The Unorganised Sector Issues And Concerns Essay

Custom Student Mr. Teacher ENG 1001-04 2 September 2016

The Unorganised Sector Issues And Concerns

Problems of Definition

The bulk of the Indian labour force is employed in what is loosely referred to as unorganised sector. Most of them are neither organised nor hive any access to social security. Their employment is unprotected, their wages are extremely low, and a large section of them live under conditions below the poverty line. The developmental efforts by the state have done little to improve their living coalitions. This is a matter of concern not only for the trade unions but also for every rational person in this country. Defining the term ‘unorganised sector’ is a difficult task indeed. Apart from the conceptual difficulties, the definition also depends on who is defining it and for what purpose. There are broadly three different usages of the term. Firstly, the government plan documents m-id demographic surveys extensively use the term. According to this usage, the unorganised sector is defined rather negatively, is comprising of the labour force that falls outside the organised sector.

The organised sector is defined is the one covering labour force employed in ‘all the enterprises in the public sector and only the non-agricultural establishments in the private sector employing … 10 or more workers…’ The criterion of 10 is derived from the Factories Act, which covers all the establishments employing 10 or more people. This definition though indicative of the structure of employment fails to qualify each sector, and therefore leaves many questions unanswered. It nonetheless serves the purpose of government planning and projections. Given the fact that unorganised sector accounts for more than 90% of the labour force in the country, the inadequacies of this definition as reflected in the statistical data, appear to be marginal, even though in actual terms the numbers may be very high. Another governmental source, which defines the unorganised sector, again for statistical and administrative purposes, is that of the Central Statistical Organisation’.

According to this definition, the unorganised sector includes all those unincorporated enterprises and household industries (other than the organised ones) which are not regulated by any legislation and which do not maintain annual accounts or balance sheets. This definition also serves the limited administrative purposes, and does not qualify the sector. In any case, both the above definitions are based on the existing legal framework, whether concerning labour or business establishments, and are therefore liable to change with every change in legislation. Therefore, these definitions are hardly adequate tools for social analysis. The second source of definition of the term ‘unorganised sector’ is literature in the economics discipline. Economists have tried to define this sector in terms of the organisation of capital, nature of products, ‘technologies used (traditional or modern), the markets served (local or general) or the consumers of the products (rich or poor)…’

The thesis has been that the unorganised sector is characterised by low technology that it caters to local markets and to consumers who come from the lower segment of the society. There are many difficulties with this definition too. Bannerji argues that attempts at clearly delineating the character of the unorganised sector have not been successful because such clear-cut demarcation is not universally valid. “The exact combination of activities that actually exist in any one region at a given time, seem to be an outcome of the interaction of various factors such as complexity of the economy, the actual extent and distribution of control of investment resources and the technological choices available to that economy. Since the configuration of such factors is almost always specific to each situation, what is true of one country at one time, fails to apply to another Attempts to distinguish the two sectors on the basis of products, markets and technologies have a severe limitation, because of the extensive linkages that exist between the sectors, very often the organised sector taking ‘advantage of the low cost operation in the unorganised sector to manufacture its own products which are for general market.

Moreover, bulk of the export goods are manufactured in tile unorganised sector through a systematic decentralisation of the production process and the putting-out system. The third usage of the term ‘unorganised sector’ is by the trade unions and those concerned with labour. The attempt made by Nirmala Bannerji comes under this category of usage of the term. According to her, the unorganised sector ‘… usually consists of productive activities with loosely formed groups bound by diverse types of informal working contracts. It includes a section of the self-employed, wage earners, family producers as also household workers’. The significance of this definition is that it brings in the nature of employment relationship as the main factor that distinguishes organised from the unorganised sector. The unorganised sector consists of ‘productive activities’ carried out by ‘loosely formed groups’ which are bound by ‘informal contracts’. Even though Bannerji’s definition brings out the most important characteristic feature of the unorganised sector, from labour’s point of view, further exploration is required to get an insight into the complexity and the diversity of this sector.

There are certain fundamental difficulties in using the existing categories of ‘organised sector’ and ‘unorganised sector’ for trade union purposes. Trade unions by their very nature are essentially concerned with protecting labour from exploitation and arbitrariness of whoever employs them. If labour Protection is taken is the basic criterion of the trade unions, then ‘organised’ and ‘unorganised’ cease to be homogeneous categories, because we find unprotected labour in both the sectors. Even though the unorganised sector accounts for the majority of them, even the organised sector has its own share of unprotected labour in the form of casual, contract, badli, and temporary workers whose employment conditions are similar to those in the unorganised sector. One may argue that the proportion of the unprotected labour in the organised sector is very marginal.

This is however not true, because, during the eighties there has been a gradual decline in permanent employment accompanied by a sharp rise in the casual employment. A recent survey of seven major industries, commissioned by Friedrich Ebert Foundation in 1991, reports that during the eighties, in almost all the industries the proportion of casual and temporary employment has increased phenomenally, ranging between a quarter to nearly half of the total workforce. The National Sample Survey data also show a similar trend. According to this data, in the organised sector, the employment growth rate has declined from 2.48 per cent during 1977-78 –1983 to 1.38 per cent during 1983 –1987-88. In the organised manufacturing sector, particularly, employment had virtually stagnated during 1983- 1987-88. Given the above trends, from the trade union perspective, it would be fallacious to characterise organised sector as the protected sector, and the unorganised sector as the unprotected sector.

Apart from these conceptual difficulties, very often, among the trade union circles, there exists confusion between the terms ‘unorganised sector’ and ‘unorganised labour’. Many use these terms synonymously, even though there is a substantial difference between the two. While the former refers to the unorganised’ part of the industry or the whole economy, the latter refers to workers who are not organised as trade unions. It is true that the bulk of the labour force in the unorganised sector is not organised, but at the same time there are also unorganised workers in the organised sector. Similarly, there are also some workers within the unorganised sector, as we shall see, who are organised as trade unions.

From a purely trade union point of view, it may be more appropriate to use the terms ‘protected sector’ and ‘unprotected sector’ which cut across both organised and unorganised sectors. However, it would be impossible to totally discard the terms that are currently in use because the entire edifice of the statistical data is built on this foundation. Nonetheless, it would be useful to be aware of the inadequacies of the existing categories. One needs to be, particularly, careful while interpreting the official data.

Labour in the Unorganised Sector

Keeping the above mentioned definitional problems in view, let us now examine the salient features of the labour force in the unorganised sector as reflected in the official data. According to 1991 census, the total labour force in India is estimated to be 317 millions. Out of this, the organised sector employs only 26.8 millions (8.5 %), while the unorganised sector employs as many as 290.2 millions, (91.5 %) (See Chart 1 and Table 1).

Pension scheme for agricultural labourers all over the country. As discussed earlier, the distinction between these two sectors is very crucial from the point of view of employment relationship. It is not clear from the census data whether the figures for the organised sector employment include the casual / contract workers also. If it does, then the proportion of the protected labour will be less than 8.5 per cent. While the majority of workers in the organised sector hive regular salaried jobs in the registered factories and service establishments, the workers in the unorganised sector are either self-employed or work as casual wage labourers in a wide range of sectors – both non-agricultural and agricultural. The crucial distinction between the sectors is the nature of employment relationship. Going by Bannerji’s definition cited earlier, the unorganised sector includes agricultural labourers, construction workers, forest workers, fish workers, beedi workers, workers in small and tiny industrial units, powerloom and handloorn workers, self-employed workers, domestic workers and so on.

If we use the term ‘unprotected sector’, then the list also includes all the casual / contract workers employed in the organised sector. Technically, labour laws do not differentiate between organised and unorganised sectors. However, in practice, they provide ample opportunities to the employers and their contractors to deny basic rights to certain categories of workers. As we shall see later, there are certain structural problems, which make, it difficult for workers to assert their rights. In the organised sector, for instance, the production strategies such as subcontracting, ancillarisation, etc., are essentially geared to by-pass the protective legislations. As a result, over the years, the proportion of casual and contract labour has been increasing in almost all the industries in both private and public sector. An important characteristic feature of the unorganised sector is that it employs a large number of women.

The relative proportion of female workers is very high in this sector. As shown in Table 1, only 4.2% of the total female workers (as defined in Census) are in the organised sector. The corresponding percentage for male workers is 10.2%. The difference is rather striking if we look at the absolute figures. As against 23 million male workers there are only 3.8 million female workers in the organised sector. That is, for every six male workers there is only one female worker. In contrast to this, in the unorganised sector, there are 86.8 million women workers against 203.4 million male workers. That is, there is one woman worker for every two and odd male workers. Table 2 shows the sex distribution in both the sectors. In the organised sector, women constitute 14.2%, whereas in the unorganised sector they constitute 30%.

In terms of wages and earnings, there exists a substantial difference between the organised and the unorganised sectors. Table 3 shows the aggregate figures for the year 1981. Out of the total annual income of Rs.87,840 crores, the self-employed workers earned Rs.44,719 crores (50.9%,) while the wage and salary earners earned Rs.43,121 crores (49.1%). Within the wage earners category, the organised sector accounted for Rs.24,850 (28.3%) while the unorganised sector accounted for Rs.18,271 crores (20.8%). If we look at overall sector-wise figures by combining self-employed and the wage earners in the unorganised sector, we would get the broad picture of earnings in the unorganised sector in contrast to those in the organised sector. The unorganised sector accounts for 71.7 per cent of the total earnings in comparison to 28.3 of the organised sector.

The organised sector workers, even though account for only nine-tenth of the total workforce, earn more than one-fourth (one third according to the latest figures) of the nation’s total wages and incomes. The figures of the average annual income per worker bring out the contrast between the sectors more sharply. While the organised sector worker earned Rs.10,851 per annum, the wage earner in the unorganised sector earned Rs.2,482 and the self-employed person earned Rs. 3,549. If we take the average of the unorganised sector as a whole, the figure would be much lower. These figures are for the year 1981, and the present figures in actual terms may be relatively higher.

Issues and Concerns

The primary concern regarding labour in the unorganised sector is that most of them live below the poverty line. Their access to the basic necessities of life such as food, clothing, shelter, education, health and other forms of social security is extremely poor. One of the major reasons for this is that they are not organised. They lack organisations which can effectively represent their issues and problems at the national level. The established trade unions in the country, including the left unions, have completely neglected this sector. This is reflected in the membership figures of the central trade union organisations. According to the latest verification of membership conducted by the central government in 1990, the membership of the top five unions is around 10 millions, which is roughly around 3 per cent of the total working population in the country. Even though this includes both the organised sector as well as the unorganised sector, the proportion of the latter is very insignificant.

For example, according to 1980 figures, the INTUC, which at that time was the largest union, had only 15 unions in the agricultural sector with a membership of 25,931, which is slightly more than one per cent of its total membership of over 22 lakhs. Similarly, CITU hid only 14 unions with a membership of 2,212, which is less than one per cent of its total membership of over 3 lakhs. There are, of course, certain structural difficulties in organising workers in the unorganised sector. Unlike in. the organised sector, the existing conditions are not conducive to the functioning of trade unions. In the organised sector, that is, in large factories and other establishments, collective bargaining institutions are well developed and trade unions are accepted as legitimate organisations representing workers. In other words, the means of struggle for better wage and working conditions are institutionalised. This is however not the case with the unorganised sector. The following are some of the problems at the very fundamental level in this sector.

1. Employment regulation

In the unorganised sector the primary issue is regulation of employment. This is a very difficult task for unions to achieve. The employment contract is unwritten and informal. Workers are at the mercy of the employer. Giving an appointment letter is unheard of in this sector. By making the very employment relationship informal, the employer keeps himself out of the statutory obligations. Workers in order to make any legal claim have to first identified the employer and establish the employment relationship. Quite apart from these legal problems, since workers depend on the ’employer’ who may be a contractor or a middleman or the principal employer himself, for their sustenance, they dare not take recourse to legal action. This problem is more acute in the case of migrant workers, for instance, in the construction industry. Another means of bypassing a formal employment relationship adopted by trader-merchant-manufacturer is to utilise the home-based family labour.

The so-called ‘self employed’ workers in beedi, carpet, handloom, coir, hosiery and a host of other industries, come under this category. The trader-merchant-manufacturer or his middlemen provide the raw material to the home-based workers and collect the semi-finished or finished goods which they market themselves. The price that the workers get for their value-addition is very low and equivalent to wages, and their living conditions are no better than the wage labour. So, the ‘self-employed’ who constitute nearly 56 per cent of the total workforce in the country are not really ‘self-employed’ in the true sense.

In the absence of a formal employment relationship the established trade unions, which are more used to functioning in the organised sector where all that they have to do is submit charter of demands and negotiate a reasonable bargain for the workers, find it extremely difficult to fight for workers in the unorganised sector. Trade union work in the unorganised sector is much more demanding and relates to certain structural changes of very fundamental nature which requires struggle at various levels. The means and strategies to be adopted for achieving these changes also differ very much with those that are adopted in the organised sector. The following are the three different levels at which the trade unions in the unorganised sector have to fight.

• Grass-root Level
• Labour Courts
• Political Level

At the grass-root level, as mentioned earlier, it is very difficult to identify a single, consistent employer to deal with. As a deliberate strategy, contractors keep changing from time to time in order to avoid any legal binding. Also, at times, workers themselves move from one workplace to another. In certain cases such as domestic workers, unions have to deal with multiple employers who are not concentrated in one place but scattered all over. Given such a wide variation and the fluid state of employer-employee relationship, unions in this sector have to evolve innovative strategies to fight for the basic rights of their members. The second level of struggle is in the labour courts. Since the employer-employee relationship in this sector is not institutionalised, the disputes invariably end up in litigation.

For instance, in case of contract workers in the organised sector much of the trade union work involves fighting court cases, which demands not only determination on the part of the unions but also resources. This is one of the major reasons why the unions of the workers in the organised sector turn a blind eye to the plight of the contract and casual workers. The third and the most important level of struggle is at the political level for policy changes and enactment of protective legislation by the government. This requires the unions to have a wider support base coupled with political campaigns.

2. Lack of trade union consciousness

In this sector the very idea of trade union organisation is new. Due to their insecure employment situation, workers are not always forthcoming to participate in the union activity. The unions have an extremely difficult task of gaining the confidence of workers to begin with, and then convincing them -about the importance of dealing with their employers collectively rather than as individuals.

3. Struggle for legitimacy

In the unorganised sector, the basic struggle of the trade unions is for legitimacy of their own existence and freedom to function as trade unions. They are confronted with hostile employers whose basic ‘advantage’ in operating in the unorganised sector is its unregulated employment and availability of cheap labour. Since trade unions by their very nature fight for regulation of employment, better wages and social security measures, they strike it the very root of this ‘advantage’. This results in a bitter conflict in which very often the trade unions are at the receiving end. Given such hostility to any form of trade union activity in this sector, the union activists have to find various means of obtaining legitimacy.

Where hostility is very high, the activists function only as a voluntary organisation. As the situation improves they start functioning both as a voluntary organisation as well as a trade union simultaneously. Since, by definition, these two types of organisations have different legal status the activists function as either, depending on the need and circumstance. Such a strategy is essential in order to continue the organisational effort in a hostile environment.

4. Issues related to development policy

Trade unions in the unorganised sector are confronted with not merely employment and wage issues, but also are forced to raise certain fundamental issues related to developmental policy. This is so because, in various sectors, such as fisheries, forestry, agriculture, etc., the workers directly depend, on natural resources for their livelihood. Government’s development policy has a direct bearing on their lives. For instance, the forest workers, who have for generations lived in forests and enjoyed certain customary rights over forest resources, are now confronted with modem ‘developmental’ agencies such as state corporation’s which have drawn boundaries within the forest area depriving them of their traditional rights, and in many cases even displacing them. The local people depend on forests for fuel, fodder, and material to build their houses.

The forest corporations which were created with the explicit purpose of directly taking up commercial activity related to forest resources, and thereby replacing the middlemen who had been exploiting the forests, have, in reality, deprived the local people’s access to the forests. Another example is that of fish workers living near and around Chilika Lake located in Orissa on the eastern coast. Thousands of fish workers for generations hid depended on this lake for their livelihood. But now, with government leasing out the lake to private entrepreneurs for developing prawn culture for export, these workers have been debarred from fishing in the lake. Such issues, related to the governmental policy can be taken up only at the national level, which means that there should be a national level organisation to represent the interests of the unprotected workers in the unorganised sector. Today, unfortunately, such an organisation does not exist.

5. Lack of visibility

Lastly, the workers in the unorganised sector lack visibility at the national level. In contrast to workers in the organised sector, their working conditions and problems hardly ever become subjects of national debate. This is best illustrates by the fact that the primary focus of the New Economic Policy is the organised sector. The question of exit policy has generated a great deal of debate, and become a politically sensitive issue. It is a different matter whether the government is genuinely concerned about the retrenched workers in the organised sector. The point is, in the unorganised sector, which employs more than 90% of the total workforce in the country, redundancies and retrenchments are a daily affair. Ironically, this issue has never merited a debate or discussion either in the media or in the trade union establishments.

Source:Unprotected Labour in India – Issues and Concerns by Sarath Davala (ed.) Friedrich Ebert Stiftung, 1994, pp:1-13.

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