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Informality: The cause of labour distress

The urban labour market is largely informal, lacks a social security net, which increases labour vulnerability and distress during lockdowns .


April 27, 2021 6:47:19 pm
Covid-19 lockdown, migrant workersMigrant labourers, leaving Delhi after the government announces seven-day lockdown, at Anand Vihar bus terminal in New Delhi. (Express Photo by Praveen Khanna)

Written By Krishna Ram

With the spread of the new variants of COVID-19, and the anticipation of further extensions of the short lockdowns, the exodus of labourers is visible again. Large crowds can be seen at railway stations and bus depots in Delhi and Maharashtra. This situation again exposes our system for not providing adequate safeguards that prevent such mass exodus. It also seems that the government has not learnt any lessons from the recent experience — last year, almost at the same time, due to the same reason, migrant labourers started leaving large cities. We have seen how painful the exodus was. It seems that we are moving in the same direction again. So, a fundamental question arises: Why do these people choose to leave these cities despite the government’s appeal to not panic and despite assurances of help and support?

One plausible answer is the informality in the urban labour market. The latest Periodic Labour Survey (PLFS 2018-19), which captures the employment and wage situation for the period between July 2018 and June 2019, shows that about 128 million people aged 15-59 years are part of the labour force in the urban sector of which 116 million are employed. Out of the total employed persons, 23 per cent are formal workers and 77 per cent are informal workers. Formal workers work in the public and private organised sectors and have adequate social security benefits. But informal sector workers lack these benefits, making them very vulnerable to economic and political shocks in urban areas.

Out of the total workforce, around 38 per cent workers are self-employed workers, 48.7 per cent are regular salary workers and 13.5 per cent are casual workers. The casual workers among the informal workers are most susceptible to economic shocks as most of them do unskilled, low-paid occupational jobs. A significantly high proportion of these workers belong to the marginalised groups and are migrant labourers. According to reports, out of 7.3 lakh workers who returned to Madhya Pradesh during the lockdown, 60 per cent belonged to the Dalit and Adivasi communities. These workers mostly live in urban slums. Their basic necessities, most notably food, are hard to be arranged, if they do not work daily.

If we look at the daily wage earnings of these informal workers across social categories and work status (Figure 1), we find that the per day wage earnings of casual workers is about half (Rs 350) that of the self-employed workers (Rs 526). But it is almost at par with the regular wage workers. The monthly wage earnings of regular workers is higher than the casual workers because the availability of work is assured for all working days for them, while the same is not true in the case of casual workers.

Figure 1: Per Day Wage Earning (in Rs.) for Regular, Casual and Self –Employed Workers across Caste in India, 2018-19

Across social categories, we can see that Dalits, Adivasis, and OBC workers earn, on average, less than other category workers, irrespective of their status of employment. The difference in average wage-earning across social groups is primarily because of these marginalised groups’ structural disadvantages. The historical oppression and marginalisation faced by these groups created systematic differences in terms of endowment, opportunities, and skills. Because of these reasons, Dalits and Adivasis are often found in low-paid, low-occupational jobs compared to other castes in India. The structural disadvantage in term of literacy and skills make them more prone to exploitation. The discrimination in the urban informal labour market against these people leaves them with no choice but to accept the offered wage.

Figure 2: Distribution of Working Poor Workers (PS+SS) across Caste in Urban India, 2018-19.

Comparing the wage earnings of these informal workers to the minimum wage stipulated for the unskilled workers as per the Minimum Wage Act 1948, we find that around 32 per cent of all urban informal workers do not get even the bare minimum wage. Across social categories, the figures are even higher for Dalits and Adivasis. Around 35 per cent of Adivasis, 43 per cent of Dalits, and 31 per cent of OBCs were not getting minimum wages during 2018-19. Furthermore, about 10 per cent (11 million) of informal workers (excluding unemployed persons) earn less than the poverty line. It is worrisome that around 11 million workers and their family members live in poverty despite being employed. An additional, about 38 per cent (44 million) workers are the vulnerable poor. (The vulnerable poor are those who earn less than two times of poverty level of income). The poverty headcount ratio for the population (including the employed and unemployed workers and their family members) is 22 per cent (82 million). The headcount ratio rises to 51 per cent ( 188 million) if we include the vulnerable poor. Across social categories, the poverty headcount ratios are 59 per cent, 57 per cent, and 55 per cent for Dalits, Adivasis, and OBCs respectively. Focusing back on Delhi and Maharashtra, it worth underlining that around 41 per cent of workers in Delhi and 38 per cent in Maharashtra on average earn less than the daily wage stipulated for unskilled workers. About 32 per cent workers are poor workers in Delhi and 33 per cent in Maharashtra. Headcount ratios (including the vulnerable poor) for these states are 44 per cent and 47 per cent, respectively.

These data indicate depressed wages, precarious living standards, and impoverishment faced by the urban informal workers. There is a government failure to reduce wage inequality and ensure a bare minimum wage to a large chunk of the urban informal workers during normal times. Therefore, the majority of urban informal workers remain highly vulnerable and live in precarious conditions even during normal times. A lockdown deprives the majority of the informal workforce of their job and hence their earnings immediately. Unavailability of any other potential source of earning, coupled with inadequate government support, forces these workers to head back home for survival.

(The writer is an assistant professor at Ambedkar University, Delhi)

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