India’s war on informal labour is turning out bad for workers

Source: The post is based on the article “India’s war on informal labour is turning out bad for workers” published in “Live mint” on 19th October 2023.

Syllabus: GS3- Economy- Employment

News: The article discusses India’s struggle to move its workforce from informal to formal jobs. Despite economic growth, many remain in precarious, informal positions. The government’s policies, like the GST, have complicated issues. Challenges also exist for women and Dalits. Efforts to solely link informality to tax evasion are not successful.

What are the job challenges present in India?

Prevalence of Informality: 74% of non-farm workers are in informal positions, mainly within proprietorships and partnerships.

Post-COVID Resilience: The proportion of informal workers barely changed even after multiple COVID waves, indicating the entrenched nature of informality.

Limited Social Security: Only 54% of salaried workers have access to crucial social-security benefits, leaving a significant portion vulnerable.

Complicated GST: The 2017 Goods and Services Tax, though intended to help formalize the economy, became complex, disadvantaging smaller businesses and benefiting larger ones.

Unfulfilled Government Initiatives: A $24 billion incentive aimed at promoting factory setups resulted in fewer than 200,000 jobs by the previous September.

Job Aspirations vs. Reality: Many jobs don’t offer essentials like contracts or benefits, creating a gap between youth aspirations and actual job conditions.

Challenges for Specific Groups: Women face difficulties finding formal work near homes, and Dalits are predominantly stuck in daily-wage work.

What’s the future concern?

Aging Population: By 2050, India’s elderly population will surge, exceeding 350 million. Without proper job opportunities, they won’t be able to save for their old age or medical emergencies.

Dependency on Future Workers: If the elderly remain in low-productivity jobs without savings, they will heavily rely on a smaller group of future workers’ tax resources.

Comparison with Neighboring Economies: While Japan faced aging issues when it was already wealthy, China’s momentum slowed earlier. India needs to ensure quality jobs before its demographic advantage diminishes.

Pension Concerns: Political opponents are suggesting reintroducing a fiscally challenging defined-benefit pension. This could strain future taxpayers and hinder welfare funding targeting the economically vulnerable.