The concept of “informality” was first introduced in the 1970 by International Labor Organization (ILO). According to the international standards adopted by the 15th ICLS, the informal sector consists of units engaged in the production of goods or services with the primary objective of generating employment and incomes to the persons concerned. The informal sector refers to those workers who are self employed, or who work for those who are self employed. People who earn a living through self employment in most cases are not on payrolls, and thus are not taxed. Many informal workers do their businesses in unprotected and unsecured places. The informal economy consists of economic activities that take place without official recognition and record. The ‘informal sector’ consists of communities, friends, neighbors, and kin. Informality exists in all countries regardless of the level of socio-economic development, although it is more prevalent in developing countries. More than 61% of the world's population makes their living in the informal economy, most of them in emerging and developing countries. It is a great source of employment for men 63% than for women 58.1%.
Life for many urban poor people in the developing world is a constant struggle to make a living. Whereas the rural poor can often produce most of their own food, urban residents generally depend on earned income to obtain food. Lack of access to agricultural land and other agricultural inputs often make it impossible for the urban poor to rely on urban agriculture. Thus, the urban poor make a living by severely reducing their consumption levels, or diversifying their livelihoods by finding ways to supplement their incomes or relying on social networks. Even the informal sector, which has helped to bridge the gap by providing housing and generating employment for large sections of the population in many countries, does so largely by ignoring or failing to conform to official norms, standards, and official procedures.
The Indian Economy is characterized by the existence of a vast majority of informal or unorganized labour employment. More than 90 per cent of workforce and about 50 per cent of the national product are accounted by the informal economy. A high proportion of socially and economically underprivileged sections of society are concentrated in the informal economic activities. The informal sector consists of “own-account” or unorganized enterprises employing hired workers, with the highest share of such unorganized activity being in agriculture where holdings are small and fragmented. Under the changed circumstances where informal sector is increasingly interlinked with the formal sector and plays pervasive role in the economy and in the livelihoods of the people, unemployed youth of the country got absorbed into private sector. As we all know that in private sector work load is very high and wages are less. Further private sector can adjust only those workers who are educated. But for those individuals who are illiterate it is impossible to get a job either government or private sector. Lack of education and skill has prompted millions of people to work in informal sector. Informal sector means that sector in which individual starts a small business on their or work in industries, factories and canteens on per day wages. It is a fact that informal sector is considered as low skilled sector, as workers in this sector lack skill and education. Earnings are very low in informal sector. But it is reality that the socio-economic development of India is mostly dependent of informal sector, as this sector is providing employment to millions of people. Informal sector is playing an important role in India, but still this sector lacks social security benefits. It as a matter of fact that informal sector is playing an important role and more than 90 percent of workforce is working in informal sector. Not only is this, in India the contribution of informal sector towards production of national products is more than 50 percent. In informal sector mostly those people are working who are socially and economically backward
As compare to those people who are working in formal sector with all social security benefits, workers in informal sector don't possess any social security provision and same is the case with auto drivers. It is a matter of fact that despite having low standard of living and earnings, the role of auto drivers in providing service to general public is remarkable. The conditions of workers in informal sector have not improved much over the years. The major informal sector includes agricultural laborers, street vendors, construction laborers, domestic workers, bonded child laborers and public transport sector. There are different means of transport which comes under the domain of informal sector mainly it includes motorized and non-motorized. In motorized are include buses, sumos, tavera and auto rickshaws and in non-motorized are included cycle rickshaw and bullock carts. The contribution of workers in informal sector towards the development of in India cannot be ignored. This sector is providing employment major section of the society. All those individual who are socially and economically back ward are concentrated in this sector. Not only this, even educated youth of the country are absorbed in informal sector because of non-availability of jobs in formal sector. But the workers in informal sector are trapped with so many problems. Livelihood can be best defined as the methods and means of making a living in the world. The concept revolves around resources such as land/property, crops, food, knowledge, finances, social relationships, and their interrelated connection with the political, economic, and socio cultural characteristics of an individual community. A livelihood consists of capabilities, assets, and activities that are required for living.
Informal employment is a greater source of employment for men (63.0 per cent) than for women (58.1 per cent). Out of the two billion workers in informal employment worldwide, just over 740 million are women. Women are more exposed to informal employment in most low- and lower-middle income countries and are more often found in the most vulnerable situations. The level of education is a key factor affecting the level of informality. Globally, when the level of education increases, the level of informality decreases, the report says. People who have completed secondary and tertiary education are less likely to be in informal employment compared to workers who have either no education or completed primary education. People living in rural areas are almost twice as likely to be in informal employment as those in urban areas. Agriculture is the sector with the highest level of informal employment – estimated at more than 90 per cent. The informally employed constitute an overwhelming majority of the workforce in India accounting for between 70 to 90 per cent of the labour force depending on the definition used. Identified by the lack of social security benefits attached to their employment, these jobs occur in different guises and forms. Traditionally seen as a temporary phenomenon, undertaken due to surplus labour and/or stagnant economy, this form of employment was expected to disappear over the course of a country’s development. These conventional models would then describe the informally employed as being the very young, or very old, who are illiterate or undereducated, with minimal training/skills and lack access to the formal market.
As 2 billion of the world’s employed population make their living in the informal economy, there is an urgent need to tackle informality. Although not everyone in the informal economy is poor and there is also poverty in the formal economy, ample empirical research has shown that workers in the informal economy face a higher risk of poverty than those in the formal economy, while informal economic units face lower productivity and income. Indeed, most people enter the informal economy not by choice but as a consequence of a lack of opportunities in the formal economy and in the absence of any other means of earning a living. For all those reasons, transition from the informal to the formal economy is of strategic significance for hundreds of millions of workers and economic units around the world that are working and producing in precarious and vulnerable conditions. Conditions of work and the level of earnings differ markedly between categories of workers. Despite a wide diversity of occupations, most workers in the informal economy have this in common: they lack legal recognition and work without secure contracts, worker benefits, or social protection.
What we need for them is Improve working conditions, scale-up understanding of safety measures, scale-up provision of appropriate health, safety and protection equipment, Improve physical working environments, Integrate or regularise informal economies and innovate in formal sectors, provide affordable and accessible services and processes. More attention is needed, however, on recognising existing informal support mechanisms and incorporating them in extension strategies, making social protection extension financing more equitable and sustainable, and accounting for the fact that there are large and frequent transitions into and out of informality. Last, but not least, using mixed individual-based and household-based indicators of informality turns out to be particularly important to help policy makers develop policy solutions that take into account the household dimension of informality.
(M Ahmad is a regular writer for this newspaper and can be reached at email@example.com)