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Informalization of the Indian Workforce

We have seen that the casualization of labourers is increasing and despite all the development strategies adopted, agriculture still has the maximum workforce. Economists are of the opinion that the quality of employment has been deteriorating. Even after putting in many years of service, a majority of workers are deprived on gratuity, pension and provident fund. People employed in the private sector earn less than those in the public sector. The section of workforce which earns a regular income is protected by the government through labour laws. This section of workers form trade unions and bargains for better wages and social security measures like gratuity and pension. In order to know about this kind of people, we classify workers as workers in the formal or organized and informal or unorganized sectors. All the public sector enterprises and those private sector firms with more than 10 workers are called the organized sector and the workers are called formal workers. The others are called informal workers and they include farmers, self employed individuals, people running small enterprises and those employed in such enterprises.

The people employed in the formal sectors earn more and also enjoy social security measures. It was thought by our planners that as the economy grew the number of workers in the formal sector would increase but that has not been the case.

Workers in Formal/Informal sector, 1999-2000


Formal Sector

Informal Sector










Out of the 4million workforce of our country less than 7% is employed while the rest is working in the unorganized sector. In the formal sector more than 80% are men, while the women workforce is less than 20%. In the informal sector, there are 69% of men and 31% of women.

India and other developing countries started paying attention to the workers in the informal sector from the late 1970s. Workers in the informal sector do not get a steady income and have no protection from the government. The workers can be dismissed without any compensation. In the informal sector, the technology used is outdated and there is no proper maintenance of accounts. The workers belonging to this sector generally live in slums and squatters. In recent times, because of the efforts taken by the International Labour Organization (ILO), the Indian government has also started taking steps to modernize the informal sector and providing social security to the workers belonging to the sector.

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