A new report finds that the great majority of labour in India works in one form or the other of informal employment, allowing those who pay them to dodge labour laws.


In India, as elsewhere, the predominant view of policy makers is firmly rooted in the belief that the primary vehicle for creating decent employment opportunities is economic growth. Relatively high economic growth in the past decade has not, however, met these ‘trickle down’ expectations. Very few jobs have been added, mostly of low quality, whereas employment opportunities in public enterprises, the formal private sector, and agriculture have actually declined. While Gross Domestic Product growth in the past two decades accelerated to 7.52% per annum, employment growth during this period was just 1.5%, below the long-term employment growth of 2% per annum, over the four decades since 1972. Just 2.7 million jobs were added in the period from 2004-2005 to 2009-2010, compared to over 60 million during the previous five-year period. This refutes the assumption that economic growth necessarily leads to growth in employment. In fact, employment growth has been above the long run average when GDP growth has been flat or lower, for example between 2000 and 2005.

In a country where an estimated 15 million persons enter the labour market every year, and labour intensive sectors like agriculture are in decline, there has been little attempt to adopt policies that seek to accommodate this large unskilled workforce in the economy. For instance, the services sector, which has seen rapid growth since the early 1990s, accounted for 58.3% of GDP in 2004-2005, but its share of employment was only 29%. In contrast, labour-intensive manufacturing accounted for only 17% of GDP and 12% of employment, which was not materially different from the scenario in 1993-94.

Informally Employed Persons

In 2009, the report of the National Commission for Enterprises in the Unorganised Sector (NCEUS) revealed shocking data about India’s labour landscape. A vast majority of jobs created in recent years have been in the informal sector, outside the legal framework for labour protection and social security. Out of every 100 workers, the report revealed, 86 work in the informal economy, producing half of India’s economic output. Hence, around 400 million workers, a number considerably larger than the total population of the United States of America, are employed with little job security or any formal entitlements to call upon the protection of the state. Without the availability of formal employment, the solution for workers lies either in opting for self-employment, or becoming casual labourers, answerable to a labour contractor.

Informally employed workers are vulnerable to exclusion from decent work on a number of counts. Under this regime, workers no longer benefit from the protection of labour laws. For them the presumed social contract ceases to exist. Their sole responsibility in the eyes of the contractor is the completion of the assignment, which forms the basis of their remuneration. The modalities under which the assignment is completed are the responsibility of the contracted party. Whether these imply excessive working hours, lack of safety gear and hazardous working conditions, the help of children and other family members, is no longer considered a concern for the contractor. In the new labour market, each one has to fend for themselves, and the state is nowhere to be seen.

The disempowerment of these workers is compounded when they obtain work through an intermediary. It is this agent determining who gets to work where, for how long and at what price. For these services of making the match between supply and demand of labour, the agent receives a fee, further depressing the remuneration of contracted labour, and further reducing the negotiating ability of contracted workers to strive for a proper deal. This chain of command also means that work in the informal sector is more often than not conducted under inhumane conditions. Employers at each level attempt to escape direct responsibility for the health and safety of their employees, as well as the duty to provide them with the minimum remuneration that they would otherwise be legally obliged to pay. The NCEUS has estimated that in 2004–2005, 836 million Indians lived on Rs 20 or less per day, which, in all likelihood, has a strong correlation with their conditions of employment.

Even in the formal sector, over half the workers are informally employed. Such workers have no secured tenure of employment, social security and other protections. Trilok S Papola and Partha P  Sahu further note that the proportion of informally employed workers in the formal sector has also risen over time, from 42% of total formal sector employment in 1999–2000, to 51% in 2009–2010. As a result, in 2009–2010, 92% of all workers, in the formal and informal sectors combined, were effectively in ‘informal’ employment. Such trends can be explained by the increasing move towards the use of contract labour within the formal sector, in order to increase profits and avoid adhering to labour laws.

Persons Engaged in Unseen Work

Persons engaged in unseen work are, in a sense, some of the most deprived and vulnerable categories of those denied access to decent work. The official labour force participation rate for men, which measures the proportion of the total male population in the labour force, stood at 55.6% in 2011-2012, unchanged from its level in 2004–2005. For women, already scarcely represented in India’s labour market, the labour market participation in the same period dropped from 29.4% to 22.5%. This large remaining share of the population, while not recorded as being a part of the labour force, is nonetheless involved in a range of labour activities. Some of these activities are non-remunerative – examples include the involvement of women, children and the elderly in household tasks and care-giving – while others, like home-based work, domestic work, child labour, and work by the elderly, are remunerated but remain unseen and difficult to detect under formal labour registration systems.

It is not only in the home that the elderly participate, however. The combination of extreme poverty and the lack of adequate social security in India make the elderly a part of the expanded labour force in the country. The unorganised sector has no retirement age. Labour force participation rates and other conventional indicators tracked globally mostly look at persons of working age when assessing the available labour force. A large section of the elderly, usually classified as ‘dependent’ due to their age, are actually independent and engaged in remunerative work. In India, the National Sample Survey Organization (NSSO) survey in 2007-2008 revealed that 40% of those aged 60 years and above had continued to work. The figure is much higher among men, and in rural areas. In developed countries this ratio is closer to 20 per cent.

Worsening Terms of Employment

In the present day labour market, employers hire the same employees, no longer on the basis of an employment relationship for a specified period of time, but to perform and complete a certain task. Many workers are no longer attached to an enterprise, but hired as individuals who themselves are considered ‘entrepreneurs’. They bring their own tools, and in fact work at their own expense. Once the assigned task is accomplished, they get their fee for delivered services and move on to the next job. Their labour inputs are no longer part of an employment relationship between an employer and an employee, but part of a business contract between two different ‘enterprises’.

The working poor have plenty of reasons to protest the new terms of employment, which are increasingly becoming the norm. Arriving at their workplace, many workers, especially migrants, find that their wages and employment terms are not what they expected to receive, or that they have been lured into jobs that do not exist. This practice of deception by recruiters is tantamount to trafficking, which is prohibited by law. Many workers pay a fee to recruiters in order to obtain a job, and end up in a situation in which their remuneration is much lower than expected, and does not cover the payment of the fee. As a result, workers have to work for longer periods or longer hours than foreseen. They cannot leave the workplace, as contractors will constantly remind them of their incurred debts; they become, in effect, bonded. To make sure workers do not leave their workplaces unexpectedly, recruiters and employers turn to violent practices to keep workers where they are. The cycle of exclusion closes in on itself when workers fall sick or get injured, leaving them unable to work. The costs of not working, for someone already close to starvation levels of poverty, are extremely high, and many are forced to take on debts for their treatment. The objective of this exploitation is the availability of an ultra-cheap labour supply, deprived of the freedom to choose the terms of their employment.

Shortened workweeks are another characteristic of changing terms of employment in many industries that are having detrimental effect on the labourer’s condition. In the case of migrant workers, for example, contractors sometimes artificially diminish working time, to keep their working days outside the purview of legislation. They deliberately shift contract workers from one workplace to another, keeping workers unemployed for some time. Many workers in agriculture and the informal sector also face similar underemployment. To them, work is available intermittently and, even then for only three or four days a week.

Excerpted (with small edits) with permission from ‘Labour Markets: Exclusion from ‘Decent Work’, The India Exclusion Report 2013-14.

The India Exclusion Report 2013–’14, which will be released on June 25, is a widely collaborative effort involving numerous institutions and individuals working with disadvantaged and marginalised communities in India. For details, see http://centreforequitystudies.org/category/ixr1314