Plus One Economics Chapter 7
Plus One Economics Chapter 7

Plus One Economics Chapter 7

Chapter 7:-

Employment: Growth, Informalization and Other Issues.

Plus One Economics Chapter 7


Work gives both livelihood and mental satisfaction. When people work they contribute to economic growth and development of the country. Information on the quality and nature of employment in our country helps human resource planning. It also brings out social issues like exploitation, child labour, etc.

Workers and Employment

National income is defined as the money value of all goods and services produced in a country in a year. From the income perspective it is an “earnings total”. It is the total income earned by the people from engaging in economic activities. Economic activities are those activities that contribute to the Gross National Product (GNP). Persons who engage in economic activities are workers.

There are huge variations in socio-economic conditions and educational attainments of the people. So, employment situation in India is very complex.

Important Features of Employment in India

  • 93 per cent of the workers work in the unorganised sector. Only 7 per cent work in the organised sector.

  • Many, like agricultural labourers, have only seasonal employment.

  • Many workers in the unorganised sector work for less than minimum wages.

  • Child labour is prevalent in many parts of the country.

  • Workers in the organised sector like government and good private companies have good salary and benefits like pension.

  • Workers in the unorganised sector do not have these benefits.

  • India has a workforce of 400 million (1999-2000), 75 per cent of this is rural workforce.

  • 70 per cent of workers are men, 30 per cent are women. Women account for one third of workers in rural areas. and one fifth of workers in urban areas.

Participation of People in Employment

The worker-population ratio is the ratio of workers to total population.

Worker-population ratio = \(\mathbf{\frac{Total\,number\,of\,workers}{population}}\)

This ratio helps to understand the proportion of population actively contributing to production of goods and services. Higher worker-population ratio indicates high involvement of people in the production process. Low worker-population ratio shows the lower involvement of its population in economic activities.

Table 7.1 Worker-population ratio in India


Sex Worker-population ratio in India
Total Rural Urban
Men 54.4 54.3 54.6
Woman 21.9 24.8 14.7
Total 38.6 39.9 35.5

The table reveals that:

  • Around 39 per cent of the population are workers.

  • The worker-population ratio is round 40 per cent in rural areas and 35.5 per cent in urban areas. Men outnumber women in work-force.

  • Women work participation is low in urban areas (15) and high (25) in rural areas.


Lower work participation by women is due to several factors like:

  • Lower women literacy and educational attainments.

  • Many men want their wives to be housewives. Many women also prefer that.

  • Most high income jobs are in urban areas.

  • In rural areas opportunities are lower.

  • More women in rural areas are forced to work to earn a living.

Most household chores like cleaning, washing, cooking, etc. are done by women. Since housewives are not paid for this work, this is not regarded as employment. This leads to under estimation of female employment.

Classification of Workers


Workers who own and operate their own enterprises to earn a living are called self employed workers. e.g. shopkeepers, chartered accountants, lawyers, hotel owners, black smiths, etc.

Casual Wage Labourers

Workers who get daily wages are called casual wage labourers. They get no allowances. e.g. Farm workers, construction workers, etc.

Regular Salaried Employees

People employed in organised sector and getting regular salary and allowances are called regular salaried employees. e.g. Govt. employees, teachers, bank staff, public and private sector staff, etc.

Distribution of workers Urban/Rural

Distribution of workers Urban Rural The self employed form the largest segment of workforce in India. It is higher in rural areas than in urban areas, due to the predominance of agriculture. Regular salaried is a small segment in ural areas, but much higher in urban areas. Casual workers are more in rural areas than in urban areas.

Distribution of Employment by Gender

Gender distribution of employment is important. It throws light on gender justice in employment. See the following table.

Table 7.2
Category Male Workers (in %) Female Workers (in %)
Self employed 51 56
Regular salaried 20 13
Casual workers 29 31

  • There are more female workers than male in both self employed and casual workers category.

  • Male workers account for 20 per cent of regular salaried jobs compared to 13 per cent for females.

  • Men have higher levels of literacy and skills in India.

Different Sectors of the Economy

All economic activities are classified under eight important sectors for calculation of national income under three main categories:

    • (i) Primary Sector
  1. Agriculture and allied activities
  2. Mining, quarrying, fisheries, etc.
    • (ii) Secondary Sector
  3. Manufacturing
  4. Electricity, gas and water supply
  5. Construction
    • (iii) Tertiary Sector
  6. Trade
  7. Transport and Storage
  8. Services

Employment in Firms, Factories and Offices

As an economy develops, the share of agriculture in GDP declines. The share of industry and services increases. At higher levels of economic development, services will grow faster than industry and agriculture. During this process, occupational distribution in the economy will also change. The share of agriculture in employment will decline and the share of industry and services will increase. Along with this, urbanisation becomes a major trend. At higher levels of economic development, services will employ more persons than industry.

Distribution of workforce by industry

Changes in the occupation structure in India and its rural-urban and gender distribution are shown in the following table:

Table 7.3 Distribution of workforce by industry (2011-12) (in per cent)

Particulars Place of Residence Sex Total
Rural Urban Male Female
Primary Sector 66.6 9.0 43.6 62.8 48.9
Secondary Sector 16.0 31.0 25.9 20.0 24.3
Tertiary Sector 17.4 60.0 30.5 17.2 26.8
Total 100 100 100 100 100

  • The primary sector is the source of employment for the vast majority of workers (around 49 per cent).

  • Around 24% of workers are employed in the secondary sector.

  • Around 27% in the services sector.

  • Around 67% of workers in rural areas depend on the primary sector.

  • Secondary and tertiary sectors provide employment to only around 16 and 17 per cent of workers respectively in rural areas.

  • Around 63% of workers in urban areas work in the services sector and around 44% in the secondary sector.

  • The primary sector employs only around 9% of workers in the urban areas.

Now let us come to the gender distribution of workforce among various sectors, The primary sector is the source of employment to around 63% of female workers compared to around 44% for males. The secondary and tertiary sectors employ only lesser per cent of females than males.

Growth and Changing Structure of Employment

Growth of Employment

Two important indicators of development are GDP growth rate and growth rate of employment. If the economy: is to develop GDP and employment should grow. Let us look at India’s experience in this area. The following chart shows the growth rates in GDP and employment during the period 1951 to 2012.

We can derive the following conclusions from the chart:

Growth of Employment and GDP

  1. GDP growth rate was low till 1979. Then it picked up. After a temporary decline in 1990-91, it again improved.
  2. Growth rate of employment has been steady at around 2 per cent during 1961 to 1990.
  3. Even though GDP growth rate improved sharply after 1992, employment growth rate declined during this period. The situation of high growth with less job growth is called ‘jobless growth’.

Changing Structure of Employment

Changes in the sectoral contribution to employment, is important from the development perspective. Equally important is the status of the people employed. Look at the trends in the sectoral contribution to employment and the status of the employed in India over the years.

Table 7.4 Trends in Employment Pattern (Sector-wise and status-wise) (1972-2012 in percent)
വിവരങ്ങൾ 1972-73 1983 1993-94 1999-2000 2011-12
Primary 74.3 68.6 64 60.4 48.9
Secondary 10.9 11.5 16 15.8 24.3
Tertiary 14.8 16.9 20 23.8 26.8
Total 100 100 100 100 100
Self employed 61.4 57.3 54.6 52.6 52.0
Regular Salaried 15.4 13.8 13.6 14.6 18.0
Casual labourers 23.2 28.9 31.8 32.8 30.0
Total 100 100 100 100 100

Following conclusions can be derived from the trends in employment.

  1. Share of the Primary sector in employment is declining. It has declined from 74.3 per cent in 1972-73 to 48.9 per cent in 2011-12.
  2. Share of secondary and tertiary sectors has improved. Share of secondary sector in employment has improved from 10.9% in 1972-73 to 24.3% in 2011-12. Share of services sector has improved from 14.8% to 26.8% during this period.
  3. Majority still continues to be self-employed. Percentage of regular salaried employees remains more or less constant – 18 per cent, But percentage of casual labourers in total employment has increased from 23.2 in 1972-73 to 30 in 2011-2012. This trend is called ‘casualisation of work-force’.

Informalisation of Indian Workforce

There are different kinds of employment: Self employed (examples: farmers, tailors, shop-keepers, etc.), regular salaried employees (examples: government employees, employees working in large private companies, etc.) and casual labourers (examples: agricultural labourers, daily wage workers, etc.).

Salary, other benefits like pension, leave facilities, working conditions and social status of these categories are different. Regular salaried employees, have reasonably high salary. When they retire, they receive pension, There are other benefits like paid leave, medical benefits, maternity leave for women, etc. Some self employed people also have high income. e.g. practising chartered accountants, lawyers, doctors, businessmen, big farmers, etc. But majority of the self employed have low income.

Casual workers get only low wages. They don’t get paid leave. Women do not have maternity leave. They have no pension. Their working and living conditions are not satisfactory.

Regular salaried employees belong to the formal sector, Casual labourers and majority of self employed belong to the informal sector. Formal sector is also called the organised sector, while the informal sector is called the unorganised sector. All government establishments (government departments plus public sector undertakings) and private sector establishments. employing 10 hired workers or more come under the organised or formal sector. All others come under the unorganised or informal sector.

Table 7.5 Formal sector and Informal sector

Formal Sector Informal Sector
1. All public sector and private a establishments employing 10 hired workers or more. 1. All others come under the informal sector
2. Regular salaried employees with other benefits like pension, leave facilities, medical benefits, maternity leave for women, etc, 2. All employees of public sector and private sector establishments.
3. Also called organised sector. 3. Also called unorganised sector.
4. All employees of public sector and private sector establishments. 4. Farmers, agricultural labourers, owners of small enterprises and people working there as well as self employed who do not have any hired workers.

If the economic and social conditions of people are to improve more workers should move to the organised (formal) sector from the unorganised sector, Progress in this area in India is not satisfactory. Even after six decades of planning, vast majority of Indians work in the unorganised sector.

Table 7.6 Distribution of workers in formal and informal sectors (in million) 2009 – 2012

Category Sector Total
Formal Informal
Male 24 310 334
Female 6 133 139
Total 30 443 473

According to this data, the total workforce in India is 473 million. Of this, only 30 million are in the formal sector. This is only around 6 per cent of the total. So 94% of workers are in the informal sector. This is not a satisfactory situation. Another important issue is that women constitute only 20% of the formal workforce. It is 30% in the informal sector. This is a clear case of gender injustice.

Governmental intervention and reforms are necessary to improve the conditions of workers in the informal sector. International Organisations like the ILO (International Labour Organisation) have laid down norms for minimum wages, good working conditions and prevention of child labour. Central and state governments have initiated measures to provide social security to some informal sector workers and vulnerable sections.


Unemployment is a situation in which people are willing to work, but work is not available. Some economists define an unemployed person as one who is not able to get employment for even one hour in half a day.

Data Sources of Unemployment

Reports of NSSO (National Sample Survey Organisation) Reports of Census of India Reports of Employment Exchanges These reports give us information regarding the nature of unemployment in the country.

  • Reports of NSSO (National Sample Survey Organisation)

  • Reports of Census of India

  • Reports of Employment Exchanges

Unemployment in India is highly complex. There are many types of unemployment in India like open unemployment, disguised unemployment, seasonal unemployment, etc.

I. Open Unemployment

If a person is prepared to work and work is not available, it is open unemployment. People standing in some select areas waiting to be hired for the day’s work is a case of open unemployment. Similarly, people waiting to be employed after registering with employment exchanges is also open unemployment.

II. Disguised Unemployment

This is a peculiar kind of un-employment that exists in the agricultural sector of developing economies like India. Disguised unemployment is the situation in which more people are employed in agriculture than necessary. Even if some people employed in agriculture are withdrawn, out-put will not decline. Disguised unemployment is widespread in India.

III. Seasonal Unemployment

Agriculture is a seasonal occupation. It can provide jobs only during the busy sowing and harvesting seasons. In between, employment opportunities are limited. Therefore, agricultural labourers in India remain unemployed for about six months on an average in a year. During this period of seasonal unemployment, some people migrate to urban areas in search of jobs.

IV. Structural Unemployment

Unemployment that occurs due to changes in technology is structural unemployment. e.g. unemployment resulting from the introduction of new machinery/ technology in agriculture or other sectors.

V. Educated Unemployment

It is concerned with joblesness among the educated i.e., matriculate and higher educated. In this situation, unemployed persons may not be getting work suitable to their qualifications to enable them them to make full use of their capacities. Mostly towns and cities are faced with this problem of educated unemployment.

Government and Employment Generation

Unemployment pushes people into poverty. The Government of India has been initiating measures to solve the unemployment problem. A major initiative is the National Rural Employment Guarantee Scheme (NREGS).

The level of unemployment in developed countries is low. Unemployment protection is given through social security measures such as unemployment allowance. In developing countries like India, the government intervenes through measures like minimum wages, improvement of working conditions, etc. Also, governments improve the employability of people through primary education, public health, rural housing, rural infrastructure, improvement of nutrition, etc.


During the last two decades there has been rapid growth in India’s GDP. But it did not lead to a corresponding increase in job opportunities. New job opportunities have come up especially in the service sector. The unorganized sector should be protected from exploitation. Unemployment is both an economic and a social problem.

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