Employment: Growth, Informalisation and Other Issues — NCERT Class 11 Economics

A worker is any person who is engaged in an economic activity — producing goods or services — regardless of whether the activity is for wages, profit, or own consumption. This includes: 1. Regular salaried employees in offices, factories, and government. 2. Self-employed persons running farms, shops, or small businesses. 3. Casual labourers hired for daily or short-term work. 4. Unpaid family helpers who contribute to a family enterprise. 5. However, people doing only domestic work in their own homes without pay are not counted as workers.

Workforce Participation Rate (WFPR) is the proportion of the total population (or a specific age group) that is employed or actively seeking employment.

Informalisation refers to the increasing proportion of workers in the informal sector compared to the formal sector. In India: 1. Over 90% of workers are in the informal sector — no job security, no social protection, no written contracts. 2. The formal sector employs less than 10% of the workforce, mostly in government and large private companies. 3. After economic reforms (1991), formal sector jobs have grown slowly while informal employment has expanded. 4. Even in organised industries, many workers are hired through contractors (contract labour) without formal benefits.

(See Intext Q1 for the definition.) Categories of workers:

1. Self-employed — operate their own farms, shops, businesses, or practise a profession. They do not work for an employer. About 52% of India's workforce is self-employed. 2. Regular salaried/wage employees — work for an employer under a written or verbal contract, receiving a fixed wage or salary. About 18% of the workforce. Includes government employees, corporate staff, and teachers. 3. Casual wage labourers — hired on a daily or short-term basis; paid per day or per task; no job security or benefits. About 30% of the workforce. Includes agricultural labourers, construction workers, and porters.

(See Intext Q3 for the definition.) It is a matter of concern because: 1. Informal workers have no job security — they can lose income overnight. 2. They lack social security — no pension, health insurance, or maternity benefits. 3. Wages are low and irregular — workers remain in poverty. 4. Working conditions are often unsafe — no regulation of hours, safety, or child labour. 5. Workers cannot access formal credit — they depend on moneylenders. 6. Children of informal workers drop out of school, perpetuating poverty. 7. Government loses tax revenue — informal enterprises are outside the tax net. 8. It reflects a failure of economic growth to create quality jobs.

1. Structural unemployment — caused by a mismatch between the skills workers have and the skills employers need. For example, agriculture has surplus labour but industry lacks skilled workers. 2. Seasonal unemployment — occurs when workers are idle during certain seasons, especially the agricultural off-season. In India, farmers and labourers have work for only 5-7 months a year. 3. Disguised unemployment — more workers are employed than actually needed; removing some workers does not reduce total output. Common in Indian agriculture where a family of 5 may need only 3 workers on their small plot. 4. Educated unemployment — educated people (graduates, postgraduates) unable to find jobs matching their qualifications. Common in urban India. 5. Frictional unemployment — temporary unemployment when workers are between jobs or searching for their first job. 6. Cyclical unemployment — caused by downturns in the business cycle; less common in India but present in export-dependent sectors. 7. Technological unemployment — caused by automation and technology replacing human labour.

1. Social norms — traditional expectations that women should manage the household, not work outside. 2. Lack of education — female literacy is lower than male literacy, limiting job options. 3. Safety concerns — lack of safe transport, workplace harassment, and unsafe streets discourage women. 4. Unpaid domestic work — women spend long hours on cooking, cleaning, and childcare, which are not counted as "work" in employment statistics. 5. Early marriage — many girls marry before 18 and leave education and the workforce. 6. Type of work — when women do work, it is often in agriculture or home-based activities, which are informal and undercounted. 7. Caste factors — upper-caste women face more restrictions on working outside; lower-caste women have higher WFPR out of necessity. 8. Urban-rural gap — urban middle-class WFPR for women is very low; rural women work more on farms but are often unpaid family helpers.

1. Agriculture dominance — in 1950, 72% of workers were in agriculture; by 2020, this declined to about 42%, but still far above agriculture's share of GDP (about 16%). 2. Slow shift to industry and services — unlike developed countries where industry absorbed agricultural workers, India's industrial employment grew slowly due to capital-intensive methods. 3. Services sector growth — services now contribute about 55% of GDP but employ only about 30% of workers — it is skill-intensive, not labour-intensive. 4. Informalisation — the quality of jobs has not improved; over 90% of workers remain in the informal sector. 5. Rural-urban migration — millions move to cities for work, but urban job creation is inadequate. 6. Women's employment — female WFPR has stagnated or even declined in urban areas. 7. Youth unemployment — young people (15-29 years) face much higher unemployment rates than the overall average. 8. COVID impact — the pandemic reversed some gains; millions of informal workers lost jobs and returned to villages.

MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act, 2005) guarantees 100 days of wage employment per year to every rural household whose adult members volunteer for unskilled manual work.

How it addresses rural unemployment: 1. Income security — provides guaranteed work when no other employment is available, especially during the agricultural off-season. 2. Minimum wages — workers receive government-fixed minimum wages, preventing exploitation. 3. Asset creation — work includes building roads, ponds, canals, and land development, creating durable rural infrastructure. 4. Women's empowerment — at least one-third of beneficiaries must be women; it has significantly increased female employment in rural areas. 5. Reducing migration — work availability in villages reduces distress migration to cities. 6. Wage-led growth — increased rural incomes boost demand for goods and services, stimulating the rural economy. 7. Transparency — wages are paid directly into bank accounts, reducing corruption and leakage.

1. Jobless growth — GDP growth has been driven by capital-intensive sectors (IT, finance) that create fewer jobs. 2. Skill mismatch — education produces graduates without employable skills; vocational training is weak. 3. Slow industrialisation — manufacturing has not grown fast enough to absorb the rural workforce. 4. Rigid labour laws — complex regulations discourage formal hiring; firms prefer contract workers. 5. Population growth — about 12 million youth enter the workforce every year; job creation is far below this. 6. Automation — technology reduces the need for manual labour in both industry and services. 7. Agriculture surplus — too many workers dependent on agriculture; they need to be shifted to other sectors. 8. Informalisation — new jobs are mostly informal, with low wages and no security. 9. Regional imbalances — jobs concentrate in a few states and cities; backward regions lag behind. 10. Gender gap — cultural and structural barriers keep women out of the workforce.

Disguised unemployment occurs when more workers are employed on a task than actually needed, and removing the surplus workers does not reduce total output. Their marginal productivity is zero.

Example: A family owns 2 acres of farmland. Three family members cultivate it and produce 40 quintals of wheat. If one member leaves for a city job, the remaining two still produce 40 quintals. The third worker was disguised unemployed — their presence was not adding to output.

In India, disguised unemployment is widespread in agriculture: 1. Small and marginal farms employ the entire family, even when the land cannot productively use all their labour. 2. About one-third of agricultural workers are estimated to be disguised unemployed. 3. This is a form of underemployment — workers appear employed but are not fully utilised. 4. The solution is to create non-farm employment to absorb surplus agricultural workers.

1. No job security — workers can be dismissed at any time without notice or compensation. 2. Low and irregular wages — often below minimum wage; paid by the day, with no guarantee of work tomorrow. 3. No social security — no PF, pension, health insurance, gratuity, or paid leave. 4. Long working hours — 10-14 hour days are common; no regulation of overtime. 5. Unsafe conditions — no safety equipment or training; high risk of injury. 6. Child labour — children work in informal enterprises (construction, bidi-rolling, carpet-weaving). 7. No written contract — employment terms are verbal; workers have no legal recourse. 8. Women and migrants — disproportionately represented; face exploitation and harassment. 9. No access to credit — workers cannot borrow from banks; depend on moneylenders at high interest. 10. No skill development — no training opportunities; workers remain low-skilled throughout their lives.

1. They are not registered with the government — there is no record of their employment. 2. Employers in the informal sector do not contribute to PF, ESI, or other social security funds. 3. Workers are often hired through contractors who avoid legal obligations. 4. Government enforcement of labour laws is weak — inspectors are few and corruption is common. 5. Many informal workers are self-employed (street vendors, small farmers) and have no employer to provide benefits. 6. Social security laws (like the Unorganised Workers' Social Security Act, 2008) exist but are poorly implemented. 7. Workers themselves may not be aware of their rights or may fear losing work if they demand benefits.