Unorganized or the Informal Sector

        The terms “Informal Sector” and “Unorganized Sector” are generally used interchangeably. Although a specific definition of the sector is not possible it can be loosely defined as the sector engaged in economic activities which do not fall under the category of modern industrial activities. The Unorganized Workers’ Social Security Act, 2008, defines unorganized sector as “an enterprise owned by individuals or self employed workers and engaged in production or sale of goods or providing any kind of service whatsoever, and where the enterprise employs workers, its number is less than ten.” The Act also defines an unorganized worker as a home based worker; a self employed worker; a wage worker in the unorganized sector or a worker who is not covered by any of the labour laws specified in the said Act. 

       Although, the sector has been termed as informal, it is the primary source of employment in India and provides employment to about 93% of the labour force. The sector also makes substantial contribution to the GDP. The sector displays diversity in the nature of trades as well as in the economic condition of the people involved in such activities. At the higher end are the small entrepreneurs, contractors and retail shopkeepers etc. who are the employers and are comparatively well off while at the lower end are the workers of these units, wage earners, rickshaw pullers etc. who can barely make the ends meet.

Characteristics

       While submitting its Second Report in the year 2002, the National Commission on Labour has devoted one chapter to the unorganized or informal sector. The Commission points out that the informal sector is too vast to be defined by way of a conceptual definition although its characteristics can be identified. Some of the important characteristics are as under:

• Organizations, both in terms of number of people involved and level of management are of lower level.
• Labour relations are either on casual basis or kinship including family labour or personal relations.
• Small amount of capital with business expenditure indistinguishable from household expenses.
• Easy entry and exit from the business and free mobility within the sector.
• Use of indigenous resources and labour intensive technology.
• Long working hours and lack of employment security.
• Lack of support from government.
• Generally a low wage and low earning sector.
• Has a high percentage of migrant as well as women workers.
• The sector is a prominent employer for child labour.
• Piece rate payment, home based work and contractual work is prevalent.
• Some types of work are seasonal which means there would be no work for some part of the year.
• Workers are not organized into trade unions which adversely affects their bargaining power.
• Health hazards exist in a number of occupations.

Relations between the formal and informal sector

            The informal or the unorganized sector does not exist independently of the formal sector. It is linked to and in some case dependent upon the organized sector. It depends on the organized sector for raw materials and other capital requirements and for marketing facilities etc. In a large number of cases informal sector does the actual production of goods for the formal sector through a channel of outsourcing. On the other hand, a large part of the formal sector, particularly the industries, has started hiring labour through a contractor, which is largely informal in nature.

Problems of informal sector

• The sector provides low wages which at times are even less than the minimum wages prescribed by the Government which makes the life of the worker quite difficult.
• As informal units have small capital, they are not able to provide proper facilities at the work place leading to health problems to the workers.
• The workers do not have any social security to fall back in times of need.
• As the units do not have sufficient capital, they usually resort to illegal cost cutting measures which include hiring of children as a cheap labour and avoiding of legal requirements.
• As these units are not covered under any labour laws, employees do not have facilities like PF and ESI which are available to workers of the organized sector.
• As the workers get low wages they are not able to afford proper housing due to which the migrant labour resorts to living in slums. Incidentally, a number of such informal units are located in slums. Bigger slums like Dharavi in Mumbai house thousands of such units.
• These units do not have proper waste disposal facilities and hence are a cause of environmental concerns.
• In some cases, particularly in rural and tribal areas, this sector faces problems due to depletion of resources like forests etc.

Efforts of the Government

            Although the sector is huge both in terms of participating people and also in terms of its contribution to the GDP, it is extremely heterogeneous with each group having its own problems. Due to this and also due to the fact that the workers are not organized into trade unions or associations, the sector did not get similar benefits accruing to workers of the organized sector. However, situation has tended to improve in the last few years and a number of schemes have been launched for benefit for this sector. Some of the benefits/protections available to workers of this sector are as under:

• Minimum Wages Act, 1948 provides for prescribing minimum wages for unskilled and skilled workers in some of the unorganized sectors. Minimum wages are revised from time to time.
• Welfare funds have been established for some specific categories of unorganized workers like beedi makers, miners working in mines other than coal mines and for cine workers. These funds are regulated through The Mica Mines Labour Welfare Fund Act, 1946; The Limestone and Dolomite Mines Labour Welfare Fund Act, 1972; The Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour Welfare Fund Act, 1976; The Beedi Workers Welfare Fund Act, 1976; and The Cine Workers Welfare Fund Act, 1981.
• National Scheme for Welfare of Fishermen was launched in the year 1991-92 and is specifically dedicated for welfare of fisherman. The scheme has four components, Saving-cum-relief, Development of model fisherman villages, Group accident insurance for active fisherman and Training & Extension.
• The Building and Other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996 has been enacted to regulate the working conditions, safety & health measures and payments of wages and compensation.
• National Commission for Enterprises in the Unorganized Sector was set up in the year 2004 to look into the problems faced by the enterprises in the unorganized or the informal sector. The Commission has submitted reports on National Policy of Vendors, Unorganized Sector Workers Bill, Framing Legislation for minimum conditions of work and social security for unorganized workers, financing of enterprises in unorganized sector and creation of a national fund for unorganized sector.
• Handicraft Artisans’ Comprehensive Welfare Scheme comprising of insurance as well as health insurance was launched for benefit of artisans. Major part of the premium is paid by the Government while a small is paid by the beneficiary. A similar scheme was launched for the handloom weavers under the name Handlooms Weavers Comprehensive Welfare Scheme.
• The Unorganized Sector Social Security Act was enacted in 2008. The Act defines unorganized sector as well as unorganized worker as provides for framing social security schemes for the unorganized sector as well as formation of National and State Level Boards.
• The Government has launched a scheme “Rashtriya Swasthya Bima Yojana” (RSBY) with effect from 1^st April 2008. The scheme provides smart card based health insurance up to Rs.30, 000/- to BPL families. Premium of the insurance is paid jointly by the Central Govt (75%) and State Govt (25%).
• Aam Aadmi Bima Yojana (AABY) has been started for providing insurance cover for the head of the family or earning member of a rural landless household. The scheme provides for Rs.30, 000/- in case of natural death, Rs.75, 000/- in case of accidental death and permanent disability and Rs.37, 500/- in case of partial disability. Premium amount is shared equally by the Central and State Governments.
• National Rural Employment Guarantee Scheme has been launched to provide employment of a minimum of 100 days to any rural household willing to do unskilled manual work.
• Indira Gandhi National Old Age Pension scheme has also been launched to provide old age pension to all citizens who are more than 60 years of age and living below poverty line.
• Government has enacted National Policy on Street Vendors in 2009, with the objective of providing legal status, a regulated mechanism, credit facilities and civic facilities to the street vendors. The policy aims to serve as a model to the State Governments for enacting suitable legislation.
• The Government has also introduced “The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill, 2012”. The bill provides for setting up of a Town Vending Committee (TVC) which shall also have representatives of street vendors. The bill also provides for framing of a scheme of street vendors by the State Governments. As per the bill the local authority along with the planning authority shall prepare a vending plan every five years. The bill has recently been passed by the Lok Sabha.

Present Status

            Despite the efforts of the govt, the position of people engaged in this sector is far from satisfactory. The sector is heterogeneous in nature and many of the professions still lack adequate legal regulation and protection. Apart from adequate laws, workers are usually unorganized and ignorant about their rights. Apart from a few organizations like Self Employed Women Association (SEWA), a trade union working primarily for women workers; Cine Workers Union; National Association of Street Vendors and few other organisations, trade unions and associations are usually nonexistent.  Poor implementation of laws is another problem. Minimum wages are rarely given but the worker is forced to work for lower wages due to pressure of unemployment. Social security schemes like RSBY and AABY have helped these people to some extent but the relief under these schemes is highly inadequate.  In the present scenario, providing adequate means of livelihood as well as adequate social security to all the workers in the unorganized sector remains a challenge before the policy makers.