Chapter-6 Employment: Growth, Informalisation and Other Issues

Employment: Growth and changes in work force participation rate in formal and informal sectors;
problems and policies

Why do people work?

 People work for ‘earning’ a living.
 Employment gives us a sense of self-worth and enables us to relate ourselves meaningfully
with others.
 Employment contributes to national income and hence, the development of the country by engaging in
various economic activities.
 Employment also gives a sense of accomplishment when people work to meet the requirements of the
dependents.

Why should we study about working people?

 Studying about working people gives us an idea about the quality and nature of employment
in a country.
 It helps in understanding and planning our human resources.
 It helps us to analyse the contribution made by different industries and sectors towards
national income.
 It also helps us to address many social issues such as exploitation of marginalised sections of
the society, child labour, etc.

Workers and Employment

What is the difference between GDP and GNP?

 The total money value of all final goods and services produced in a country in a year is called
its gross domestic product for that year.
 When the earnings (plus or minus) from foreign transactions is added to GDP, we get the
country’s gross national product for that year.

The nature of employment in India is multifaceted.’ Elaborate.

 Some workers get employed throughout the year and some get work only for a few months.
 Majority of our people are residing in rural areas. Therefore, the proportion of workforce
residing there is higher.
 Over the last five decades, people have moved from self-employment and regular salaried
employment to casual wage work.
 77% of workers are men.
 Self-employment sector is the major employment provider.

Who is a worker?
 All those who are engaged in economic activities are workers.
 A worker is a person who is engaged in some productive activities.
 He is engagedin the process of value addition and contributes to national income of the
country.

How are workers classified?

Workers are classified as self-employed workers and hired workers.

 Self-employed workers are those workers who are engaged in their own business or own
profession. Eg: A farmer working on his own land. About 52% workforce in India belongs
to this category.
 Hired workers are those workers who work for others. They render their services to others and as
a reward get wages or salaries. Eg: A teacher working in school, A Cashier working in a
nationalised bank.
Hired workers are classified as Casual wage labourers and Regular salaried employees.
 Casual wage labourers are casually engaged in others’ farms or work place and, in return, get
a remuneration for the work done. They account for about 25% of India’s workforce. They are
not given social security benefits like provident fund, gratuity or pension. Eg: Costruction
workers.
 When workers are engaged in others’ enterprise and paid wages on a regular basis, they are
known as regular salaried employees. They account for about 23% of India’s workforce. They
are entitled to all social security benefits like provident fund, gratuity or pension. Eg:
Teachers, Docters. 
 Self-employment is a major source of livelihood for both men and women. 
 Casual wage work is the second major source for both men and women.

Why is the bulk of our workforce Rural-based? Or

What is the reason for widespread of poverty in rural areas?

 Majority of our people are residing in rural areas. Therefore, the proportion of workforce
residing there is higher.
 More people are engaged in farming and allied activities but contributing less to GDP.
 There is low productivity of workers in rural areas so they have low earnings.
 The reason for widespread of poverty in rural areas is the low earnings of workers.

Participation of People in Employment

What is Worker-population ratio?

 Worker-population ratio is the ratio of total workers to total population.
 It is an indicator which is used for analysing the employment situation in the country.
 This ratio helps us to know the proportion of population contributing to the production of
goods and services of a country.
 If the ratio is higher, it means more people are employed.
 If the ratio is medium, or low, it means that a very high proportion of its population is
unemployed.
 Worker-population ratio = The total number of workers /The population in India X 100

Define Population.
Population is defined as the total number of people who reside in a particular locality at a
particular point of time.

The following table shows distribution of workforce in India for the year 1972-73. Analyse it and
give reasons for the nature of workforce distribution. You will notice that the data is pertaining
to the situation in India about 50 years ago!

Place of Male Female Total

residence
Rural 125 69 194
Urban 32 7 39
  In 1970’s the workforce was more rural based.
 In rural areas 125 million males were in workforce but in urban area only 32 million males
were in workforce.
 In rural areas 69 million females were in workforce but in urban area only 7 million
females were in workforce.
 In rural areas people have limited resources to earn a higher income and participate more
in the employment market.
 Urban people have a variety of employment opportunities.

Worker – population Ratio in India, 2017-2018

Sex Rural Urban Total

Men 51.7 53.0 52.1

Women 17.5 14.2 16.5

Total 35 33.9 34.7

Why is the proportion of rural workers higher than the urban workers in economic activities?
 People in rural areas have limited resources to earn a higher income and participate more in
the employment market.
 Many do not go to schools, colleges and other training institutions due to their poor economic
condition.
 Even if some go, they discontinue in the middle to join the workforce.
 In rural areas, people cannot stay at home due to their poor economic condition.
 In urban areas, many are able to study in various educational institutions.
 Urban people have a variety of employment opportunities.
 They look for the appropriate job to suit their qualifications and skills.

Why is the percentage of female workers low?

Or
Why is worker population ratio higher in males than in females in India?
 Where men are able to earn high incomes, families discourage female members from taking
up jobs.
 Many household activities done by women are not recognised as productive work.
 Women are not paid for the works like cooking, fetching water and fuelwood and participate
in farm labour. These works are non-recognized.
 Women workers are under-estimated.

Employment in Firms, Factories and Offices /Occupational Structure / Distribution of Workforce among
Different Sectors

How are economic activities distributed into different industrial divisions?

 (ii) Mining all economic activities are divided into eight different industrial divisions.
 They are (i) Agriculture and Quarrying (iii) Manufacturing (iv)Electricity, Gas and Water Supply
(v) Construction (vi) Trade (vii) Transport and Storage and (viii) Services.
  All the working persons engaged in economic activities can be clubbed into three major
sectors
(a) Primary sector which includes agriculture, mining and quarrying,
(b) Secondary sector which includes manufacturing, electricity, gas, water supply &
construction
(c) Service sector which includes trade, transport, storage and other services.

Analyse and compare the distribution of workforce in different industrial division in rural and urban
areas.
Refer table 6.2 in Text book ( pg no : 99)
 In rural areas almost 60% of workforce are engaged in primary sector. Only 6.6% of urban
workforce are engaged in primary sector.
 34.3% of urban workforce are engaged in secondary sector while only 20% of rural workforce
are engaged in secondary sector.
 In urban areas 59% of workforce are engaged in tertiary sector while only 19.8% of rural
workforce are engaged in tertiary sector.
 From the above table it is clear that in rural areas more people are engaged in primary sector
and in urban area service sector is the main source of employment


Growth and Changing Structure of Employment

What are the two indicators of development?

The two developmental indicators are the growth of employment and increase in GDP.

What is Jobless growth?

 Jobless growth is defined as a situation where the production of goods and services is possible
without creating employment opportunities.
 There was Jobless growth in the Indian economy in the late 1990s.
 In the late 1990s in Indian economy, the GDP grew positively through technology without
generating employment. This situation is known as Jobless growth.

What is casualisation of workforce?

 The process of moving from self-employment and regular salaried employment to casual wage
work is known as casualisation of workforce.
 Casualisation of workforce is defined as a situation where the percentage of workforce
working in self-employment and regular salaried employment tends to decline and the
percentage of workforce working as casual wage workers tend to rise.
 Casualisation of workforce was noticed in India during 1972-94.
 This makes the workers highly vulnerable.

Informalisation of Indian Workforce

What is informalisation of labour?

Informalisation of labour is defined as a situation where the percentage of workforce in the formal
sector tends to decline and the percentage of workforce in the informal sector tends to rise.
What is the difference between formal sectors and informal sectors?

 Formal sector is otherwise known as organised sector.

 All the public sector establishments and those private sector establishments which employ 10
hired workers or more are called formal sector establishments.
 Workers who work in such establishments are formal sector workers.
 In India, about 6% people are employed in formal sector.
 Informal sector is otherwise known as unorganised sector.
 All those private sector establishments which employ less than 10 hired workers are called
informal sector establishments and those who work in such establishments are informal
sector workers.
 Informal sector includes farmers, agricultural labourers, owners of small enterprises and people
working in those enterprises, the self-employed who do not have any hired workers and all nonfarm
casual wage labourers such as construction workers and headload workers.
 94% of people working in informal sector.

What are the benefits enjoyed by the workers in the formal sector?
 Those who are working in the formal sector enjoy social security benefits like maternity
benefit, provident fund, gratuity and pension.
 The government, through its labour laws, enable them to protect their rights.
 They earn more than those in the informal sector.
 They have job security with a regular income.
 They are covered by social security schemes protecting their health and old age.
 They have strong trade union that bargains with employers for better wages and other social
security measures.

What are the problems faced by the workers in the informal sector?
 Workers in the informal sector have no job security and do not get regular income.
 They do not have any protection or regulation from the government.
 Workers are dismissed without any compensation.
 They are not covered by social security schemes protecting their health and old age.
 Technology used in the informal sector enterprises is outdated.
 They also do not maintain any accounts.
 Workers of informal sector live in slums and are squatters.

What do you know about Formal Sector Employment?

 The information relating to employment in the formal sector is collected by the Union
Ministry of Labour through employment exchanges located in different parts of the country.
 The public sector is the major employer in the formal sector in India.
 In 2012, out of about 30 million formal sector workers, about 18 million workers were
employed by the public sector.
 Here also men form the majority, as women constitute only about 1/6 of formal sector work.

Unemployment

Unemployment refers to a situation when people are willing to work at the existing wage rate, as
well as able to work, but are not getting work.
Which are the three sources of data on unemployment?
The three sources of data on unemployment are
 Reports of Census of India,
 National Statistical Office’s Reports of Employment and Unemployment Situation,
 Directorate General of Employment & Training data of Registration with Employment
Exchanges.

Explain the different types of unemployment prevailing in India.

 The National statistical office (Earlier it was known as National Sample Survey Organisation) defines
Unemployment [Open Unemployment] as a situation in which all those who, are willing to work,
are not able to get job.
 Economists define unemployed person as one who is not able to get employment of even one hour
in half a day.
 Disguised unemployment: It is a situation when the number of workers engaged in a job is much
more than actual prequired number of persons. Unemployment prevailing in agricultural sector is
disguised unemployment. One third of agriculture workers in India are disguisedly unemployed.
Causes of disguised unemployment are,
 On account of joint family system, farming families continue to work on family land, no
matter the actual number of workers far exceeds the required number.
 Per person holding size continues to shrink with the expansion of the family size.
 Lack of job opportunities outside agriculture in rural sector.
 Seasonal unemployment: During off seasons, there is no work to do on farms. Farmers become
unemployed. This kind of unemployment is known as seasonal unemployment. Work in agriculture
is seasonal. It is estimated that a farmer who grows one crop in a year usually remains unemployed
for 5 to 7 months.

Causes of Unemployment in India

1. Slow Economic Growth – slow growth rate fails to generate enough employment opportunities for
the rising labour force. Size of labour force is much more than the available employment
opportunities.
2. Rapid Growth of Population- constantly rising population has been a grave problem in India. It is one
of the principal factor contributing to unemployment.
3. Ariculture – a Seasonal Occcupation – it is the primary occupation of our country and a large size of
the population depends upon it,but its seasonal character does not provide stable jobs to the farmers
throughout the year.
4. Lack of Irrigation Facilities - irrigation facilities are covering only 44% of agriculture area. In the
absence of multi-cropping, opportunities of employment remain limited.
5. Joint Family System – joint family system is more prevalent in rural areas, hence a high degree of
disguised unemployment in these areas.
6. Decay of Cottage and Small Industries – decay of cottage and small industries during the British
regime has given a big blow to the potential of sell-employment in India. Emergence of large
industries after independence has failed to yield employment opportunities to the desired extent.
7. Low Savings and Investment
8. Limited Mobility of Labour – owing to a variety of family as well as social constraints, people are
reluctant to move to far-off areas when jobs are available there.
 Some Basic Concepts related to Employment

l) Labour supply –amount of labour that the workers are willing to offer corresponding to a
particular wage rate.

ll) Labour force = number of people actually working + number of people willing to work

lll) Work force = labour force – unemployed people

lV) Unemployed people = labour force – work force

V) Rate of unemployment = number of persons unemployed X 100

Size of labour force

Vl) Participation rate = total work force X 100

Total population

Government & Employment Generation

The following are the steps taken by the government in creating employment opportunities.
Mahatma Gandhi National Rural Employment Guarantee Act, 2005 [MGNREGA].
 National Rural Employment Guarantee Act [NREGA] was launched in 2005.
 It has been renamed as Mahatma Gandhi National Rural Employment Guarantee Act
[MGNREGA] 2005.
 It promises 100 days of guaranteed wage employment to all rural households willing to do
unskilled manual work.
The role of Union and State governments in generating employment opportunities.
 The efforts taken by the Union and State governments in generating employment opportunities
can be broadly categorised into two — direct and indirect.
 In direct generation of employment opportunities category, the government employs people in
various departments for administrative purposes. It also runs industries, hotels and transport
companies, and hence, provides employment directly to workers.
 In indirect generation of employment opportunities category, when a government enterprise
increases its output, it will result in direct increase in employment in that government company.
The private enterprises which receive raw materials from that government enterprise will also
raise their output and hence increase the number of employment opportunities in the economy.
This is the indirect generation of employment opportunities by the government initiatives in the
economy.
Rural Works Programme
This programme aims at providing not only employment but also services in areas such as
primary health, primary education, rural drinking water, nutrition, assistance for people to buy
income and employment generating assets, development of community assets by generating
wage employments.
National Rural Employment Programme
This programme aims at creating community assets such as construction of houses and
sanitation, assistance for constructing houses, laying of rural roads, development of wastelands/
degraded lands for strengthening rural areas and improving the quality of rural life.
Other Government Poverty Alleviation Programmes
All government Poverty Alleviation Programmes are employment generation programmes.
Prime Minister’s Rozgar Yojna [PMRY], Swarna Jayanti Shahri Rozgar Yojna [SJSRY], Rural
Employment Generation Programme [REGP], etc are some of the government programmes.

Refer SKILL INDIA, MAKE INDIA, MGNREGA and START UPS

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CBSE BOARD QUESTIONS

1. Who is a worker?
2. Compared to urban women, more rural women are found working. Why?
3. What do you mean by hired workers?
4. Define economic activity? Explain its types.
5. What do you mean by work force participation ratio?
6. Define unemployment? How is unemployment rate calculated?
7. Write short notes on:-
a. Rural unemployment
b. Urban unemployment
8. State the causes of unemployment in India?
9. Briefly explain National Rural Employment Guarantee Act 2005 and also state its efforts?
10. Is it necessary to generate employment in the formal sector rather than in the informal
sector? Why?
11. Sam is able to get work only for two hours in a day. Rest of the day, he is looking for work. Is
he unemployed? Why? What kind of jobs could persons like Victor is doing?
12. How will you know whether a worker is working in the informal sector?