Improving Quality of Informal

Employment

Sunita Sanghi

Adviser (NITI AAYOG)

Government of India

Informal economy includes

•India has a preponderance of Informal employment with 92 percent

Informal sector

All unincorporated private enterprises engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten workers

Informal employment

•those working in the informal sector or households with no social security

•workers in the formal sector without any employment and social security

Formal-Informal Employment across Organized –

Unorganized

(in millions)

2004-05

Organized Unorganized Total

Formal 32.06

(52)

1.35

(0.3)

33.41

(7.3)

Informal 29.54

(48)

396.66

(99.7)

426.20

(92.7)

Total 61.61

(13)

398.01

(87)

459.61

(100)

2011-12

Organized Unorganized Total

Formal 37.18

(45.4)

1.39

(0.4)

38.56

(8.1)

Informal 44.74

(54.6)

390.92

(99.6)

435.66

(91.9)

Total 81.92

(17.3)

392.31

(82.7)

474.23

(100)

Broad Sectoral Distribution of Formal-Informal Employment

(in percent share)

2004-05 Organized Sector Unorganized Sector Total

Formal Informal Formal Informal

Agriculture 0.76 0.99 0.00 56.75 58.50

Manufacturing 1.21 2.10 0.10 8.33 11.73

Non-manufacturing 0.53 1.45 0.00 4.42 6.41

Services 4.48 1.89 0.19 16.80 23.36

Total 6.98 6.43 0.29 86.30 100.00

2011-12 Organized Sector Unorganized Sector Total

Formal Informal Formal Informal

Agriculture 0.06 0.16 0.00 48.69 48.90

Manufacturing 1.48 2.79 0.06 8.28 12.60

Non-manufacturing 0.69 3.77 0.01 7.18 11.65

Services 5.62 2.72 0.22 18.29 26.84

Total 7.84 9.43 0.29 82.43 100.00

Informal Employment in Non-Agricultural Sector

(in millions)

Non-Agricultural

Sector

2004-05 2011-12

Organized Unorganized Total Organized Unorganized Total

Mining 0.91 0.90 1.82 0.99 0.80 1.79

Manufacturing 9.64 38.28 47.92 13.23 39.26 52.49

Electricity & water

supply

0.16 0.08 0.24 0.78 0.43 1.21

Construction 5.60 19.35 24.94 16.12 32.80 48.92

Trade, hotel &

restaurant

1.71 44.30 46.02 2.57 47.60 50.17

Transportation, storage

& communications

1.35 13.31 14.66 2.31 15.71 18.02

Real estate other

business activities

0.49 2.93 3.43 1.05 3.96 5.02

Education 2.40 2.75 5.15 3.55 2.75 6.31

Finance 0.41 0.72 1.13 0.67 1.14 1.81

Health 0.61 1.49 2.10 1.02 1.66 2.68

Public admin, defence 1.09 0.08 1.17 1.11 0.00 1.11

Other services 0.64 11.62 12.26 0.58 13.92 14.50

Total 25.01 135.81 160.83 44.00 160.04 204.03

Education level of informal workforce in non-agricultural sector (in percent)

Education level 2011-12

Illiterate 22.97

Below primary 10.74

Secondary education 48.23

Higher secondary 7.72

Diploma/certificate 1.46

Graduation and above 8.88

Status of the Informally Employed Workforce

(in millions)

Status 2011-12

Self-employed 244.97

(56.22)

Regular wage/ salaried 48.79

(11.19)

Casual Worker 141.91

(32.57)

Total Informal Workforce 435.66

(91.78)

Size of enterprise mattersSize by

class of

empl

Item Economic Census Years

1990 1998 2005 2013

1-5 Establishments 93.4 94.0 95.4 95.5

Employment 54.5 58.6 67.3 69.5

6-9 Establishments 3.5 3.3 3.4 3.1

Employment 8.4 8.3 10.3 9.3

10 &

above

Establishments 3.1 2.8 1.3 1.4

Employment 37.1 33.1 22.4 21.2

6th Economic Census:

36.2% of all the establishments were home based i.e. inside household.

18.4% operating from outside household without fixed structure,

45.4% operating from outside households with fixed structure.

89 % of the workers employed in the establishments hiring less than 10 workers.

Gender disparity: 13.76% of the establishments owned by women entrepreneurs

What Breeds Informality

Poverty

Enter labour market with low level of skills and education

High Cost of Compliance to the labour regulations

Employers preference for contract workers

Poor Working Conditions

Lack of Bargaining Power

Lack of social security/job security

Low productivity

Vicious circle of low productivity and working poor

Transforming labour market for Decent jobs

Creating more jobs with social protections

Formalize the informal

Help the unprotected

Need is integrated strategy of policy mix to address the problem

Making Employment central to the growth strategy

Creation of employment opportunities a monitorable

Manufacturing policy aims at generation of 100 million jobs by 2022

focus on labour intensive manufacturing sector

Make in India Campaign

Access to finance Market

Improving labour Laws Administration

increasing workers’ skills and productivity ;

Promoting Entrepreneurship

Social Security

Improving Labour Market Administration to

Reduce transaction costs of the formal economy for small firms and the self-

employed

a unified Web Portal –'Shram Suvidha‘ facilitating

Online registration

self certification

Web based inspections

Identification of Unorganised workers

Amendments to number of Acts impacting working conditions, social security and

availability of skilled manpower

Social Safety Net to overcome vulnerabilities

Range of instruments to address requirements of vulnerable segments in the

informal economy

Legislation based Welfare funds

Legislation based Schematic interventions

MGNREGA

General interventions for poor which includes these informal economy workers also

Atal Pension Yojana

Pradahn Mantri Jeevan Suraksha and Jeevan Jyoti Yojana

Jan Dhan Yojana

Sectoral Target group specific interventions

RSBY

Extension of Organised Sector Benefits to the informal workers

Skilling for improved Employability

A dedicated Ministry of Skill Development

Policy focus on inclusive skill development

Target Group Specific

Recognition of Prior learning

Focus on Entrepreneurship

Catalyzing private sector for skilling

Focus on Apprenticeship in SMEs

Skilling in mission mode approach

Local development strategies

Promoting livelihood business incubators in the rural areas

Create jobs at local level

Favourable ecosystem for entrepreneurship

Training Barefoot Technicians in the basic concepts of civil

engineering and involving them in the MGNEREGA work

Creation of Durable assets

Availability of jobs

Horizontal and vertical mobility

Maintenance of Rural Networks

Increased employment opportunities

Involvement of local communities

Social Dialogue Social dialogue plays a key role in promoting opportunities, particularly for the

marginalized to obtain decent and productive work in conditions of freedom, equality,

security and human dignity.

It underpins good governance and democratic decision making in the labour market.

Policy formulation on the informal economy requires that actors in the informal

economy are able to organize, articulate their needs and rights, and engage

effectively within social dialogue platforms.

Governments have a key role to play in setting the enabling framework for social

dialogue

Informal economy actors be articulate their needs and interests (irrespective of caste,

gender, where they are located )

THANK YOU

Small and Medium Enterprises (SMEs)

36 million units, provides employment to over 80 million people.

The Sector through more than 6,000 products contributes about 8% to GDP, 45% to the

total manufacturing output and 40% to the exports from the country.

Need for Innovation, Entrepreneurship and Skilled Workforce

Credit, networking, capital, market linkages, hand holding

Vocational education, ITI courses and other skill development programmes in line with industry needs.

Social Safety net (Health Insurance, Suraksha Bima Yojana, Jeevan Jyoti Yojana, NPS, APY etc.)

ASPIRE: A Scheme for Promoting Innovation and Rural Entrepreneurship

Atal Innovation Mission (AIM) including Self-Employment and Talent Utilization (SETU) is

Government of India’s endeavour to promote a culture of innovation and

entrepreneurship

MUDRA

Ease of doing business for enterprise growth

World Bank Doing Business Report (2016), India’s ranking improved to 130th (up

by 4 points) among 189 countries.

But still a long way to go

Simplified, streamlined and cost effective registration procedures

Simplify the regulatory regime

Simplified taxes for SMEs - GST Bill

Speedy resolution of disputes

Capacity building of enterprises to enable compliance with regulations and

improve working conditions;

Opening access to skills training,

business advisory services, market information,

technology support,

social protection

trade opportunities.

Cause of Informality

On the labour supply side: internal constraints brought about by poverty, inadequate human capital accumulation, such as low education, training and ability to manage risks and income. These prevent workers fromtaking more productive employment or from accessing financial and other services;

• On the labour demand side: a policy incentive regime that encourages labour saving technologies and capital intensive growth which orients public and private support institutions away from small enterprises and private sector growth; and

• On the external environment: globalization and greater competitiveness that force companies to rely on atypical, non-standard workarrangements that are less costly to employers but result in greater precariousness for workers.

Access: The informal economy has become the last resort for many as a result of discrimination in access to formal labour market

Informality occurs when social security systems are out of reach of certain types of workers and entrepreneurs leav­ing them vulnerable to risks of sudden impoverishment;

Addressing contingencies from unemployment, loss of livelihood, maternity, sickness or old age.

Death and disability when occupational safety and health measures are not available

Multiple factors are responsible for informality in INdia Increased period of high growth but informalisation of employment in the organized

sector

Low skill and education

Poverty and cannot wait so pick up jobs low paid jobs, labour market discrimination

prevents from investment in skill

Structural transformation and inability of the industry to absorb the surplus manpower

due to lack of adequate skills in non manufacturing sector or services sector

More importance to contract workers to have flexibility

high cost of compliance to regulation results in ‘rigidity of the labour market’ and the

‘voluntary choice of informality’.

Promoting equality and addressing

discrimination

Curbing informality means addressing the factors which push many

vulnerable groups into the informal economy.

Labour market discrimination against poorer women, youth,

disabled, socially disadvantaged groups, migrant groups often puts

segregates them into the informal economy.

Policy and legal frameworks need to eliminate discrimination in the

formal labour market and open access to the formal economy

through targeted strategies in all policy areas.

Informality and Decent Work AGENDA

Employment

need to expand productive and decent livelihood opportunities

access to skills training, financial services, market information that can open

the space for the economic activities of the poor, utilize their assets and

expand their markets (for example labour intensive production techniques,

infra­structure facilities accessible to clusters and communities, trade

policies that do not unduly discriminate against the products of the poor,

financial services and market space accessible to the poor).

(

Working Conditions

All those who work have rights at work, irrespective where they work. The

ILO calls for improvement of the conditions in which work is carried out,

wherever work might occur, whether in the formal or the informal

economy, whether at home, in the community or in the voluntary sector,

whether workers are orga­nized or not.

Informality in terms of rights can be found among populations that are not

pro­tected by labour legislation and administration, have no access to

dispute settle­ment mechanisms, cannot form legally-recognized

associations, are beyond the reach of legal and rights education, and work

under bonded or unfair conditions out of the purview of state scrutiny.

Transitioning from Informal to FORMAL Economy

Growth strategies and quality employment generation

Regulatory environment for effective implementation

Bargaining Power

Equality of opportunity irrespective of bias

Entrepreneurship, skills, finance, management, access to markets

Extension of social protection, social security, social transfers

Local (rural and urban) development strategies

Working poverty as an indicator of informality Working poverty is a useful indicator when focusing on informality, firstly because the main employment related problem in developing countries is less a problem of widespread unemployment (the poor are too poor not to work) but rather mass underemployment and working poverty; and secondly because there is a frequent overlap between being amongst the working poor and working informally. Although some activities in the informal economy offer reasonable livelihoods and incomes, most people engaged in the informal economy face insecure incomes and a wide range of decent work deficits. Many workers in informal employment, including own account workers, unpaid contributing workers, and those operating very small enterprises, often have lower earnings and face higher poverty risks than those working in formal employment. Thus there are strong linkages between informality and working poverty.