Category : Eye on Economy

The writer holds a postgraduate degree in Political Science and is currently working as a Research Associate at the Centre for Study and Research (CSR), New Delhi.

Introduction

The unorganised sector (interchangeably, the informal sector) comprises 90 per cent of the country’s workforce and contributes around half of the GDP, according to the Labour Bureau, Government of India.

Recent events, such as gig workers’ strikes and the controversy around the government’s reformulation of existing labour laws (i.e. The Code on Social Security, 2020), have drawn attention to the problems of those working in the unorganised sector face. This reformulation of labour laws in the era of crony capitalism, where AI is threatening to take over what little jobs are left, especially in the post-pandemic world, raises questions about the future of work and workers.

But which categories of people are considered to be from the unorganised sector?

The Ministry of Labour & Employment defines the term unorganised worker as having been defined under the Unorganised Workers’ Social Security Act, 2008, as a home-based worker, self-employed worker or a wage worker in the unorganised sector and includes a worker in the organised sector who is not covered by any of the Acts mentioned in Schedule-11 of the Act i.e.

  • The Employee’s Compensation Act, 1923 (3 of 1923)
  • The Industrial Disputes Act, 1947 (14 of 1947)
  • The Employees’ State Insurance Act, 1948 (34 of 1948)
  • The Employees Provident Funds and Miscellaneous Provision Act, 1952 (19 of 1952)
  • The Maternity Benefit Act, 1961 (53 of 1961)
  • Payment of Gratuity Act, 1972 (39 of 1972)

The most well-known of these are construction workers, domestic workers , street vendors, and cottage industries like pickling, beedi-making, etc. and the latest and most rapidly growing sub-category of unorganised labour, gig workers (delivery persons for e-commerce platforms) and many others.

As per the data from an EPW research paper, it is worth noting that state-by-state estimates of formal/informal sector share demonstrate that the informal sector workforce dominates in most Indian states. This is especially noticeable in economically underdeveloped states like Bihar, Uttar Pradesh, Madhya Pradesh, Orissa, and Rajasthan. These are the same states with a significantly higher share of agriculture and related activities than others. More than 94% of workers in these states are estimated to participate in informal economic activity. Even in industrially advanced states like Maharashtra, Gujarat, Tamil Nadu, and West Bengal, unorganised workers account for about 90% of the entire workforce. However, smaller states like Goa, Delhi, and Kerala appear to have less.

Insecurity of work

Despite the devalued and often denigrated nature of unorganised work, its economic contribution is too crucial to be ignored. Yet, the problems faced by those who work in this sector are not being addressed with the required urgency. Women also comprise a large percentage of the unorganised sector workers and face unique problems. Many women in the post-COVID era have also taken to running home businesses and they also face job insecurity.

Due to cyclical job cycles, many unorganised workers lack stable employment opportunities. Even people who appear visibly employed are not gainfully and substantially used, implying the possibility of hidden unemployment. Workplaces are dispersed and fragmented. There is no official employer-employee relationship. In rural areas, the unorganised labour force is stratified based on caste and community. While such factors are significantly fewer in urban regions, it cannot be stated that they are absent because most unorganised workers in urban areas are usually migrants from rural areas.

Workers in the unorganised sector are frequently susceptible to indebtedness and bondage since their meagre earnings cannot cover their necessities.

Unpredictable working conditions can mean earning significantly less than those in the formal sector, even for positions that may not be very different in terms of labour productivity. Caste-based socioeconomic disparities, along with a lack of opportunities for education and skill impartation, prevent workers from adopting newer technologies and better production methods.

The ‘pakodanomics’ phenomenon

Curiously, the economic policy being followed by the government seems to favour the concept of the unorganised sector itself. There were mixed reactions in 2018 when the Prime Minister lauded the idea of self-employment using selling pakoras as an example. Some hailed the idea that the government was promoting self-employment and entrepreneurship; the much-touted policy of Atmanirbhar Bharat encourages self-reliance as a strategy for economic growth.

Others, however, felt this approach, while honourable self-employment (in P Chidambaram’s words), could not be called a job. Such a populist approach brushed the real concerns of growing unemployment and its long-term repercussions.

The merits or demerits of this policy would be a whole other discussion. Still, as renowned public policy scholar Jean Dreze has pointed out, the changing nature of the economy (shrinking of the public sector inevitably leading to more privatisation) notwithstanding, the state can most definitely secure workers’ social security rights.

Social security, or its lack thereof, is easily the biggest concern of the unorganised sector. Significant decline in the unorganised sector of the Indian economy, pointing to the aftermath of demonetisation and the implementation of the Goods and Services Tax (GST). Despite official claims of over 7% annual economic growth, unofficial data reveals a different reality. An All India Manufacturers’ Organisation Survey indicates a substantial reduction in jobs in micro and small enterprises since 2014, with similar trends in medium-scale enterprises and the trading sector. The unorganised sector, which constitutes 31% of GDP, is experiencing a decline, contrary to the organised sector’s growth, leading to a disparity in overall economic growth rates.

Demonetisation and GST have disproportionately affected the unorganised sector, impacting employment, demand for rural employment schemes, and contributing to agrarian distress. The decline in non-agricultural unorganised employment has led to various economic problems, including low capacity utilisation, reduced investment, poor credit offtake, and a rise in the banking sector’s non-performing assets (NPAs).

Unjust changes to labour laws that increased during the COVID-19 global pandemic prompted protests by workers’ unions and even led them to raise their global concerns by approaching the International Labour Organization (ILO).

In 2020, the Government of India replaced 44 extant labour laws. It subsumed them under four new labour codes: the Code on Social Security 2020, Occupational Safety, Health and Working Conditions Code 2020, Industrial Relations Code 2020, and Code on Wages 2019.

These Codes attempt to regulate the organised/unorganised (or any other) sectors and provide social security benefits to all employees and workers across organisations during sickness, maternity, disability, etc. There was much buzz around the fact that, for the first time, the definition of ‘gig worker’ and ‘platform worker’ had been included.

Seemingly progressive, it included important provisions such as digitisation and penalisation of employers who failed to pay employees on time, among others.

However, specific provisions attracted criticism for failing to address the concerns of unorganised sector workers and perpetuating them. For example, informal sector workers have difficulty availing of the government welfare schemes allotted to them. Under this Code, the delivery of social security benefits remains fragmented and overseen by several agencies, including the Central Board of Trustees, Employees State Insurance Corporation, and Social Security Boards. This makes it difficult for workers to receive their welfare benefits. Further, they exclude many informal workers, particularly women, from the benefit provisions.

Looking towards the future

One possible way to make a breakthrough in the current impasse would be to foreground the demands of worker unions, highlighted in the strikes and protests in urban areas in the past year. Specifically, to make these demands an electoral issue. Here, the support from the urban, propertied middle classes will be critical. As the ruling party’s most crucial voter base, the solidarity of this demographic could potentially force the government to take workers’ demands seriously.

The other important task, but easier said than done, would be to support the idea of worker-controlled economies. Practically, that would look like workers being given managerial charge in private enterprises, which would be accountable to workers themselves, as has been suggested by Jean Dreze.

In either case, being avidly concerned for the welfare of people who are repeatedly invisibilised at every turn, from the public policy boardroom to the voting booth, would mean looking beyond the concerns of one’s own caste and class, a tall order for most in majoritarian Indian society.

References:

https://labour.gov.in/sites/default/files/Chapter%20-%208.pdf

Unorganised Sector Workforce in India, Review of Labour, Vol. 41, Issue No. 21, 27 May 2006, Economic and Political Weekly (EPW)

Unorganised labour force in India, Vikaspedia

Falling Fortunes: Evidence is mounting of a crippling decline in the unorganised sector, Arun Kumar, The Caravan

India’s labour law reforms without social dialogue are of concern: ILO’s Corinne Vargha

Nileena MS, The Caravan

‘Self-reliance for Poor and State Support for Business is the New Motto’—Jean Dreze

Pragya Singh, Newsclick

Code on Social Security 2020 and Gig Workers: Notes, Drishti IAS website

Workers in the unorganised sector are frequently susceptible to indebtedness and bondage since their meagre earnings cannot cover their necessities.
Unpredictable working conditions can mean earning significantly less than those in the formal sector, even for positions that may not be very different in terms of labour productivity. Caste-based socioeconomic disparities, along with a lack of opportunities for education and skill impartation, prevent workers from adopting newer technologies and better production methods

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