Employment: Growth, informalisation and other issues

Employment refers to the condition of being gainfully in the state of having a paid job. However, it also refers to the process of utilizing skills, knowledge, capability, aptitude and culture to contribute to development. There are 2 parties to the condition of employment: the employer and the employee. An employer is a person who employs competent people for the betterment of the organization. An employee is one who the employer employs for the purpose of contributing to the betterment of the organization. An employee and an employer, together, form the fundamental basis of the state of employment.

Therefore, employment refers to the situation where able-bodied persons are willing to work in order to yield regular incomes. It is a condition of voluntary yielding engagement.

In other words, employment refers to the relationship between 2 parties (the employer and the employee). The 2 parties are bound in a contract of doing something valuable. It is the act of being in an employment engagement contract and working towards achieving the goals of the enterprise.


An employee is a person who has a contract or an agreement to do work for an organization. An employer hires an employee for the purpose of contributing their skills and knowledge for the development of the firm. An employee is that person who receives compensation (either in terms of salary or other benefits) for the job done. The employee’s job may or may not be stated in the engagement agreement depending on the policies of the firm. A self-employed person does not classify to be termed as an employee. An employee SHOULD work for the benefit of another firm. Whereas as a self-employed person is termed ‘an entrepreneur’.

However, workers and employees are different.

  • Hired worker refers to those people who enter into terms of employment after undergoing the selection process that another person conducts. The hired worker then works for the betterment of the hirer. There are 2 kinds fo hired workers: casual workers and salaried workers. Casual workers are those workers who have not undergone hiring process by the employer and do not have a permanent job. Construction workers are the best example of casual workers. Employers only hire them during demand season. Salaried workers on the other end are the mainstream employees who have a rather permanent job with the enterprise and also receive many social and health benefits.
  • Self-employed worker refers to a person who owns and runs an enterprise either by himself or with partners, to make a living. They are entrepreneurs who reap maximum benefits in terms of profits from the activities they do.


The recent facts regarding the size of the Indian workforce are as follows:

  • 45% of the Indian workforce who are under gainful employment (either in a business or as an employee) are women.
  • 55% of the Indian workforce who are under gainful engagement (either in a business or as an employee) are men.
  • Nearly 64% of India’s workforce population belong to the rural regions.
  • Nearly 36% of India’s workforce population belongs to the urban and semi-urban regions.


Unemployment is one of the toughest challenges that an economy faces. Not only does it have a decremental impact on the economy but also tends to affect other sectors within. Underdeveloped and developing countries witness large percentages of unemployment of the population. Unemployment directly leads to poverty and stagnates the growth prospects. Therefore, employment plays a crucial role in the organization and overall development of a nation.

The society does contain a large number of unemployed people. Every unemployment condition, status and situation vary from another. There are many sources through which one can learn about India’s unemployed population. A few such sources are:

  • Reports of the Census of India
  • Directorate General of Employment and Training Data of Registration with Employment Exchanges.
  • National Sample Survey Organization’s Reports (of employment as well as unemployment situations).

Unemployment is further categorized into the following few categories.

  1. Urban unemployment refers to that unemployment situation that exists in the urban areas. Unemployed people in the urban regions often register themselves with the employment exchanges. There are 3 kinds of urban unemployment. Educated unemployment wherein educated people are unable to land themselves in a salaried job. Industrial unemployment wherein people willing to work in industries are unable to find jobs due to acute immigration. Technological unemployment wherein people with poor technological knowledge are unable to find jobs in the era where technical knowledge in every field is crucial.
  2. Rural unemployment refers to that unemployment condition that exists in the rural (village) regions.


Before discussing the informalisation of employment or Indian workforce, it is important to understand the difference between the formal sector and informal sector. The formal sector refers to those enterprises whose activities form a part of the country’s Gross Domestic Product (GDP). Also, the IT department monitors and tracks their business activities. The informal sector, on the other hand, is contrary to the formal sector activities. Their activities are not a part of the GDP and the IT department does not monitor their actions.

Informalisation of workforce and employees in India refers to the condition wherein there is a constant and continuous decrease in the percentage of the workforce (or employees) in the formal sector. This condition also includes the proportionate and simultaneous increase in the percentage of the workforce in the informal sector.

In the case of Indian workforce, the employment economy is said to be doing well only in the case of an increase in formal sector workforce. This condition should be an accompaniment of a decrease in the informal sector workforce.

Some of the reasons for and impact of informalisation of the workforce in India are as follows:

  1. Due to high rigidity in the labour market, there is a decrease in the formal sector employment. Directly leading to informalisation.
  2. Another major reason for this condition is the illiteracy level and poor skills set.
  3. Increasing competition from imports is yet another critical reason for informalisation of the workforce in India.
  4. Increased flexibility of employment has proven to be a major threat that leads to informalisation of Indian workforce.
  5. The economy has seen a major decline in the employment opportunities in the formal sector. And this had lead many people to seek employment in the informal sector. Directly leading to informalisation of the Indian workforce.

Some of the secondary reasons of informalisation of workforce in India are as follows:

  1. Unbundling of manufacturing employment outsourcing.
  2. Other outsourcing contracts
  3. Contractual services.
  4. .The growth of the telecommunications services
  5. The growth of the information technology services
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