Chapter 6 — Employment: Growth, Informalisation and Other Issues

Chapter 6 is titled 'Employment: Growth, Informalisation and Other Issues.' It covers basic concepts like workers and economic activity, participation of men and women in the workforce, sector-wise and status-wise distribution of employment, types of unemployment, informalisation of the Indian workforce, and government initiatives to generate employment.

A worker is any person engaged in economic activities that contribute to the gross national product — whether their capacity is high or low. This includes self-employed persons and those who temporarily abstain from work due to illness, injury, bad weather, or social functions. It also includes those who help the main workers in these activities.

Worker-population ratio is the number of workers as a proportion of the total population, multiplied by 100. For India in 2023-24, the overall ratio was 43.7 — about 45.6 in rural areas and 38.9 in urban areas. The ratio for men was 56.4 compared to 30.7 for women.

Workers are classified as self-employed (those who own and operate an enterprise — about 58 per cent of India's workforce), casual wage labourers (engaged casually, paid for work done — about 20 per cent), and regular salaried employees (engaged by an enterprise and paid wages on a regular basis — about 22 per cent). Self-employment is the single largest source of livelihood for both men and women.

Informalisation refers to the growing share of workers in the informal (unorganised) sector — enterprises and workers outside formal sector establishments. In 2019-20, about 89 per cent of India's approximately 535 million workers were in the informal sector. Informal sector workers do not get regular income, social security benefits like provident fund, gratuity or maternity benefits, and technology used in these enterprises is often outdated.

Formal sector establishments are all public sector establishments and those private sector establishments which employ 10 or more hired workers. Workers in the formal sector enjoy social security benefits and earn more than those in the informal sector. All other enterprises and workers form the informal sector, which includes farmers, agricultural labourers, owners of small enterprises, and non-farm casual wage labourers.

Disguised unemployment occurs when more workers are engaged in a job than are actually needed. For example, if a farmer needs only two workers and himself for his four-acre farm but employs five workers plus family members, the extra workers are disguisedly unemployed — they appear to be working but their marginal productivity is effectively zero. One study from the late 1950s showed about one-third of agriculture workers in India were disguisedly unemployed.

Seasonal unemployment arises because agricultural work is not available throughout the year — it depends on the agricultural season. Workers migrate to urban areas during the off-season looking for jobs and return to their home villages when the rainy season and farm work begins. This is a common form of unemployment in rural India.

Jobless growth is when the economy is able to produce more goods and services (GDP grows) without a corresponding increase in employment. During 1950-2010, India's GDP grew positively and was always higher than employment growth, which grew at not more than 2 per cent. In the late 1990s, employment growth started declining even while GDP continued to expand, widening the gap between the two.

The Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA) promises 100 days of guaranteed wage employment in a year to all rural households who volunteer to do unskilled manual work. It is one of the key government measures to generate employment for those in need in rural areas and also aims to develop community assets and rural infrastructure.

In 1972-73, about 74.3 per cent of the workforce was in the primary sector. By 2023-24, this had declined to about 46.1 per cent. The secondary sector's share rose from 10.9 per cent to 24.1 per cent, and the service sector's share rose from 14.8 per cent to 29.8 per cent over the same period. This indicates a substantial shift from farm to non-farm work over the five decades.

Women's worker-population ratio (30.7) is much lower than men's (56.4), with urban women's ratio (20.7) being especially low. Where men earn high incomes, families often discourage women from taking up jobs. Much of women's household work — cooking, fetching water and fuelwood, farm labour — is unpaid and therefore not counted as economic activity, leading to underestimation of women workers. Social norms also restrict women's participation, particularly in urban areas.

According to the chapter, economists point out that the reform process initiated in the early 1990s resulted in a decline in the number of workers employed in the formal sector. In 2012, out of about 30 million formal sector workers, about 18 million were employed by the public sector, making the government the major formal sector employer. Women constituted only about one-sixth of the formal sector workforce.

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