What is meant by the ‘employment’ and what is its connection with the term ‘work’? Is there a difference between the two? This chapter focusses, in length, on the economic definition of work, worker, labour force, workforce, and employment. Let us dive right in.
Economic Definition of Work
To understand the issues of employment, let us first understand the relevance of ‘work’. Work helps us to earn a living. But more importantly, work gives us a sense of worth to be able to do something and lends meaning to our being. It is our way of contributing to the national income of the country.
By that definition, a ‘worker’ is one who is bound by a contractual agreement or one who gets rewards from working or is self-employed. There can be different types of workers defined on the basis of certain parameters.
Types of Workers
- Hired Worker: These are workers who are employed by others (employers) and receive a salary/wage as compensation for work. Hired workers may again be of two types:
- Casual Worker: These are workers who are engaged by employers on a temporary basis for some specific work. They are not permanent and do not receive any social security or other work benefits. Example: Construction workers are contracted only for specific projects and not hired permanently. Seasonal workers such as those engaged on the farm only during the harvest season are also classified as casual workers.
- Regular Salaried Worker: These are workers hired by employers on a permanent basis and are paid regular salaries/wages for their work. Example: Chartered accountants, teachers, sports trainers at a sports club.
- Self-Employed: The other set of workers are those who are not employed by some employer but who own and work for their own enterprise. Example: Proprietors, business persons.
In the urban areas, in India, 41% workers are self-employed and 59% are hired. In rural areas, 54% are self-employed and 46% are hired. The percentage of self-employed persons is more in the rural areas as the workers there are usually engaged in working on their own farms. Contrarily, in the urban areas, workers tend to be employed in factories or offices in larger proportion than their rural counterparts.
Employment: Definition and Important Terminologies
The term ‘employment’ refers to the state of being employed. It is the relationship between an employer and employee, usually. Employment for people varies in the sense that some of them are employed for the entire year, while the others are employed for only some portion of the year.
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Worker and Workforce
All the persons in a country who are engaged in productive activities i.e. in activities that contribute to the national product of the country constitute workforce. Statistics on the workforce reveal that 70% of the workforce is constituted in rural areas, while only 30% belong to the urban areas. Out of the rural workforce, only 26% are female workers.
In the urban areas, the figure drops to 14%. The overall female percentage of the workforce is 30%, while the remaining 70% is constituted by males. It is important to note the formula for the workforce participation ratio:
Participation Ratio = (Total Workforce/ Total Population) x 100
Note that the workforce discussed earlier is different from another concept called labour force. It refers to the number of workers willing and able to offer their labour at a wage rate. This is nothing but labour supply. It refers to the work workers are willing and able to do at a given wage rate.
The participation rate in rural areas is 41% and higher than that in urban areas (35% only). The overall participation rate in the country stands at a low figure of slightly over 39%. This means that even while more people may be working, only a small chunk is engaged in productive activity. Even then, the participation rate is higher in rural areas. Even the female participation rate is higher in rural than urban areas.
Sectors of the Economy
Based on the engagement of workers in different kinds of employment, the economy can be broadly divided into three sectors:
- Primary: Constitutes agriculture and allied activities. The Primary sector continues to employ the maximum number of workers in our country, even though the number has dropped over the years.
- Secondary: Mainly includes the manufacturing activities, along with electricity, gas, water supply, and construction. Workers have shifted from agriculture to other forms of productive activity. This is also followed by rural to urban migration. A country’s transformation in employment from agriculture to secondary and tertiary sectors is called structural transformation.
- Tertiary: Comprises the service sector i.e. transport and communication, banking, insurance, trade, storage, etc.
Solved Example for You
Question: What is worker -population ratio and what is its significance?
Answer: Worker -population ratio is the ratio of the workers who are contributing to productive activities in a country to its total population. The population figure is the total number of people residing in a country at a point of time. It is useful to give an idea about the employment situation of a country. It indicates what proportion of the population is actually contributing to the production of goods and services in the country. The ratio is usually multiplied by 100 for percentage values.