Daily Hot Topic

Topic : India’s Workforce: A Move Towards Formality

GS-3 Mains : Economy 

Revision Notes

A Formal Future

  • Indian Staffing Federation (ISF) unveils “India@Work: Vision Next Decade” for workforce formalization.
  • Aiming to formalize the massive informal workforce – over 400 million.
  • Organized staffing companies seen as key contributors.

Why Formalization Matters

  • Pandemic exposed the vulnerability of the informal sector (less than 15% with social security).
  • Formalization promises better working conditions and social security benefits.

ISF’s Focus Areas

  • Expanding social security coverage.
  • Increasing take-home pay for workers.
  • Smooth implementation of new labor codes.

Key Recommendations

  • Removing employment bottlenecks.
  • Faster rollout of the four labor codes.
  • Policy changes and incentives for formalization.
  • Lowering GST for staffing services (5% with ICT benefits instead of 18%).
  • Linking skill development to employment opportunities.

About ISF (Established in 2011)

  • Promotes benefits of flexible staffing solutions.
  • Advocates for a conducive regulatory environment.
  • Maintains ethical and professional standards within the industry.
  • Conducts research on the staffing industry’s growth and challenges.

Formal vs. Informal Sector

  • Formal: Written contracts, defined working conditions, legal and social awareness of rights.
  • Informal: Unincorporated private enterprises, often family-owned, operating outside formal regulations.

A Dominant Yet Unorganized Force

  • India’s informal sector: A vast majority, employing nearly 85% of the workforce.
  • Generates more than half of the country’s GDP, highlighting its significance.
  • Composition: Socially and economically underprivileged sections of society.

Challenges of Informality

  • Impact on Women:
    • Majority of informal workers, yet face lower wages, income volatility, and lack of social security.
    • Female labor force participation at a low 21.2% (March 2021).
  • Low Wages and Exploitation:
    • No written contracts, paid leave, or minimum wage protections.
    • Long working hours exceeding labor standards are common.
  • Lack of Social Security:
    • No healthcare, pensions, or unemployment insurance.
    • Vulnerable to economic shocks and health crises.
  • Limited Access to Finance:
    • Difficulty obtaining loans and credit to grow businesses or improve living standards.
  • Poor Quality of Life:
    • Unorganized sector workers more likely to be poor.
    • Low salaries and health problems lead to poor nutrition intake.
  • Tax Evasion:
    • Informal firms often evade taxes, depriving the government of revenue.
  • Lack of Data for Policymaking:
    • Absence of reliable data hinders effective policy formulation.

Way Forward: Towards Formalization

  • Relaxing Restrictions:
    • Make it easier for informal businesses to become formal.
    • Self-help groups can empower informal workers and address work condition concerns.
  • Comprehensive Data Collection:
    • Build a robust statistical base on the informal economy for informed policy decisions.
  • Grievance Redressal Mechanism:
    • Establish a transparent and official system to address informal worker grievances.
  • Enforcing Equal Pay:
    • Implement and strengthen laws ensuring equal pay for equal work (Article 39(d) of the Constitution).

Conclusion: A Call to Action

  • The plight of informal workers demands urgent attention.
  • Income inequality and poverty necessitate a structural shift towards formalization.
  • Formalization is essential for equitable opportunities and sustainable livelihoods for all.

Source :https://www.thehindu.com/business/indias-over-400-mn-informal-labour-market-requires-a-structural-shift-isf/article68211459.ece

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