Informal Work

Author(s): Meghnad Desai

Source: Indian Journal of Industrial Relations , January 2013, Vol. 48, No. 3, Special
Issue on Unorganized Workers (January 2013), pp. 387-389
Published by: Shri Ram Centre for Industrial Relations and Human Resources

Stable URL: https://www.jstor.org/stable/23510785

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Informal Work

Meghnad Desai

Formal Labor Markets

For much of history, work was infor

The situation of informal work
ers in India remains precarious.
The rigid boundaries defining
what is a formal sector enter
prise not only leave many out
side but even in the formal sec
tor casualization is rampant
since the costs of employing
workers on a regular basis in a
formal sector are higher than
having contract labor. The re
cent troubles at the Maruti Plant
in Manesar (Haryana) owed
something to the conflict be
tween the rights of casual con
tract labor as against the regu
lar labor, argues the author.
Meghnad Desai is Professor Emeritus at the Londonended up with formal labor markets and
School of Economics and the Founder Director of
the Centre for the Study of Global Governance. Hework.
is a Member of the House of Lords.
mal, casual and precarious. But it was
seldom regular or bound by the clock. It
was often seasonal. People worked for
themselves as peasants or for landlord
as serfs or slaves. Apprentices signed up
with Masters and became like family
members. Shop keepers employed thei
family members or poorer relations on a
informal basis.
With the advent of the Industrial
Revolution, work became more regular,
dictated by the needs of the machines,
and the importance of getting things out
on time. There were shifts of work and
the issue of the length of the working
day (to which Karl Marx devoted a large
chapter in Capital Volume 1) became an
arena of struggle. As things advanced,
there was a greater protection for work
ers in enterprises about their hours of
work, their health, and their wage rates.
Trade Unions entered the foray to se
cure better rights and got legislation
passed to enshrine the rights of factory
workers in law. Developed countries
workers' rights defined at the place of
The insecurity of periodic unem
ployment still remained but even so when

The Indian Journal of Industrial Relations, Vol. 48, No. 3, January 2013 387

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 Meghnad Desai

employed in an enterprise, workers had of employing workers on a regular basis

rights. in a formal sector are higher than having
contract labor. [The recent troubles at th
Much of the rest of the world has Maruti Plant in Manesar (Hary
carried on with a tiny sliver of the something to the conflict be
economy organized along formal lines rights of casual contract labo
with factories and labor legislation guar- the regular labor.]
anteeing workers' rights. These, largely
urban, workers employed in the larger
India has an exceptionally large
enterprises have secured rights, similar
proportion of workers in the infor
to those in the developed country in
mal sector even compared to other
theory, if not in practice. In India, after
South Asian or developing econo
independence, there was great effort to
mies.
secure the workers in the formal sector
as many rights as their fellow workers in
the metropolitan economies enjoyed. The issue of costs of employment
the key here. In the formal sector, the
money costs of the risks and uncertain
In India, the developed formal sec
tor remains an island of under 10 ties of enterprise have to be shared be
tween the employer and the employee.
percent surrounded by the swamp
of informal workers. These costs are additional to the wage as
such. In the informal sector, all the costs
fall on the worker. The gap between the
Yet the bulk of labor force worked in total costs of employing a worker on
the informal sector. In India, the devel- regular basis in the formal sector and the
oped formal sector remains an island of wage of a worker in the informal secto
under 10 percent surrounded by the or even a causal worker in the same e
swamp of informal workers. Informal terprise is very wide. India has an exce
work is the norm; formal work the ex- tionally large proportion of workers in the
ception. Yet little effort has been made informal sector even compared to othe
to extend even a modicum of rights to South Asian or developing economies a
those working in the informal sector Chen and Vanek show in their paper in
this Special Issue. The advent of liberal
Formal Sector Casualization economic reforms has not led to any ex
tension of rights to the informal sector, nor
As many articles in this Special Is- any dilution of rights in the formal sector,
sue point out, the situation of informal Still as Ramaswamy shows, the persisten
workers remains precarious. The rigid high growth of the last decade has led t
boundaries defining what is a formal sec- a rise in real wages across the board in
tor enterprise not only leave many out- the informal sector. This is welcome bu
side but even in the formal sector not enough to alleviate the insecurity o
casualization is rampant since the costs the worker in the sector.

388 The Indian Journal of Industrial Relations, Vol. 48, No. 3, January 201

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 Informal Work

One reason for weakness of the in- even a third of total labor force under
formal sector is the difficulty of organiz- formal employment in India that would
ing the workers in these sectors. The unit be a great step forward. Can this be
of employment is small, unincorporated done?
and/or unregistered which makes com
bining workers in solidaristic unions dif- In India, this issue is often described
ficult and the downsize costs of employer as labor market/labor law reform or the
resentment high. Joseph and Jagannathan hiring and firing question. There is a great
show this in their account of three case resistance to diluting any of the legisla
studies. Yet as Nayak and Sen in their tion protecting the rights of the workers
separate contributions show, there have in the 10 % (if that) of the economy. This
been some successful attempts at orga- has led to the manufacturing sector of
nizing informal workers many of whom the Indian economy being capital inten
are self employed. There is an important sive and medium or high tech. The share
gender dimension here as women are of manufacturing in the total economy
often self employed and they are also has also stagnated around 25%. This is
more likely to be in the informal sector because the cost of labour in the formal
than men. sector is very high and only highly capi
tal intensive firms can manage to bear i
This Special Issue is not concerned Other countries of South Asia
with changes in the legislation etc. It ( Bangladesh for instance) or South East
seeks to inform and enlighten us about Asia ( Malaysia, Indonesia) have man
the true situation of the informal sector aged to have low tech manufacturing
today and as such it should become an enterprises with a large size employing
item to read again and again. thousand plus workers on a single sight.
China has of course done much better.
One More Thing
India needs to work out a midway
I want to take up a controversial is- solution between a well protected but
sue which arises out of this set of stud- small formal sector and a vast informal
ies but is not addressed by any of the sector or a total evisceration of all right
authors. What follows is my own view which many people fear who resist an
on the issue of informal labor markets. change in the current legislation. It should
be possible to extend basic rights of se
The answer to the insecurity of in- curity of employment, regularity of pay
formal employment is of course to make and health and safety rights to a muc
as much employment formal as possible, larger part of the workforce. India coul
Chen and Vanek see this as one of the remove many more people from abject
options. There will always be self em- poverty if it could provide regular fac
ployment and many SMEs will not have tory employment to many who are stuc
all the characteristics of a fully incorpo- in informal sector jobs. But this requires
rated enterprise. But if one can envisage leadership.

The Indian Journal of Industrial Relations, Vol. 48, No. 3, January 2013 38

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