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Clarifying Concepts
Glimpse into the Unorganized Sector

Glimpse into the Unorganized Sector

In regular 8-10-hour-working households, or even in informally working households, there is a need to have a helping hand in the chores. Because of their demand, maids have become an irresistible component of daily lives. Similar is the case with electricians, plumbers, and other such kinds of workers.

Have we ever thought about how they must be managing their lives with irregular or no income at times? Simply, difficult.

These workers are classified as unorganised sector workers or informal sector workers because of irregularity of income, no formal contracts, or a lack of social security. The terms unorganised sector and informal sector are used interchangeably. In India, these workers are present in both the agricultural and non-agricultural sectors.

Why does it matter?         

Those employed in the non-agricultural informal sector, making up 40 percent of India’s labour are half-rural, half-urban. On an all-India level, about half of these 40 percent are employed in industry (manufacturing and construction in equal parts), and half in services (like trade, hotels, and restaurants).

The informal sector labour force of rural India, who are not in farming, are not working here as well. These labourers, making up 20 percent of the labour force, are mostly involved in construction, followed by trade, transport, and manufacturing.

Low-skilled labourers who are desperate enough to work for miserly wages in order to meet their subsistence requirements largely constitute the labour force of unorganised economic activities.

However, when urban informal workers without social security lose jobs, many move back to their rural homes. But rural wages are 2.5x lower than urban wages, leading to lower demand and growth over time.

They are the backbones of the economy. They are the real executors of the plans prepared for growth and development of the economy.

Variety in Definitions

The term “informal sector” seems to have first been used in a report on the employment survey in Kenya undertaken by the ILO in 1972. United Nations System of National Accounts (SNA), 1993 only refers to the informal sector as a sub-sector of the household institutional sector. The informal sector according to the SNA 2008, consists of productive institutional units characterised by (a) low level of organisation, (b) little or no division between labour and capital, and (c) labour relations based on casual employment and/or social relationships, as opposed to formal contracts.

The 15th International Conference of Labour Statisticians defines the unorganised sector as made up of every unorganised private company owned by individuals and households engaged in sale and production, with fewer than 10 employees, of products and services conducted in a proprietary or collaboration manner.

National Commission for Enterprises in the Unorganised Sector (NCEUS), India defines it as the sector consisting of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers.

The term unorganised worker has been defined under the Unorganised Workers’ Social Security Act, 2008, as a home-based worker, self-employed worker or a wage worker in the unorganised sector and includes a worker in the organised sector who is not covered by any of the Acts mentioned in Schedule-II of Act i.e. the Employee’s Compensation Act, 1923 (3 of 1923), the Industrial Disputes Act, 1947 (14 of 1947), the Employees’ State Insurance Act, 1948 (34 of 1948), the Employees Provident Funds and Miscellaneous Provision Act, 1952 (19 of 1952), the Maternity Benefit Act, 1961 (53 of 1961) and the Payment of Gratuity Act, 1972 (39 of 1972).

Present Government’s Policies in India

The Government has been working to provide some sort of assistance to these workers. Here are some of the present schemes and programmes for the same.  

1. eShram

The portal for the registration of Unorganised Workers across the country was launched on 26th August 2021. This portal will help build a comprehensive National Database of Unorganised Workers (NDUW) in the country. The portal will prove to be a huge boost towards the last mile delivery of welfare schemes for crores of unorganised workers. The registration is totally free for the workers.

2. Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM)

Pradhan Mantri Shram Yogi Maandhan Yojana is a government scheme meant for old age protection and the social security of Unorganized workers.

3. Aam Admi Beema Yojana

Workers in the unorganised sector constitute about 93 percent of the total workforce in the country. The Government has been implementing some social security measures for certain occupational groups but coverage is miniscule. Majority of the workers still do not have any social security coverage. Recognizing the need for providing social security to these workers, the central government has introduced a Bill in the Parliament.

Given their vulnerabilities, these workers have to be supported through social security schemes so that through these aids and provisions they would have a fallback system in times of job unavailability or loss.

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