents, what eliibility criteria, if any,
ouht to be prescribed, what will be the scale of bene-ts that the
wor&ers and their families are entitled to receive and under
what conditions, what will be the fundin arranements that
must be put in positions to meet the cost of social security and
so on. Aren)t the unorani,ed wor&ers of this country entitled to
receive, in this J0
th
year of our Fepublic, minimum standards of
social security and labour rihts, on the scale and spread
adumbrated in the relevant IL@ convention drawn up more than
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50 years aoM "herefore, this law which does not deal with the
issue of unemployment, its reulation, waes, and conditions of
wor& and so on is not merely incomplete but dysfunctional if it
proceeds to deal with social security on a stand alone basis. "he
Act, actually, su2ers from a serious lac& of leislative policy and
intent. Gltimately this Act is an eye wash which has neither the
capacity to address nor the inbuilt provision to provide solutions
to the needs of the unorani,ed sector. 7ven the provisions and
procedure of the >inimum Waes Act H19C;I is so vaue and
futile that di2erent states of India have -$ed abysmally meare
waes and that too with so much of variations from state to
state.
In fact a comprehensive Act, caterin to the security needs of
the unorani,ed sector such as .ood, 9utrition, /ealth,
/ousin, 7mployment, Income, Life and accident, and old ae
remains a dream in India. %till the cries of the unorani,ed
sector oes unattended with the overnments layin red carpets
for the corporates and so called investors at the e$pense and
sacri-ce of the wor&in class.
Tomy Jacob
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