Informal Sector Can Be Made Competitive

The informal sector comprises a sizable percentage of the workforce, especially in developing countries.

- ARUP MITRA

Even if we exclude agriculture, which mostly belongs to the informal sector, the non-agricultural activities unravel a significant proliferation of the informal sector. Further, within the formal sector, informalization processes are in place, resulting in an overwhelming proportion of labor being engaged in informal capacity. In other words, informal employment is a much larger set, encompassing both informal sector employment and the informal employment within the formal sector.

Though parts of the informal sector have been growing in response to demand, a wide range of low productivity activities exist within the informal sector, indicating its significant overlaps with poverty and slum dwelling. There has been a close link between rural-urban migration and urban informal sector employment, suggesting a transfer of rural poverty to the urban space. Additionally, several of the workers have been residing in the urban areas for more than a decade, and they have been engaged in the informal sector in a persistent manner.

The possibility of graduating to the formal sector after acquiring experience in the informal sector is rather bleak. Hence, excess supplies of labor in many of the activities exist significantly and many of the workers continue to work within the informal sector for their entire working life span with meager earnings. Though some of the jobs within the informal sector help reduce poverty, the recent pandemic has affected the poverty reduction processes miserably. Hence, the importance of public provisioning of work opportunities in the urban context must be felt in policy circles.