Did you know that over 60 per cent of the world’s employed population earn their livelihoods in the informal economy? According to the International Labor Organization (ILO), “Informality exists in all countries regardless of the level of socio-economic development, although it is more prevalent in developing countries. The two billion women and men who make their living in the informal economy are deprived of decent working conditions.”
The report reveals that 88.2. per cent of India’s population works in the informal sector. It also finds that 81.6 per cent women in the country are engaged in the informal sector, and only 5.9 per cent work in the formal sector. If the total informal employment percentage is considered, it clearly shows that both men and women in the country are unable to find employment in the formal sector, and are therefore likely to live with severe disadvantages.
Previous ILO studies show that there is a clear link between working in the informal sector and endemic poverty. This is primarily because the average income levels in the informal sector are much lower than they are in the formal sector. The formal sector, often, also comes with added benefits like health insurance, better loan/credit facilities, and opportunities for career advancement, like training programs and scholarships. The current report highlights the fact that India, like many other developing countries, still has a higher rate of employment in the informal sector—and this, in turn, can affect our growth rate as a nation.
The report also suggests that in Europe and Central Asia, 25.1 per cent of the employed population engages in informal employment and the share decreases to 20.9 per cent if agriculture is excluded. In Central and Western Asia, 43.4 per cent is substantially above the regional average. The share of non-agricultural employment in Central and Western Asia is 31.2 per cent.
The survey also revealed that informal employment is more than twice as high in developing countries with 36.8 per cent to 15.6 per cent for developed countries. The informal sector provides 19.4 per cent of total employment in the region. Another 5.3 per cent of employment is informal employment in the formal sector and only 0.5 per cent is informal employment in households. Women account for 23.6 per cent of the workforce in the informal sector.
If that’s not all, 35.7 per cent or over one-third of the young population and the 40.8 per cent of the older workforce are in informal employment compared to about 21.8 per cent or one-fifth for the adult population. However, the survey also revealed that informality is more prevalent in rural areas, 33.2 per cent as compared to urban areas at 19.4 per cent. What’s alarming is that 71.6 per cent or nearly three-quarters of the agricultural sector belongs to the informal employment. However, various industries and service sectors do have similar proportions of informal employment with 21.9 per cent forming part of various industries, and 20.2 per cent accounting for the service sectors.