The Emerging Dynamics of Informal Employment

Bino Paul & Krishna Muniyoor

Published: June 2021

Informal employment accounts for a significant proportion of the workforce in less-developed economies, particularly India, and has grown steadily in the past two decades. Using unit-level data from three consecutive employment and unemployment surveys conducted by the National Sample Survey Office (NSSO) in 2004–5, 2011–12 and 2018–19 (PLFS), we investigate the emerging dynamics of formal and informal employment in Maharashtra, India. This article highlights: a significant increase in the share of women performing unpaid domestic work; uneven distribution of the status of employment in rural and urban Maharashtra; the burgeoning size of the working poor, who earn barely enough wages to obtain a decent living; and inadequate coverage of formal employment in the economy. From a policy perspective, we argue that the state should aim at restructuring employment status and labour laws by infusing more skill to trigger an upward spiral of higher productivity, which will catapult the economy to a desirable trajectory, as well as facilitate and foster inclusive growth.

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Employment in India

The growth of employment has become a matter of grave concern in India for the past two decades. This paper – based on the unit-level data of the 61st and 66th quinquennial rounds on employment and unemployment released by the National Sample Survey Organisation (NSSO) in 2005 and 2010, respectively – pinpoints some of the emerging issues and dynamics in various segments of the Indian labour market. It finds that, notwithstanding India’s average annual growth of more than 8% and compound annual population growth of 1.4% between 2004/05 and 2009/10, the workforce grew at a snail’s pace, hovering around 0.03% per annum. What is striking is that, considering the workforce by sex, about 21 million female workers, approximately equivalent to the population of Australia, were out of the workforce between 2004/05 and 2009/10. Interestingly, segregating the workforce by rural–urban sector, it would seem that, contrary to a quantum leap of 13 million in the rural male workforce, the rural female workforce recorded a decline of 19 million during the same period, of which scheduled tribe, scheduled caste and other backward class combined to add up to a significant proportion. Interestingly, a precipitous increase in the number of females attending educational institutions and domestic duties accounted for a large-scale decline in the female workforce. The findings presented in this paper point to the need for a concerted effort to mitigate widening gender disparity and shrinkage of the female work participation rate in India.

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