Insecurity of women workers and the chimera of formality in India

C.P. Chandrasekhar, ]ayati Ghosh, Nancy Yadav and Shreya Sharma

I. Introduction

In this chapter, we consider how gender inequality is expressed in the Indian labour market and analyse various official attempts at formalisation of work. The Indian experience presents a striking example of the failure of formalisation policies in the context of a sluggish labour market with significant underemployment and open unemployment and poor regulator)' practices.

There are many paradoxes of the recent pattern of growth in India. India is remarkable even among developing countries, for the extreme prevalence of informality in economic activities and in employment. Despite rapid GDP growth in India since the 1980s, there has not been any noticeable expansion of decent work opportunities for India’s relatively young labour force, nor of more formal employment. The (already low) employment elasticity of output growth declined, even as the economy was more exposed to global competition that was supposed to have favoured more labour-intensive activities. In recent years, it has even turned negative, as aggregate employment declined between 2011-12 and 2017-18. Growth did not generate employment diversification, as most workers (especially women workers) remain stuck in low value added but arduous work in agriculture and low-grade services. The share of manufacturing in both output and employment has remained low, and low productivity work continues to dominate in total employment. Even within sectors, there are extremely wide variations in productivity across enterprises. Over several decades of rapid income growth, the expected formalisation of work and the concentration of workers into large-scale production units has not occurred—rather, there has been widespread persistence of informal employment and increase in self-employment in non-agricultural activities. Most striking of all is that the period of rapid GDP growth has been marked by low and declining workforce participation rates of women, in a pattern that is unlike almost any other rapidly growing economy in any phase of history over the past two centuries.

This does not mean that workers in the informal economy in India have simply been excluded from formal activity—rather, they are deeply integrated into it both directly and indirectly. The perception that the informal economy exists because low wages allow it to compete with the formal sector in a host of non-agricultural activities is misplaced. In many instances, the informal economy is not in competition with the formal sector, but actually services its requirements, through subcontracting and provision of various inputs and service activities. In this way, low wages in the informal economy help sustain profits in the formal sector.1

There is strong evidence of substantial increases in subcontracting by the formal manufacturing industry to more informal production arrangements since 2001 (Bairagya, 2010; Kesar, 2017; Sahu, 2010; Sundaram et al., 2012). This provides greater flexibility to formal operations and lowers their costs because of the ability to suppress net incomes in informal enterprises. The value chains evident in a number of important exporting industries in sectors as varied as readymade garments, gems and jewellery, automotive components, leather and leather products and sports goods, which are often co-ordinated by large and possibly multinational corporate entities, provide evidence of the significant and increased contribution of informal activities to what are seen as formal sector production (Damodaran, 2010). These are only some examples of a wide and pervasive process of extremely close intertwining of formal and informal sectors, and the effective subsidisation of the formal sector by low-paid informal activities.

Furthermore, labour markets in India are massively determined by the ability of employers to utilise social characteristics to ensure lower wages to certain categories of workers. Caste and other forms of social discrimination have a long tradition in India, and they have interacted with capitalist accumulation to generate peculiar forms of labour market segmentation that are unique to Indian society. Studies (such as Thorat 2010Human Rights Watch, 2007; Shah et al., 2006; Thorat, 2010; Thorat et al., 2009) have found that social categories are strongly correlated with the incidence of poverty and that both occupation and wages differ dramatically across social categories.

Gender-based differences in labour markets and the social attitudes to women’s paid and unpaid work are also reflections of this broader tendency (Ghosh, 2009; Mukheijee, 2012). Most socio-economic indicators point to the low status of women in the Indian society. The widespread perception that women’s work forms an “addition” to household income and, therefore, commands a much lower reservation wage is common to both private and public employers. Women workers typically receive significantly lower wages for similar work (on average 60 per cent of men’s wages) pointing to one of the highest aggregate gender wage gaps in the world. In public employment, the use of underpaid “voluntary” women workers receiving well below minimum wages has become institutionalised in several major government programmes to deliver essential public sendees of health, nutrition, support for early child development and even education. Furthermore, the role played by the unpaid labour of women in contributing not only to social reproduction, but also to what would be recognised as productive economic activities in most other societies has been absolutely crucial in enabling this particular accumulation process.

This is the broad political economy context in which successive governments have introduced various measures to “formalise” the economy by bringing more producers and workers into the ambit of formal regulations—or at the very least to try and increase the number of workers classified as “formal workers”. Unfortunately, most of these measures have not taken into account or addressed macroeconomic factors that affect the rate and pattern of employment generation. Nor have they sought to change the specificities of Indian labour markets, which rely on existing forms of inequality (such as those based on caste and gender) that lead to varying outcomes for different types of workers. As a result, as will be seen below, the impact of most of these measures has been marginal at best, and at worst even counterproductive, in terms of improving the conditions of women informal workers.

The chapter is organised as follows. In the next section, we examine the broader context of employment trends and women’s work in India. The third section considers the relative extent of formal/informal activity and organised/ unorganised sectors. The fourth section is a brief description of some of the recent schemes and programmes of the government with respect to formalisation. The fifth section contains the results of a primary survey of workers conducted in the Delhi National Capital Region (NCR) region over August-October 2018, to assess how these efforts at “formalisation” affect women workers. The final section contains some brief conclusions and highlights their relevance for policy.

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