More than formalising informal jobs, we need to create productive ones
India is a complex nation strengthened by geographic, linguistic and resource diversity, but still challenged by social divisions on the basis of caste, gender and religion. Its labour markets are as multifaceted as the nation itself.Yet, the discussion largely hovers around informality and formality.This tidy binary posits informality as always bad with poor quality work and lack of skill with low productivity and wages.
In actuality, the spectrum of employment is a continuum based on graduating levels of productivity, associated wages, social protection and tax compliance. This covers those with contracts, health care and retirement benefits, to those with regular wages but no social protection, to daily wage workers with no written contracts and, thus, who can be dismissed at will. All these categories of workers can be found with all types of employers, whether working for households, family firms, formal registered large enterprises or government agencies.
Going forward, the tech-fuelled changing nature of work forces us to recall the past, which used to have a stable lifetime job with health and retirement benefits. Most jobs in large firms and even government jobs no longer have a defined pension and health benefits are diverted through insurance schemes. With limited employment security, soon there will be little to distinguish such formal work from informal employment with social protection.
Instead of being fixated on the dichotomy between informality and formality, it is time to think of the quality of work as a matrix where one axis reflects various forms of social protection and the other indicates types of employment — from uncertain daily labour to permanent employment.Once social protection is delinked from work, it is possible for a daily wage construction worker to have access to retirement benefits and health insurance, as is already possible, but not widespread, in India.The other imperative is to enable workers to leverage skills acquired without formal certification. For this, recognition of prior learning is key and our existing initiatives need to be improved and scaled up significantly.
Beyond social protection and skill recognition, the challenge of improving productivity and raising earnings remains.This needs support to smaller firms, not through subsidies but by access to reliable infrastructure, affordable and accessible finance and linkages to global value chains.
Much is made of technology and the rise of the platform economy and its flexible work arrangements. A worker who earned a fixed and low wage can, in principle, now earn more as part of the platform — at times, by self-exploiting himself or herself by working longer hours.It is not as if flexibility is absent from traditional work arrangements. Even today, manufacturing is outsourced to home-based workers, often women, allowing them to balance socially constructed domestic responsibilities with income generation activities, bringing a few more women into a workforce from which they are conspicuously absent. A key difference is that the platform enables a direct link to the consumer, enabling workers to retain more of the surplus.
But more than flexibility, a major benefit of platform arrangements is the increase in visibility of the worker. This is also true for contract workers employed through formal suppliers. In addition to better tax compliance, it can be leveraged to connect workers to social security frameworks. Workers like contract manufacturing workers, drivers, delivery persons, carpenters, domestic workers and beauticians are all ordinarily invisible to the social protection system. But once on a platform, they become visible and potential beneficiaries of a universal social protection system, with benefits that continue even if they change jobs or migrate. This breaks the conflation of informal employment with lack of social protection.
Concomitantly, while platform arrangements can be used to skirt tax and labour regulations, it also brings together disconnected, self-employed workers. Despite their uncertain legal status as employees, they can organise to make demands. Some nascent research suggests the emergence of new forms of organising and bargaining in the platform economy. These forms use digital technologies and social media to organise, and find creative ways to subvert the power asymmetries between ‘employers’ and workers, leading to new forms of collective bargaining.
The Indian labour market was already much too heterogeneous to fit into simple dualism frameworks.Technology and migration only make it more complex. Our challenge is not about formalising the informal, but rather the production of more just jobs — work that is productive and remunerative. It is removing barriers to productivity, ensuring wages rise in tandem, enabling a voice for workers and expanding a portable social protection framework that is delinked from employment. Only then can we confidently navigate the transition to the future of work.
Sabina Dewan is president and executive director, JustJobs Network, and senior visiting fellow, Centre for Policy Research. Partha Mukhopadhyay is senior fellow, Centre for Policy Research. This is the second in a series of articles for the CPR Dialogues starting shortly in New Delhi. Hindustan Times is the print partner for the event. For more: www.cprdialogues.org. The views expressed are personal