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ISSUES AND CHALLENGES OF EMPLOYMENT IN UNORGANIZED SECTORS

ISSUES AND CHALLENGES OF EMPLOYMENT IN

UNORGANIZED SECTORS

 

 

Abstract:

Informal sector is referred to as the unorganized sector. This sector broadly corresponds to the household sector including private unincorporated enterprises. The unorganized sector also includes some formal activities on which there is no regular system of data availability. However, contribution of these formal activities in the unorganized sector is quite small he term informal sector was coined by the British economist Keith Hart in 1971, the fact remains that it has emerged as a dynamic and vibrant sector, representing a growing proportion of economic activity, particularly in the developing countries. This sector broadly corresponds to the household sector including private unincorporated enterprises. The unorganized sector also includes some formal activities on which there is no regular system of data availability. The Government of India set-up a  ‘National Commission on Enterprises in the Unorganized/Informal Sector’ through a resolution dated 20th September, 2004 as an advisory body and watchdog for the informal sector.   This paper is based on Issues and Challenges of employment in unorganized sectors, and it is explain about introduction of unorganized sector, Status, Issues and Challenges of employment in India, and also explained about unorganized sectors details and issues and challenges details, and the conclusion of unorganized sectors details.

 

INTRODUCTION

The definition of informal sector as adopted by the Fifteenth International Conference of Labour Statisticians in 1993, is regarded as a group of household enterprises or unincorporated enterprises owned by households that includes informal own-account enterprises, which may employ contributing family workers and employees on an occasional basis; and enterprises of informal employers, which employ one or more employees on a continuous basis. Although various conceptualizations of the informal sector have been debated ever since the term “informal sector” was coined by the British economist Keith Hart in 1971, the fact remains that it has emerged as a dynamic and vibrant sector, representing a growing proportion of economic activity, particularly in the developing countries.

 

In the informal sector is referred to as the unorganised sector. This sector broadly corresponds to the household sector including private unincorporated enterprises. The unorganised sector also includes some formal activities on which there is no regular system of data availability. However, contribution of these formal activities in the unorganized sector is quite small.

The Government of India set-up a ‘National Commission on Enterprises in the Unorganized/Informal Sector’ through a resolution dated 20th September, 2004 as an advisory body and watchdog for the informal sector.  The terms of reference of the Commission included (i) the status of unorganized/informal sector in India including the nature of enterprises, their size, spread and scope, and magnitude of employment; (ii) the existing arrangements for estimating employment and unemployment in the informal sector  (iii) suggest elements of an employment strategy focussing on the informal sector; (i) identify constraints faced by small enterprises with regard to freedom of carrying out the enterprise, access to raw materials, finance, skills, entrepreneurship development, infrastructure, technology and markets and suggest measures to provide institutional support and linkages to facilitate easy access to them, etc.  As the Commission started functioning, the adoption of a uniform definition of un-organized/informal sector, based on the characteristics of the enterprises, became an absolute necessity for the completion of its tasks.

The first Indian National Commission on Labour (1966-69) defined the ‘unorganised sector work-force’ as “those workers who have not been able to organise themselves in pursuit of their common interest due to certain constraints like casual nature of employment, ignorance and illiteracy, small and scattered size of establishments”. On the other hand, the unorganised sector refers to those enterprises whose activities and/or collection of data are not regulated under any legal provision or where any regular accounts are not maintained. Further, in the unorganised sector, in addition to the unincorporated proprieties or partnership enterprises, enterprises run by the cooperative societies, trusts, private and limited companies are also covered. The informal sector, therefore, can be considered as a sub-set of the unorganised sector.

STATUS, ISSUES AND CHALLENGES OF EMPLOYMENT IN INDIA

Division across sectors:

In the usually employed (‘all’ workers) category, 57 per cent among males and nearly 62 per cent among females were self-employed. The corresponding proportions in urban India were 44 per cent for males and 45 per cent for females. One needs to examine to what extent institutional finance has a role to play in the lives of those self-employed. In the rural areas, 67 per cent of usually employed males and 84 per cent of usually employed females were engaged in the agricultural sector. In rural India, the proportion of ‘all’ male workers engaged in the agricultural activities declined gradually from 81 per cent in 1977-78 to 67 per cent in 2004-05. (This may be pointing to increased migration to cities, among other causes). For all female workers, the decline was less - from 88 per cent in 1977-78 to 83 per cent in 2004-05.

In urban India, the tertiary sector engaged 59 per cent of male workers while secondary sector accounted for 35 per cent of the usually employed males. For females, the corresponding proportions were lower at 53 and 31 per cent.  In urban India, the ‘trade, hotel and restaurant' sector engaged about 28 percent of the male workers while ‘manufacturing’ and ‘ser­vices’ sectors accounted for nearly 24 and 21 percent, respectively, of the usually employed males. Quality of employment in these sectors, especially trade, hotel and restaurants is an issue of concern.

Wages (gender parity)

In rural India, on an average, per day, a male casual labourer earned Rs. 56.53, Rs. 20.38 more than a female causal labourer who earned Rs.36.15. In urban India, wage difference was more prominent. A male casual labourer in the urban areas earned Rs.75.51 in a day and female, Rs. 44.28 in a day.

Rates of employment/unemployment

93 per cent of the labour force is employed in the "unorganised sector", i.e. sectors which don't provide with the social security and other benefits of employment in the "organised sector."  The unemployment rate went up between 1993-94 to 2004. On the basis of current daily status (unemployed on an average in the reference week), during the reference period, unemployment rate for males increased from 5.6 per cent to 9.0 per cent in rural areas, and from 6.7 per cent to 8.1 per cent in urban areas.

Unemployment rate for females increased from 5.6 per cent in 1993-94 to 9.3 per cent in 2004 in rural areas. The gender differential in the worker population ratio (WPR) was distinct: 55 per cent for males and 33 per cent for females in the rural areas, and 55 per cent for males and 17 per cent for females in the urban areas.

The rate of growth of employment declined sharply from 2.04% per year in the period 1983-94 to only 0.98% per year in the period 19994 to 2000. This is while the labour force increases roughly by 2.5% every year.

There is substantial decline in employment elasticity (e.g. increase in employment for every unit rise in GDP) in almost all the major productive sectors, except for transport and finance. The reason for the phenomenon of jobless growth could be that growth in India has essentially been capital intensive. In any case, the share of the organized sector is too small to really make a difference. The Indian economy has also seen growth on the shoulders of a very successful services sector, which has offset slow growth in manufacturing (which could have been relied upon to generate substantial employment) and the insignificant growth rates in agriculture.

Regular employment was unavailable for many workers. This was indicated by the fact that unemployment rates on the basis of current daily status were much higher than those on the basis of usual status (unemployed on an average in the reference year).

Urban unemployment rates (current daily status) were higher than rural unemployment rates for both males and females in 1993-94. However, in 2004, rural unemployment rates for males was higher than that of urban males. Again, it is important to look at quality of employment in urban areas.  Unemployment rates varied sharply across States. States, where wages are higher than in neighbouring ones because of strong bargains or social security provisions, such as high minimum wage, had high incidence of unemployment, in general.

In the rural areas, for every 1000 households, about 17 households reported that at least one male member had got the work in public works, whereas only 8 households reported that at least one female member had got the work in public works for at least 60 days during the last 365 days. Among the social groups, the incidence is found to be highest for the STs, followed by the SCs and OBCs. This may be considered in the implementation of schemes like the NREGS.

UNORGANISED SECTORS

 1. Agriculture, forestry, fishing and mining : Issues and Challenges

The estimates of value added for the primary activities (agriculture, livestock, forestry, fishing and mining) are compiled by multiplying the data on production in quantities with the producers’ prices, and deducting from therein, the material input costs. The commodity-wise data on production, prices and inputs are available from the administrative source agencies. The production data in agriculture, forestry and fishing includes production for own final consumption. Generally for these activities, the overall estimates are prepared, item-wise, and those covered under organized sector are excluded to obtain the value added estimates for the unorganized segment of these activities. However, for mining, the estimates of organized and unorganized segments are compiled independently.

 

For the agricultural activities, estimates of area under different crops are made from the village records generally on complete enumeration basis, and the estimates of yield for principal crops are based on about 500,000 crop cutting experiments conducted every year. For some of the other crops, especially those covered under plantation crops, the respective Boards provide the relevant production data. However, there is under coverage in this in respect of crops, although the gross cropped area is accounted for from the land use statistics. These relate to certain miscellaneous and ‘other’ crops, for which data on area under these crops is available from land-use statistics, but yield rates are not available. For the sake of exhaustiveness, an estimated value per hectare is applied on the area under these miscellaneous and other crops to arrive at the value of output estimate. Similarly, in respect of output of grass used as feed of livestock, estimates are built up using the gross area available from all sources (including forest) for grazing purpose. The value of output of agriculture also includes agricultural production in the backyard/ foreyard, which is estimated on the basis of data available on land under homestead and value per hectare of horticultural crops. The value added in the unorganized segment is estimated by subtracting the component of organized segment from the overall commodity-wise estimates.

In the livestock, the 5-yearly livestock census provides the data on various categories of livestock population, by age and breed. The growth rates observed between the previous two censuses are used to estimate the livestock population for the subsequent years. The annual yield rates of livestock products are estimated through the Integrated Sample Survey, which is conducted through administrative agencies. By applying the yield rates on the projected livestock population, estimates of various livestock products are obtained. The entire activity is taken to be under the unorganized sector.

 

In the forestry, the production data furnished by the forest agencies on industrial wood, minor forest products and firewood has some amount of undercoverage. In order to account for this under-coverage, the total production of industrial wood is taken as 110% of the reported production. For the firewood, the production is estimated from the data on household consumption of firewood (available from consumer expenditure surveys) suitably adjusted for inter-industry consumption and other agricultural by products used for firewood purpose. The data on household firewood consumption is available from the consumer expenditure surveys of National Sample Survey Organisation (NSSO), which includes consumption from own resources. From the overall estimates, the components of organized sector are subtracted to obtain the estimates of value added for the unorganized segment.

 

Data on fishing activity is available from the surveys conducted at landing centres to capture the production of marine and inland fish. The under-coverage in this case relates to subsistence fishing (mainly for own final consumption). Based on type studies conducted in some places, the subsistence fishing is estimated to be 12.5% of inland fish production. The data on production of salted and sundried fish is also available from the administrative sources. The value addition on account of these activities is included in the national accounts. The value added in the unorganized sector is estimated as residual from overall estimates, by subtracting the contribution of activities in the public sector.

 

For the mining and quarrying activities, data on major minerals, including salt production through pan drying process of reliable quality is available regularly from administrative sources. Contribution of minor minerals to the value added is estimated from the data available with State Governments, and is taken to be under the unorganized sector. The under coverage in this relates to subsidiary activities undertaken by the mining enterprises. The contribution of these subsidiary activities is assessed by analysing the annual reports of these enterprises. Mining activity is mostly in the public sector and the unorganized sector’s share within mining and quarrying is about 8%.

2. Social Security for Contractual Labour: Issues and Challenges

The first Indian National Commission on Labour (1966-69) defined the ‘unorganised sector work-force’ as “those workers who have not been able to organise themselves in pursuit of their common interest due to certain constraints like casual nature of employment, ignorance and illiteracy, small and scattered size of establishments”. It may also be pointed out that the organised sector comprises enterprises for which adequate data and information is available and same are covered with a legal framework. On the other hand, the unorganised sector refers to those enterprises whose activities and/or collection of data are not regulated under any legal provision or where any regular accounts are not maintained. Further, in the unorganised sector, in addition to the unincorporated proprieties or partnership enterprises, enterprises run by the cooperative societies, trusts, private and limited companies are also covered. The informal sector, therefore, can be considered as a sub-set of the unorganised sector.

The size of the unorganised sector is relatively large and will continue to be so in the years to come in view of the limited employment opportunities in the organised sector as also due to the outsourcing of a number of occupations/activities from the organised sector. The results of the Survey of the National Sample Survey Organisation (NSSO), carried out in 1999-2000, revealed that out of a total workforce of 397 million, only 28 million (seven per cent) workers are employed in the organised sector and the remaining 93 per cent are employed in the unorganised sector. The Survey also revealed that over a decade, employment in the organised sector has been almost stagnant or has slightly declined.

As per the Survey, there were 44.35 million enterprises and 79.71 million workers in the non-agricultural informal sector of the economy. Among these 25.01 million enterprises employing 39.74 million workers were in the rural areas whereas 19.34 million enterprises with 39.97 million workers were in the urban areas. The informal sector thus provides income-earning opportunity to a larger work force and a larger number of workers are getting their livelihood from the informal sector. The unorganised sector, therefore, has been playing a vital role in providing employment in the economy. It is estimated that the contribution of the unorganised sector to the net domestic product and its share in the total NDP at current prices is over 60 per cent. It accounts for over 40 per cent of our exports. In terms of savings also, its share in the gross domestic savings is significant

In view of the above, it is amply clear that the unorganised sector of the Indian economy provides employment to a large segment of labour force, including contractual labour, and that measures need to be taken to protect the workers from income insecurity, occupational insecurity and natural insecurity. The efforts and steps proposed to be undertaken by the state in this direction are appreciable. However, paucity of resources especially at the States’ level may be a hindrance to achieve the desired goals. Hence the role of the state should be that of a facilitator and at the same time to extend required assistance to voluntary agencies/associations, such as the Self-Employed Women’s Association (SEWA), to provide necessary social security to the workers of the unorganised sector.

Estimates of Informal Sector Employment:

            By applying the revised definition of Informal Sector in the non-agricultural sector and using the approximations mentioned above in the agricultural sector, the employment in the informal sector has been worked out from the data sets of NSS 57th round survey (July 2000 to June 2004) on employment-unemployment.  The estimates thus obtained were adjusted for census population as on First January, 2000.  These adjusted estimates by sector and size are given in Table 1.

Table-1:   Estimates of Employment in Informal Sector

 

Sl. No.

Sector

Estimated Number of Workers (Million)

Male

Female

Total

1.

1.1

1.2

Agriculture:

Rural

Urban

 

137.51

4.95

 

87.09

3.24

 

224.60

8.19

 

Total

142.46

90.33

232.79

2

2.1

2.2

Non-agriculture

Rural

Urban

 

40.35

45.13

 

11.68

10.36

 

52.03

55.49

 

Total

85.48

22.04

107.52

3

3.1

3.2

All India

Rural

Urban

 

177.86

50.08

 

98.77

13.60

 

276.63

63.68

 

Total

227.94

112.37

340.31

            The total employment in the economy as estimated from the same data sets was 396.77 Million.  The break-up of total employment by sector and size is given in Table 2.

Table –2:  Estimated Total Employment in the Economy

 

Sector

Estimated Number of Workers (Million)

Male

Female

Total

Rural

196.74

104.02

300.76

Urban

77.05

18.96

96.01

Total

273.79

122.98

396.77

Table-3:  Percentage share of Informal Sector Workers by Sector and Sex

Sector

Percentage Share (Million)

Male

Female

Total

Rural

90.40

94.96

91.98

Urban

65.00

71.73

66.33

Total

83.26

91.38

85.77

The percentage share of informal sector workers amongst various categories of total workers is given in Table-3.

Conclusion:

In unorganized sector corresponding proportions in urban India were 44 per cent for males and 45 per cent for females. One needs to examine to what extent institutional finance has a role to play in the lives of those self-employed. In the rural areas, 67 per cent of usually employed males and 84 per cent of usually employed females were engaged in the agricultural sector. On the basis of current daily status (unemployed on an average in the reference week), during the reference period, unemployment rate for males increased from 5.6 per cent to 9.0 per cent in rural areas, and from 6.7 per cent to 8.1 per cent in urban areas.

 

Unemployment rate for females increased from 5.6 per cent in 1993-94 to 9.3 per cent in 2004 in rural areas. The gender differential in the worker population ratio (WPR) was distinct: 55 per cent for males and 33 per cent for females in the rural areas, and 55 per cent for males and 17 per cent for females in the urban areas.

 

The rate of growth of employment declined sharply from 2.04% per year in the period 1983-94 to only 0.98% per year in the period 19994 to 2000. This is while the labour force increases roughly by 2.5% every year. The size of the unorganised sector is relatively large and will continue to be so in the years to come in view of the limited employment opportunities in the organised sector as also due to the outsourcing of a number of occupations/activities from the organised sector. The results of the Survey of the National Sample Survey Organisation (NSSO), carried out in 1999-2000, revealed that out of a total workforce of 397 million, only 28 million (seven per cent) workers are employed in the organised sector and the remaining 93 per cent are employed in the unorganised sector. The informal sector thus provides income-earning opportunity to a larger work force and a larger number of workers are getting their livelihood from the informal sector. The unorganized sector, therefore, has been playing a vital role in providing employment in the economy.

 

References:

1. Commission of European Communities, International Monetary Fund, Organization for Economic Cooperation and Development, United Nations and World Bank             (1993): System of National Accounts 1993
2. Organization for Economic Co-operation and Development (2002): Measuring the Non-Observed Economy - A Handbook
3. Central Statistical Organization, India (1998): National Industrial Classification
4. Central Statistical Organization, India (2004): Report of the Working Group on Workforce Estimation for Compilation of National Accounts Statistics with base Year 1999-2000
5. Central Statistical Organization, India (2006): Brochure on New Series of National Accounts Statistics, base year 1999-2000.
6. Central Statistical Organization, India (2007): National Accounts Statistics: Sources and Methods.
7. Bhalla, Shiela (2003): ‘The Restructuring of the Unorganised Sector in India’, Report           on a Project Funded under the Planning Commission Scheme of Socio-Economic   Research, Institute for Human Development, New Delhi.
8. International Labour Organisation (2004): Economic Security for a Better World, ILO      Socio-Economic Security Programme, International Labour Office, Geneva.
9. Mitra, Arup (2001): ‘Employment in the Informal Sector’ in Kundu, Amitabh and    Alakh N Sharma (ed), Informal Sector in India – Perspectives and Policies, Institute for Human Development, New Delhi.
10. 10. Sastry, N S (2004): ‘Estimating Informal Employment and Poverty in India’,   Discussion Paper Series – 7, Human Development Resource Centre, UNDP, India.
11. 11. Satpathy, Anoop (2004): ‘Size Composition and Characteristics of Informal Sector in  India’, NLI Research Studies Series No 056/2004, V V Giri National Labour Institute, Noida.

Article By

P. Devika

Mphil Scholar

Karpagam university.

E-mail : sabaridevika@gmail.com

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