Chapter 7 – Employment: Growth, Informalisation and other Issues

(Indian Economic Development)

Notes

 

Why do people work?

Work plays an important role in our lives as individuals and as members of society.

1. People work for ‘earning’ a living.
2. Being employed in work gives us a sense of self-worth and enables us to relate ourselves meaningfully with others.
3. By engaging in various economic activities – work, every working person is actively contributing to the national income and hence, the development of the country.
4. We work not only for ourselves, but also for those who depend on us, like our family. It gives us a sense of accomplishment when we work to meet their requirements.

 

Note: Studying about working people gives us:

• • insights into the quality and nature of employment in a country and  helps in understanding and planning our human resources.
  • helps us to analyse the contribution made by different industries and sectors towards national income.
  • helps us to address many social issues such as exploitation of marginalised sections of the society, child labour, etc.

 

Some Basic concepts

• Gross Domestic Product (GDP) – GDP refers to the total money value of all final goods and services produced within the domestic territory of a country in a year.
• Gross National Product (GNP) – GNP refers to the total money value of all final goods and services produced by the normal residents of country in a year.
• Economic activities – Those activities which contribute to the gross national product are called economic activities.
• Worker – All those persons who are engaged in various economic activities and hence contribute to the gross national product are workers.

It is generally believed that people who are paid by an employer for their work are workers. However, this is not true. It also includes

• • self-employed persons, like shopkeepers, cobblers etc.
  • All those who are temporarily abstain from work due to illness, injury or other physical disability, bad weather, festivals, social or religious functions or some other reasons.
  • all those who help the main workers in these economic activities.

Hence, the term workers include all those people, who are engaged in work/ economic activities, whether for others (i.e. paid workers) or for themselves (self employed workers).

 

Nature of employment in India

• The nature of employment in India is multifaceted. While estimating the number of workers, all those who are engaged in economic activities are included as employed.
• Some get employment throughout the year; some others get employed for only a few months in a year like seasonal workers.
• Many workers do not get fair wages for their work.
• A small section of Indian workforce is getting regular income. Proportion of workforce employed in the formal sector has increased after independence.
• Even after 70 years of planned development, around half of the Indian workforce depends on farming as the major source of livelihood. Although there has been a substantial shift from farm work to nonfarm work in last four decades.

 

State of Employment in India

1. During 2011-12, India had about a 473 million strong workforce. Since majority of our people reside in rural areas, the proportion of workforce residing there (rural areas) is higher. So, out of 473 million workers, about three fourth were rural workers.
2. Men form the majority of workforce in India. About 70 per cent of the total workers are men and the rest are women (men and women include child labourers in respective sexes).
3. Women workers account for one-third of the rural workforce whereas in urban areas, they are just one-fifth of the workforce. This is due to the fact that –
   • Rural women participate in large number in productive activities as compared to urban women.
   • Secondly, in rural areas, many women carry out works like cooking, fetching water and fuelwood and participate in farm labour. They are not paid wages in cash or in the form of grains; at times they are not paid at all. For this reason, these women are not categorised as workers. However, Economists argue that these women should also be called workers.

 

Worker-Population Ratio/ Work Participation Rate

Worker-population ratio is an indicator which is used for analysing the employment situation in the country. It is calculated by dividing the total number of workers in a country by the population in that country and multiplying it by 100.

 

Worker-Population Ratio = Number of workers_× 100

Total Population

 

“Population is defined as the total number of people who reside in a particular locality at a particular point of time”.

 

Significance of Worker-Population Ratio

It indicates the proportion of population that is actively contributing to the production of goods and services of a country.

• If the ratio is high, it means that high proportion of population is involved directly in economic activities.
• if the ratio for a country is medium, or low, it means that low proportion of population is involved in economic activities.

The above Table shows the different levels of participation of people in economic activities in 2017-18.   I. Worker-Population Ratio is higher in rural areas than urban areas. 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.   Causes for such a difference between worker population ratio in rural and urban areas: People in rural areas have limited resources to earn a higher income and participate more in the employment market. Many in rural areas 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 whereas in rural areas, people cannot stay at home as their economic condition may not allow them to do so.   II. Men particularly rural men, form the major section of workforce in India or (Worker- Population Ratio is lower for women in general, and urban women, in particular,) i.e. As compared to females (16.5%), more males (52.1%) 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.   Causes for such a difference between worker population ratio in men and women: It is common to find that where men are able to earn high incomes, families discourage female members from taking up jobs. Women in rural areas perform many household activities like cooking, fetching water and fuelwood and they also participate in farm labour. These are not recognised as productive work as they are not paid wages for such work. Hence women are not categorised as workers. This narrow definition of work leads to non-recognition of women’s work and, therefore, to the underestimation of the number of women workers in the country.

 

Types of workers (Self-employed and Hired workers)

1. Self-employed: Workers who own and operate an enterprise to earn their livelihood are known as self employed.
2. Casual wage labourers: Labourers who are casually engaged in others’ farms/ enterprises and in return, get a remuneration for the work done are known as casual wage labourers.
3. Regular salaried employee: When a worker is engaged by someone or an enterprise and paid his or her wages on a regular basis, they are known as regular salaried employees.

 

For example, in a construction industry, workers are employed at different levels, so the status of each one of them is different from another, like the cement shop owner is self-employed. The construction workers are known as casual wage labourers and workers like the civil engineer working in that construction company are regular salaried employees.

 

Status-wise distribution of workers in India or worker-population ratio as per their status in the society  About 52 per cent of workforce in India are self-employed.

• About 25 per cent of India’s workforce are casually employed.
• About 23 per cent of India’s workforce are regular salaried employees.

Hence, majority of workers in India are self-employed. Casual wage labourers and regular salaried employees together account for less than half the proportion of India’s workforce

 

 

Note: The status with which a worker is placed in an enterprise helps us to know –

• quality of employment in a country
• the attachment a worker has with his or her job and
• the authority she or he has over the enterprise and over other co-workers.

 

 

 

The above chart shows the status wise distribution of employment by gender. It shows that: Self-employment is a major source of livelihood for both men and women as this category accounts for more than 50 per cent (52%) of the workforce. Casual wage work is the second major source for both men (24%) and women (27%), a little more for the latter. When it comes to regular salaried employment, men are found to be engaged in greater proportion (24%) whereas women form only (21%). The reason could be skill requirement. Since regular salaried jobs require skills and a higher level of literacy which is most commonly found in men.

 

The above chart shows the status wise distribution of employment by Region. It shows that: The self-employed and casual wage labourers are found more in rural areas than in urban areas. Selfemployment is a major source of livelihood in rural areas (58%) as compared to 38% in urban areas. Since in case of rural areas, majority of those depending on farming own plots of land and cultivate independently. In urban areas, the share of, both self-employment and regular wage salaried jobs are greater. But 47% (A larger proportion) of workforce in urban areas are engaged as regular salaried employees as compared to 13% in rural areas. Due to illiteracy and lack of skills. Moreover, the nature of work in urban areas is different and enterprises require workers on a regular basis. Obviously, in urban areas everyone cannot run factories, shops and offices of various types., In case of rural areas, casual workers account for second major source of of employment with 29% of workforce. Casual workers in urban areas account for only 15%.

 

 

Industrial sectors of the economy

All economic activities of a country can be broadly classified into three categories:

1. Primary sector includes Agriculture, Forestry, Fishing etc.
2. Secondary sector includes Mining and Quarrying, Manufacturing, Electricity, Gas and Water Supply and Construction.
3. Service sector includes Transport and Storage and various other Services.

 

 

 

The above table shows the Distribution of Workforce by Industry, 2017-2018

 

It shows the distribution of working persons in different industries in India during the year 2017-18. Primary sector is the main source of employment (44.6%) for majority of workers in India. Secondary sector provides employment to only about 24.4% of workforce. About 31 per cent of workers are in the service sector (second major source of employment).

 

Distribution of Rural-Urban Employment in different sectors The table shows that Employment in Rural areas:- About 60 per cent of the workforce in rural India are engaged in primary sector (agriculture, forestry and fishing). About 20 per cent of rural workers are working in secondary sector (manufacturing industries, construction and other industrial activities.) Service sector or tertiary sector provides employment to about 20 per cent of rural workers.   Employment in Urban areas Agriculture is not a major source of employment (around 7%) in urban areas where people are mainly engaged in the service sector. About 60 per cent of urban workers are in the service sector. The secondary sector gives employment to about one-third of urban workforce (34.3%).

 

Distribution of Employment (Male-Female) in different sectors Though both men and women workers are concentrated in the primary sector, women workers’ concentration is very high there. About 57 per cent of the female workforce is employed in the primary sector whereas less than half of males (40.7%) work in that sector. It happens because men get opportunities in both secondary and service sectors. Only 18% of female workforce are employed in the secondary sector. 3) Service sector gives employment to 25.2% of female workers

Growth and changing structure of employment in India

 

 

The above chart shows trend in two developmental indicators — growth of employment and GDP. It shows that: 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 and during this period, employment grew at the rate of not more than 2%. However, 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, the gap between the growth of GDP and employment was widening. The period between 1990 to 2012, GDP growth rate has increased from a meagre 3.4% in 1991 to 7.8% in 2012. However, employment growth rate has shown a declining trend from 1.5% in 1991 to 1.12% in 2012. Between the period 1999-2005 the employment generation was at peak since independence ie 2.28% p.a. with the corresponding GDP growth rate standing at a decent 6.1% p.a. The gap between the two variables is maximum in the period 2005-2010 when the employment growth hit the lowest in history of independent India i.e. 0.28%. In the same period GDP growth rate had hit the highest level since independence to the tune of 8.7% p.a. Indian economy has witnessed the peculiar phenomena of “jobless growth” over all these years. Jobless growth refers to a situation when the economy is able to produce more goods and services without proportionate increase in employment opportunities. Learning from the situation government had put in serious efforts on employment front and brought it to a level of 1.12% p.a. between the period 2010-12.

 

Changing structure of employment

 

Trends in Employment Pattern (Sector-wise and State-wise), 1972-2012 (in %)

Item	1972-73	1983		1993-94	1999-2000	2011-2012	2017-18
			Sector
Primary Secondary Tertiary	74.3 10.9 14.8	68.6 11.5 21		64 16 20	60.4 15.8 23.8	48.9 24.3 26.8	44.6 24.4 30.0
Total	100	100		100	100	100	100
			Status
Self-employed Regular-Salaried Employees Casual Wage Labourers	61.4 15.4 23.2	57.3 13.8 28.9		54.6 13.6 31.8	52.6 14.6 32.8	52.0 18.0 30.0	52.2 22.8 25.0
Total	100	100		1001	100	100	100

 

We know that India is an agrarian nation; a major section of population lives in rural areas and is dependent on agriculture as their main livelihood. Developmental strategies in many countries, including India, have aimed at reducing the proportion of people depending on agriculture. However major proportion of workforce is still employed in the primary sector.

 

 

The above table shows Distribution of workforce by industrial sectors (Sector-wise): In 1972-73, about 74 per cent of workforce was engaged in primary sector and, this proportion has declined to about 50 per cent in 2011-12. It shows substantial shift from farm work to non-farm work. Secondary and service sectors are showing promising future for the Indian workforce as the shares of these sectors have increased from 11 to 24 per cent and 15 to 30 per cent, respectively. Tertiary sector is the second most source of employment (30%).

 

Status-wise distribution of workforce The distribution of workforce in different status indicates that over the last four decades (1972-2018), people have moved from self-employment and regular salaried employment to casual wage work, yet selfemployment continues to be the major employment provider. The share of self- employment declined from 61.4% in 1972-73 to 52% in 2011-12. The share of regular salaried employees has increased from 15.4% in 1972-73 to 22.8% in 2011-12. The share of casual workers has increased from 23.2% in 1972-73 to 25% in 2011-12.

 

The process of moving from self-employment and regular salaried employment to casual wage workis known as casualisation of workforce.

 

Informalisation of workforce in India

• 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 industrialisation strategy would bring surplus workers from agriculture to industry with better standard of living as in developed countries.
• Even after 70 years of planned development, around 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. Only a small section of Indian workforce is getting regular income. Even after working for more than 10-20 years, some workers not get maternity benefit, provident fund, gratuity and pension.
• Developmental planning envisaged that as the economy grows, more and more workers would become formal sector workers and the proportion of workers engaged in the informal sector would dwindle. But in India during 1972-2018, people have moved from self-employment and regular salaried employment to casual wage work implying that the proportion of workforce in the informal sector to the total workforce has increased.

 

 In the recent years India has witnessed an unprecedented shift of the workforce from the formal sector to informal sector. This process whereby, the proportion of informal worker in the total workforce increases is known as Informalisation of workforce. The government has initiated the modernization of the informal sector and provision of social security of measure to the worker in the informal sector.

 

Formal vs Informal sector (Organised vs Unorganised sectors)

Formal or Organised sector	Informal or Unorganised sector
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.
This section of the workforce forms trade unions, bargains with employers for better wages and other social security measures.	Thus, informal sector includes millions of farmers, agricultural labourers, owners of small enterprises and people working in those enterprises as also the self-employed who do not have any hired workers. It also includes all non-farm casual wage labourers who work for more than one employer such as construction workers and headload workers
Workers working in the formal sector get regular income, enjoy social security benefits and earn more than those in the informal sector.	Workers and enterprises in the informal sector do not get regular income; They do not enjoy social security benefits and earn less as compared to those in formal sector.
The government, through its labour laws, enable them 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.	They do not have any protection or regulation from the government. Workers are dismissed without any compensation.
Technology used is latest; they also maintain proper accounts.	Technology used in the informal sector enterprises is outdated; they also do not maintain any accounts. (Workers of this sector live in slums and are squatters).

 

Formal Sector Employment

• The information relating to employment in the formal sector is collected by the Union Ministry of Labour through employment exchanges located in different parts of the country.
• Government/ public sector is the major formal sector employer in the country.
• In 2012, out of about 30 million formal sector workers, about 18 million workers were employed by the public sector.
• Men form the majority of the workforce, as women constitute only about one-sixth of the formal sector workforce.
• The reform process initiated in the early 1990s resulted in a decline in the number of workers employed in the formal sector due to the expansion of the service sector.
• Hence, Since the late 1970s, many developing countries, including India, started paying attention to enterprises and workers in the informal sector as employment in the formal sector is not growing.
• International Labour Organisation (ILO), the Indian government has initiated the modernisation of informal sector enterprises and provision of social security measures to informal sector workers.

 

 

 

The above chart shows the distribution of workforce in formal and informal sectors. In 2011-12 there were about 473 million workers in India. There are about 30 million workers in the formal sector and the remaining 443 million are employed in the informal sector. It means, only 6% of people are employed in the formal sector and the rest 94% are in the informal sector. Male vs Female in formal and informal sectors In the formal sector, out of 30 million workers, 24 million (80%) are male workers and only 6 million (20%) are women. In the informal sector, out of 443 million workers, male workers account for 310 million (69.9 i.e. 70%) and remaining 133 million (30%) are women. Thus, in India more proportion of workforce are employed in the informal sector and men form the major section of workforce in both format as well as informal sectors as compared to women.

 

Unemployment

Unemployment refers to a situation in which people who are willing and able to work at the prevailing / existing wage rate, do not get work.

NSSO defines unemployment: A situation in which all those who, owing to lack of work, are not working but either seek work through employment exchanges, intermediaries, friends or relatives or by making

applications to prospective employers or express their willingness or availability for work under the prevailing condition of work and remuneration.

 

How to identify unemployed person?

There are a variety of ways by which an unemployed person is identified.

Economists define unemployed person as one who is not able to get employment of even one hour in half a day.

 

Sources of data on unemployment

There are three sources of data on unemployment:

1. Reports of Census of India
2. National Sample Survey Office’s Report of Employment and Unemployment Situation; Annual Reports of Periodic Labour Force Survey
3. Directorate General of Employment and Training Data of Registration with Employment Exchanges.

 

Along with the estimates of unemployment, they do provide us with the attributes of the unemployed and the variety of unemployment prevailing in our country.

 

Types of unemployment in India:

1. Open unemployment – It refers to a situation in which persons who are able and willing to work at prevailing wage rate but do not find any gainful work.

 

1. Disguised unemployment – It refers to a situation in which more people are engaged in a work than are actually required. If excess of persons are removed from work there is no change in the total output.
   • • For example: A farmer has four acres of land and he actually needs only two workers to carry out various operations on his farm in a year, but if he employs five workers on the same land then three extra workers are disguised unemployed.
     • Disguised unemployment is a common form of unemployment in rural India. Since in rural areas agriculture is the only occupation due to the absence of alternative occupation.
     • A study showed that in the late 1950s, about one-third of agriculture workers in India were disguisedly unemployed.
     • In such type of unemployment person apparently seems to be employed, but marginal productivity of the surplus labour (contribution of extra workforce) is zero.

 

1. Seasonal unemployment: It refers to a situation where the seasonal nature of the work results in unemployment during a part (some months) of the year.
   • This is also a common form of unemployment prevailing in rural India.
   • This type of unemployment is mostly found in rural areas where agriculture is a seasonal activity and there are no employment opportunities in the village for all months in the year. So, when there is no work to do on farms, people go to urban areas and look for jobs. They come back to their home villages as soon as the rainy season begins.

 

Causes of unemployment

1. Slow rate of economic growth

The rate of growth of GDP has been less than the projected rate and moreover, the employment opportunities have not kept pace with the growth rate even after globalisation due to jobless growth.

 

2. Increase in rate of growth of population

India has become one of the most populous country with a major proportion of its population in the working age group. Thus, it has not been able to generate enough employment opportunities to absorb the large growing workforce. Further, the per capita availability of resources has also declined.

 

3. Underdeveloped agriculture

There has been an increasing pressure on land and the primitive methods of agriculture such as over dependence on monsoons for irrigation etc has resulted in massive rural unemployment and underemployment in the country.

 

4. Faulty planning and insufficient infrastructural facilities

The government has not been able to encourage labour-intensive technique of agricultural and industrial production, which could have absorbed the excessive labour migrant force from rural areas. Insufficient infrastructures like power, transportation, irrigation networks, roads ad communication facilities have hampered the expansion of both agriculrtural and industrial work opportunities.

 

5. Inadequate employment planning

There has been very little priority given to the employment objective in the various plans and the implementation of the employnment schemes by the government has been ill planned and half-hearted.

 

6. Defective education system

The prevailing education system is not suited to the requirements of the industrial and services sector as it fails to impart vocational or technical education in line with their needs thus resulting in educated unemployment.

 

Government policies and Employment generation

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 categorised into two – direct and indirect.

 

1. Direct measures of employment generation: Under this, the government employ people in various departments for administrative purposes. It also runs industries, hotels and transport companies, and hence, provides employment directly to workers.

For example, when a government ownrd steel company increases its output, it will result in direct increase in employment in that government company.

 

1. Indirect measures of employment generation: When the output of goods and services from government enterprises increase, then private enterprises which receive raw materials from government enterprises will also raise their output and hence increase the number of employment opportunities in the economy.

In the above example, private companies, which purchase steel from it, will also increase their output and thus employment. This is the indirect generation of employment opportunities by the government initiatives in the economy.

 

Other Measures

The government has implemented many programmes that aimed at alleviating poverty, are through employment generation. They are also known as employment generation programmes. For example:

1. Wage employment programme such as

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. This scheme is one of the many measures the government has implemented to generate employment for those who are in need of jobs in rural areas.

In 2018-19, nearly five crore households got employment opportunities under this law.

 

 

2. Self employment programme: It includes-

REGP (Rural Employment Generation Programme), PMRY (Prime Minister’s Rozgar Yojana, SJSRY (Swarna Jayanti Shahari Rozgar Yojana). These programmes have now become Prime Minister’s Employment Generation Programme (PMEGP).

SGSY (Swarna Jayanti Gram Swarozgar Yojana) is one such programme. This has now been structured as National Rural Livelihoods Mission (NRLM) which has been renamed as Deendayal Upadhyay Antyodaya Yojana (DAY- NRLM) and National Urban Livelihoods Mission for urban poor has been renamed (DAY-NULM.)

 

3. Other programmes initiated by the government are Pradhan Mantri Gram Sadak Yojana, Pradhan

Mantri Gramodaya Yojana and Valmiki Ambedkar Awas Yojana, PDS (Public Distribution System), ICDS (Integrated Child Development Scheme etc. All these programmes aim at providing not only employment but also services in areas such as primary health, primary education, rural drinking water, nutrition, assistance for people to buy income and employment generating assets, development of community assets by generating wage employment, construction of houses and sanitation, assistance for constructing houses, laying of rural roads, development of wastelands/ degraded lands.

 

Note:

In the course of economic development of a country, labour 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.

In India still bout three-fifth of India’s workforce depends on agriculture and other allied activities as the major source of livelihood. Though there has been a change in the structure of workforce/ employment in India reflecting a rise in the workforce employed in the service sector. This happens because:

• Emerging jobs are found mostly in the service sector. The expansion of the service sector and the advent of high technology now frequently permit a highly competitive existence for efficient small scale and often individual enterprises or specialist workers side by side with the multinationals.
• Outsourcing of work is becoming a common practice. It means that a big firm finds it profitable to close down some of its specialist departments (for example, legal or computer programming or customer service sections) and hand over a large number of small piecemeal jobs to very small enterprises or specialist individuals, sometimes situated even in other countries.
• The nature of employment has become more informal with only limited availability of social security measures to the workers.