Economics Current

Unorganized Sector and its Challenges

Unorganized Sector and its Challenges
What is the unorganized sector? The term ‘unorganized sector’ in the Indian context, is defined by the National Commission for Enterprises in the Unorganised Sector as "... consisting of all unincorporated private enterprises owned by individuals or households engaged in the sale or production of goods and services operated on a proprietary or partnership basis and with less than ten total workers." It, therefore, covers most parts of rural labor and a substantial part of urban labor. The unorganized sector includes the agricultural sector, construction, fisheries, street vendors, petty service providers, domestic workers and so on, comprises the overwhelming majority of workers in the country. As of 2014, 93% of the nation’s workforce is involved in the unorganized sector and contributes to 50% of the GDP. An NSSO survey said that the unorganized sector is facing a sharp decline from 2016, however, in the last three budgets, the government has had to increase the budget allocation for the National Rural Employment Guarantee Scheme. What constitutes the unorganized sector in India? The Ministry of Labor of the Government of India has categorized the unorganized labor force under separate groups on the basis of: •Occupation ( which includes small and marginal farmers, landless agricultural laborers, sharecroppers, fishermen, those engaged in animal husbandry, beedi rolling, labeling and packing, building and construction workers, leather workers, weavers, artisans, salt workers, workers in brick kilns and stone quarries, workers in sawmills, oil mills); •Nature of employment (agricultural laborers, bonded laborers, migrant workers, contract and casual laborers); •Distressed categories (scavengers, carriers of head loads, drivers of animal-driven vehicles, loaders, and unloaders); •Service categories (midwives, domestic workers, fishermen and women, barbers, vegetable and fruit vendors, newspaper vendors). What are the features of the unorganized sector? The characteristic features of this sector are: •Easy entry •The small scale of operation, •Local ownership, •Labor-intensive •Low technology use •Flexible payment •Inadequate access to government schemes, finance, and government aid •More migrant workers •Low job security •Unstable and irregular employment •Lack of protection either from legislation or trade unions. What are the reasons behind the rise in the unorganized sector? Informal sectors are a characteristic of almost every developing and underdeveloped countries, and some of the reasons behind their inception are: •Taxation and regulation which make legal production and trading expensive. •Labour and market rigidities. •Poor skill levels. •Increasing competition due to globalization. •Non-availability of jobs. •Low level of education and vocational skills. •Illegal activities such as exploitation of workers, selling and buying of labor. What are the problems associated with the unorganized sector? •Workers do not have steady employment, secure or sustainable incomes and job security and are not covered by social security schemes. •Due to lack of education, there is no knowledge of workplace hazards, unnaturally extended work hours, exploitation, no concept of occupational safety, no concept of Trade or Labour Union, no minimum wage and protection against diseases. •Women workers, in particular, are prey to very low wages, fraudulent contractors, disease-causing environments, sexual harassment, exploitation and are underpaid in comparison to males. •Child labor is a significant characteristic of this sector. Children work in hazardous conditions and are subject to child trafficking and exploitation and are paid next to nothing. •The government also faces several issues while making legislation for the unorganized sector. There is the problem of definition and identification of unorganized labour due to its scattered nature. Laborers also avoid legislation since most of them are either migrants or are involved in illegal activities. •Globalization and the resultant reorganization of production chains have also affected the unorganized sector. The steep expansion of the unorganized sector in recent years has hugely affected employment and income security for the workforce with almost no social welfare schemes. Due to inflation, the workers’ incomes have fallen and they have become poorer. What are the measures taken by the government? The Ministry of Labor and Employment had enacted the Unorganized Workers’ Social Security Act, 2008. It provides for a constitution of the National Social Security Board which shall recommend the formulation of social security schemes. •As per the provisions of this Act, every unorganized worker shall be eligible for registration. •Every unorganized worker shall be registered by the District Administration. •The State Governments are to register the Unorganized Workers and provide benefits of welfare schemes other than the three basic social security schemes of the Central Government- life and disability cover, health and maternity benefits and old age protection. •The Central Government has constituted the National Social Security Board to recommend suitable schemes for unorganized workers and to monitor the implementation of schemes. •State Governments and UT Administrations are also required to constitute their State or UT Social Security Board to carry out the provisions of the Act. What are the Social Security Schemes for Workers in Unorganized Sector? The various social security schemes currently in force for the unorganized workers are: •Indira Gandhi National Old Age Pension Schemes •Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) •National Family Benefit Scheme •Handloom Weaver's Comprehensive Welfare Scheme •Handicraft Artesian Comprehensive Welfare Scheme •Pension to Master Craft persons •National Scheme for Welfare of Fishermen and Training and Extension. •Janshree Bima Yojana •Aam Admi Bima Yojana •Rashtriya Swathya Bima Yojana What are the criticisms against the schemes? It has been pointed out by activists and social workers that there are various gaps in the implementation of these schemes and a large part of the sector has not even been identified as such. The majority of the unorganized workers are not aware of their fundamental rights and have no knowledge about these schemes. Benefits like maternity allowances, accident relief, natural death compensation, education for children and pension are not covered under the schemes. Unorganized workers contribute nearly 50% to GDP and only about 6% of them are covered by social security measures. It has also been pointed out that efforts should be made on skilling the unorganized workforce to make them better equipped in acquiring jobs in the organized sector.

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