Work by:- Nikitasha Boro, post graduate, modern Indian History. Delhi university.
Introduction :-
In the perspective of W. Arthur Lewis’s 1958 essay, economic
development in the developed countries (aka first world
countries) would be able to generate enough modern jobs to
absorb the surplus labour from the traditional economy. This
belief was termed as the Lewis Turning Point and was quite a
widespread belief during the 1950s and 1960s.
Despite the earlier assumption of complete labour
integration within the traditional economic sector, it was
clearly seen that unemployment, open-employment and
under employment had become widespread. By the mid-
1960s, it had become a major rising issue. This led Hans
Singer to argue that he saw no sign of the “Lewis Turning
Point” and in sharp distinction, under-employment and open
employment were in fact increasing even in the
economically-developing countries1. This was attributed to
the fact that the emerging massive technological advances
were in actual fact hindering the growth of new jobs due to
capital-intensive technologies as well the increasing
population. Another effect seen was the increasing job
shortage in overcrowded urban communities.
Another impacted primary sector was the “Agrarian Sector”2
.
Agrarian economy had become monetized from the late
colonial period when large landowners paid landless
labourers in a mix of cash and kind (food, shelter, etc.). This
group of marginalized proletariats were highly exploited and
not even state-sponsored relief could neutralize that. The
issue of the rising demographic further deterred the landman ratio and added to the already copious supply of labour
in this primary sector economy.
The change in agrarian employment towards casualization
and contractualization indicated that labour was being
thoroughly comodified. Labour had degraded to a
commodity that could be hired and fired at will.
In 1972, during the International Labour Organization (ILO)
Mission (The Kenya Mission), the “Informal Sector” (outside
the Formal sector economy) was found to be full of profitable
and efficient businesses and economical activities. The
Informal economy encircled the large bracket of economic
units and workers that are outside the norm (regulated
economic activities, formal contractual employment, etc.).
During the economic crisis in 1980s (Latin America) and
1990s (Asia), production was being restructured into smallscale, flexible, decentralized units. The unemployed
population was pushed towards accepting divergent jobs
with hourly wages and few benefits. In such capital-intensive
work environment, enterprises sought for cheap labour to
maximize profits.
Such warped balance and interests between the labour force
and the capitalists further increased the presence of the
informal sector as well linking it to the production progress of
the formal economy.
A major contributing factor was “globalization”. Globalizing
the market led to fiercer competitions among the larger and
formal enterprises leading to them preferring to outsource
most labour in search of cheaper options. Though this may
create jobs, they are generally not secure source of
employment and companies generally hire temporary
workers who are paid minimum wage without much benefit.
Since the 1970s, this renewed interest in this sector also
stems from the consciousness of the links between
informality and growth on the one hand and the links
between informality, poverty, and inequality on the other.
There is growing recognition that much of the informal
economy system nowadays is integrally linked to the formal
economy and contributes to the overall economy; and that
supporting the working poor and low-paid workers in the
informal sector is a key pathway to reducing poverty and
inequality. There is also increasing awareness that women
tend to be concentrated in the more precarious forms of
casual or informal employment. Supporting working poor
women in the informal economy is a key route to reducing
women’s poverty and gender inequality3
Through the work of Maria Mies, it can be analysed that
within the household industry (part of informal sector), the
supplementary work done by most poor, rural women such
as lace work to subsidize their household income are not
even considered “work” but a “spare-time” activity which
firmly puts them under the umbrella of invisible labour. The
conditions under which they are made to work are generally
horrendous and lead to increased pauperization of peasants
due to a predetermined orthodox believe of keeping women
labour from being made into proper wage-labour. Due to
increasing hours and poorer conditions (low wage), women
are forced to give up education or training to earn money
which forces them to remain locked in this vicious circle of
destitution. Consequently, their work is exploited by men for
profit which in turn creates polarisation between men and
women labour.
Further complementing this is the oppression and
exploitation of peasants by landowners due to capitalist
farming. This systematic draining of the rural areas and the
transformation of agrarian capital into merchant capital has
led to a polarisation in the village between marginal peasant
poor (landless agricultural labourers) and rich or middle landowning peasants that gain massive wealth comparatively.
Even within the same country, the informal economy is
highly segmented and sub-divided by sector of the economy,
place of work, status of employment, social group and
gender; having only one commonality- they lack legal and
social protection.
The epistemology of the debate on the informal sector is
largely dominated by four schools of thought with their own
causal theories4- • DUALIST SCHOOL
The theory that the informal sector comprises of
marginal activities that acts as a safety net in times of
crisis and as a source of income for poor workers. It is
considered completely separate from the formal sector.
CAUSAL THEORY
Due to imbalance between growth rates of population and
of modern industrial employment.
STRUCTURALIST SCHOOL
It considers the informal sector as a subordinated
economic unit and that these workers serve to reduce
input and labour costs, thereby increasing the
competitiveness between large capitalists firms.
CAUSAL THEORY
It attributes the existence of informality on the very nature of
capitalism and capitalist agenda. It contributes its formation
as the reaction of the formal sector to the power of
organized labour.
• LEGALIST SCHOOL
It comprises of micro-enterprises that wish to avoid the
costs, time and effort of formal registration.
CAUSAL THEORY
It attributes the desire to avoid formal registration on the
hostile and cumbersome legal system.
VOLUNTARIST SCHOOL
It consists of enterprises that seek to avoid regulations
and taxation voluntarily without blaming the legal
system.
CAUSAL THEORY
They choose to operate outside the regulations of the legal
system in order to gain cost-benefits of informality.
Informalization of employment relations is a feature of
contemporary economy growth and the global economy.
Many a times, both employer and employee by mutual
consent avoid formal contractual employment to avoid
taxation so that the employee gets a larger take-home salary
while compromising on security benefits. Though the above
mentioned theories are dominant, they are still not enough
to thoroughly explain the complexity present within the
informal economy.
The Precariat and Informality
From within the “thriving” Informal economy, another class
development is seen and thusly named “Precariat”. It is a
social class framed of individuals who are experiencing
precarity, a haphazard existence with no security or
consistency5.
The existence of this is attributed to the emerging neo-liberal
philosophy that the economy or marketplace must and
should infiltrate “all aspects of life” and that competition
must drive every decision. Neo-liberals belief in “labour
market flexibility” means businesses should be free to
employ workers from every part of the world in order to gain
low cost-benefits. Due to expansion of such a form of
‘globalization’ leads to increase in number of rootless, lowpaid workers. Those at the bottom of the rung hardly know
about the companies they are working for or the time period
of their employment. Because they live ‘pay check-to-pay
check’ without any guarantee of future employment
(precariously), they are called “Precariat”. They r generally at
the bottom rung within the informal sector due to lacking
prospects as well as any reliable home base, generally they
are called drifters or ‘denizens’.
They are generally engaged in insecure forms of labour that
are unlikely to help them build a desirable identity or career:
temporary or part-time workers, sub-contracted labour, callcentre employees, interns, etc. Due to lacking job
opportunities, most youths end up falling under this criterion
within the work force even with educational qualifications.
Prof. Guy Standing argues for the reintegration of this
particular class group back into mainstream society as he
considers them exploited, rootless as well as dangerous to
stable society.
Jan Breman argues against the views of Standing by
mentioning the links between formal and informal sector
(precariat). He further emphasizes their role within the
working class which Standing denies.
We can conclude from the above debate that Precariats are a
major part of the Informal sector and innately linked to the
Formal sector but still lack or are denied any proper
opportunity towards formal employment and benefits. They
are slowly but surely becoming the new and major source of
cheap labour for the capitalist firms and enterprises.
Informality can refer to any work or employment within the
informal sector which can range from rickshaw-puller, factory
worker, industrial wage labourer, interns, ect. while
Precariat, in Standing’s definition specifically refers to
migrant workers, freelance youths, part-time workers, etc.;
those who end up selling their labour without any or no
benefits.
The precariat and informal sector are inevitably intertwined
and with increasing population and lack of opportunities and
rising competitiveness, this particular informal class group
will keep on rising in numbers and become more and more
widespread unless there is some form of state-intervention,
policies regulated, etc.
CONCLUSION
The informal economy and labour has become a widespread
phenomenon and contributes largely to a nation’s economy
alongside the formal sector. It can be understood that one of
the major reason for their presence is the want of the
capitalist firms for cheap and outsourced labour options.
Most enterprises regardless of it being under the formal or
informal sector sought for temporary or daily wage labourers
instead of formal employee contracts to avoid payment of
taxation and gain profits.
Most informal workers do not have the choice or even the
opportunity to gain formal employment and hence, end up
doing ‘precarious’ work. Though the integration of the
informal sector into the formal sector seem unfeasible,
regulation or partial regulation within this sector is possible.
To at least ensure the minimum benefits of informal workers
and precariats, reduce gender inequality, exploitation and
transform ‘invisible labour’ to visible labour, state
intervention, policy-making, etc. is of the utmost need and
importance.
Thank you and Good luck to our learner fraternity.
Team Virasath. United by understanding of education.