More than formalising informal jobs, we need to create productive ones
India should ensure better wages and expand a social protection framework that is delinked from employment
India is a complex nation strengthened by geographic, linguistic and resource diversity, but still challenged by social divisions on the basis of caste, gender and religion. Its labour markets are as multifaceted as the nation itself.Yet, the discussion largely hovers around informality and formality. This tidy binary posits informality as always bad with poor quality work and lack of skill with low productivity and wages.
In actuality, the spectrum of employment is a continuum based on graduating levels of productivity, associated wages, social protection and tax compliance. This covers those with contracts, health care and retirement benefits, to those with regular wages but no social protection, to daily wage workers with no written contracts and, thus, who can be dismissed at will.
Going forward, the tech-fuelled changing nature of work forces us to recall the past, which used to have a stable lifetime job with health and retirement benefits. Most jobs in large firms and even government jobs no longer have a defined pension and health benefits are diverted through insurance schemes. With limited employment security, soon there will be little to distinguish such formal work from informal employment with social protection.
Instead of being fixated on the dichotomy between informality and formality, it is time to think of the quality of work as a matrix where one axis reflects various forms of social protection and the other indicates types of employment — from uncertain daily labour to permanent employment. Once social protection is delinked from work, it is possible for a daily wage construc- tion worker to have access to retirement benefits and health insurance. The other imperative is to enable workers to leverage skills acquired without formal certification.
Moreover, the challenge of improving productivity and raising earnings remains. This needs support to smaller firms, not through subsidies but by access to reliable infrastructure, affordable and accessible finance and linkages to global value chains.
Much is made of technology and the rise of the platform economy and its flexible work arrangements. A worker who earned a fixed and low wage can, in principle, now earn more as part of the platform. Even today, manufacturing is outsourced to home-based workers, often women, allowing them to balance socially constructed domestic roles with income generation activities. The platform allows a direct link to the consumer, enabling workers to retain more of the surplus.
In addition to better tax compliance, it can be leveraged to connect workers to social security frameworks. Workers like contract manufacturing workers, drivers, delivery persons, carpenters, domestic workers and beauticians are all ordinarily invisible to the social protection system. But once on a platform, they become visible and potential beneficiaries of a universal social protection system, with benefits that continue even if they change jobs or migrate. This breaks the conflation of informal employment with lack of social protection. Platform arrangements also bring together disconnected and self-employed workers. Despite their uncertain legal status as employees, they can organise to make demands.
The Indian labour market was already much too heterogeneous to fit into simple dualism frameworks. Technology and migration only make it more complex. Our challenge is not about formalising the informal, but rather the production of more just jobs — work that is productive and remunerative. It is removing barriers to productivity, ensuring wages rise in tandem, enabling a voice for workers and expanding a portable social protection framework that is delinked from employment. Only then can we confidently navigate the transition to the future of work.
SMALLER FIRMS NEED SUPPORT BUT NOT THROUGH SUBSIDIES. RATHER, THEY REQUIRE ACCESS TO RELIABLE INFRASTRUCTURE, AFFORDABLE AND ACCESSIBLE FINANCE AND LINKAGES TO GLOBAL VALUE CHAINS