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Is the rise in informal jobs the real unemployment problem?

Of India’s workforce, 90% is informal, employed without social security benefits, job contracts or even the simple guarantee of getting paid fairly and on time. But look to the other half to get an idea of how many Indians have informal jobs.

columns Updated: Oct 26, 2015 02:39 IST
Sanjoy Narayan
Of India’s workforce, 90% is informal, employed without social security benefits, job contracts or even the simple guarantee of getting paid fairly and on time
Of India’s workforce, 90% is informal, employed without social security benefits, job contracts or even the simple guarantee of getting paid fairly and on time(HT Photo)

It’s an early morning sight in many Indian cities that I’m sure has met your gaze. Plumbers, electricians, housepainters, carpenters and other handymen mill around at a designated spot, usually a prominent street-corner, outside a suburban train station, or in an open urban space.

You can see them in the deeper reaches of Delhi’s Lajpat Nagar; Gurgaon’s Sikandarpur; near a Mumbai train station; or in an upcoming satellite town such as Ghaziabad or Faridabad. These tradesmen are for hire on a daily rate and such gatherings are like makeshift employment exchanges.

The men carry tools of their trade — saws, hammers and screwdrivers; wall-paint scrubbers and brushes; wires and cables; and plumbing implements. Their freelance skills are up for hire. Only, ‘freelance’ is too posh a word to describe the massive numbers that make up India’s informal workforce. It hardly conveys the degree of insecurity and desperation that they face.

Of India’s workforce, 90% is informal, employed without social security benefits, job contracts or even the simple guarantee of getting paid fairly and on time. Yes, many of India’s informal workers are employed on farms — agriculture still accounts for a shade less than half of all jobs and nearly all of those are informal. But look to the other half to get an idea of how many Indians have informal jobs.

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According to a 2014 analysis of India’s informal labour market, published by the Confederation of Indian Industry (CII), in sectors such as manufacturing, construction and services, the proportion of informal jobs is not only significant but, worryingly, it is growing.

The analysis (by A Srija and Shrinivas V Shirke of the Indian Economic Service and the Indian Statistical Service, respectively) finds that although the proportion of employment in the organised sector grew from 13 to 17% between 2004-05 and 2011-12 (the unorganised sector’s share fell from 87 to 83%), this increase was mainly informal in nature. The shocker: in 2004-05, 48% of jobs were informal; in 2011-12, it went up to 55%.

India’s unemployment problem is not only that every year 12-15 million more people seek jobs, not enough of which are created, but also that many of the lucky ones who do land jobs get those that are casual and informal. Mainly this is because nearly a quarter of the informal non-farm workforce is illiterate; and nearly half of them have only secondary school education with little else in terms of skills. That’s precisely why schemes such as the government’s ambitious Skill India drive have to make a difference.

But interventions such as Skill India are on the supply side of the labour market and, considering the millions joining the workforce and the massiveness of the problem it will take time before results show. Things could be done on the other side of the market as well. Many of India’s employers — especially the small and medium ones (which generate the most jobs) — don’t comply with labour or tax laws despite operating in organised sectors and, therefore, don’t offer their workers the benefits of formal employment.

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Inducing them to formalise their own businesses and educating them about the benefits of doing so (such as access to finance, government schemes, and trade lobbies) would be crucial in ensuring that their workers too get the benefits of formalisation.

There could be other unconventional, tech-driven solutions. Those ‘freelancers’ with traditional skills who can be spotted in the morning with their tools waiting for jobs in cities?

If, instead of the millionth angel-blessed, VC-funded app that helps you order groceries; or shop for heavily discounted smartphones; or get sushi of questionable quality delivered home… if instead of all that someone with a rare combination of entrepreneurism blended with a bit of altruism came up with a platform to match such self-employed job-seekers to jobs, would that not be great?

Yes, there’s a rash of ventures already out there that promise to fix your plumbing; repair your AC; and mend your door.

Some of them may even be good. But has anyone thought of formalising the makeshift employment exchanges that sprout so commonly in Indian cities where tradespeople gather hoping to land a day’s job? If someone does, fewer of them would probably have to go back each day empty-handed.

Sanjoy Narayan is the editor-in-chief of Hindustan Times, he tweets as @sanjoynarayan

The views expressed are personal