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Employment: Growth, Informalisation and other Issues | Class 12 Indian Economic Development Notes

Workers and Employment

Those activities which contribute to the gross national product are called economic activities.

All those who are engaged in economic activities, in whatever capacity high or low, are workers.

Even if some of them temporarily abstain from work due to illness, injury or other physical disability, bad weather, festivals, social or religious functions, they are also workers.

Workers also include all those who help the main workers in these activities. We generally think of only those who are paid by an employer for their work as workers. This is not so. Those who are self-employed are also workers.

The nature of employment in India is multifaceted. Some get employment throughout the year; some others get employed for only a few months in a year.

Many workers do not get fair wages for their work. While estimating the number of workers, all those who are engaged in economic activities are included as employed.

During 1999-2000, India had about a 400 million strong workforce. Since majority of our people reside in rural areas, the proportion of workforce residing there is higher.

The rural workers constitute about three-fourth of this 400 million. Men form the majority of workforce in India. About 70 per cent of the workers are men and the rest are women.

Women workers account for one-third of the rural workforce whereas in urban areas, they are just one-fifth of the workforce. Women carry out works like cooking, fetching water and fuel wood and participate in farm labour.

They are not paid wages in cash or in the form of grains; at times they are not paid at all.

For this reason, these women are not categorized as workers.

Participation of People in Employment

Worker-population ratio is an indicator which is used for analyzing the employment situation in the country.

This ratio is useful in knowing the proportion of population that is actively contributing to the production of goods and services of a country.

If the ratio is higher, it means that the engagement of people is greater; if the ratio for a country is medium, or low, it means that a very high proportion of its population is not involved directly in economic activities.

Employment in Firms, Factories and Offices

In the course of economic development of a country, labour flows from agriculture and other related activities to industry and services.

In this process, workers migrate from rural to urban areas. Eventually, at a much later stage, the industrial sector begins to lose its share of total employment as the service sector enters a period of rapid expansion.

This shift can be understood by looking at the distribution of workers by industry.

Generally, we divide all economic activities into eight different industrial divisions.

They are (i) Agriculture (ii) Mining and Quarrying (iii) Manufacturing (iv) Electricity, Gas and Water Supply (v) Construction (vi) Trade (vii) Transport and Storage and (viii) Services.

For simplicity, all the working persons engaged in these divisions can be clubbed into three major sectors viz.

  1. Primary sector which includes (i) and (ii)

  2. Secondary sector which includes (iii), (iv) and (v) and

  3. Service sector which includes divisions (vi), (vii) and (viii).

Primary sector is the main source of employment for majority of workers in India.
Secondary sector provides employment to only about 16 per cent of workforce.
About 24 per cent of workers are in the service sector.

Growth and Changing Structure of Employment

During the period 19602000, Gross Domestic Product (GDP) of India grew positively and was higher than the employment growth.

However, there was always fluctuation in the growth of GDP. During this period, employment grew at a stable rate of about 2 per cent.

Informalisation of Indian Workforce

One of the objectives of development planning in India, since Indias independence, has been to provide decent livelihood to its people.

It has been envisaged that the industrialization strategy would bring surplus workers from agriculture to industry with better standard of living as in developed countries.

Formal Sector Employment

The information relating to employment in the formal sector is collected by the Union Ministry of Labour through employment exchanges located in different parts of the country.

Those who are working in the formal sector enjoy social security benefits. They earn more than those in the informal sector.

Developmental planning envisaged that as the economy grows, more and more workers would become formal sector workers and the proportion of workers engaged in the informal sector would dwindle.

Government and Employment Generation

Recently the government passed an Act in Parliament known as the National Rural Employment Guarantee Act 2005. It promises 100 days of guaranteed wage employment to all rural households who volunteer to do unskilled manual work.

This scheme is one of the many measures governments implement to generate employment for those who are in need of jobs in rural areas.

Since independence, the Union and state governments have played an important role in generating employment or creating opportunities for employment generation.

Their efforts can be broadly categorised into two : direct and indirect.

  • Direct Generation: In the first category, government employs people in various departments for administrative purposes. It also runs industries, hotels and transport companies and hence provides employment directly to workers.

  • Indirect Generation : When output of goods and services from government enterprises increases, then private enterprises which receive raw materials from government enterprises will also raise their output and hence increase the number of employment opportunities in the economy.

This is the indirect generation of employment opportunities by the government initiatives in the economy.


There has been a change in the structure of workforce in India. Newly emerging jobs are found mostly in the service sector.

The expansion of the service sector and the advent of high technology now frequently permit a highly competitive existence for efficient small scale and often individual enterprises or specialist workers side by side with the multinationals.

Outsourcing of work is becoming a common practice. It means that a big firm finds it profitable to close down some of its specialist departments and hand over a large number of small piecemeal jobs to very small enterprises or specialist individuals, sometimes situated even in other countries.

The traditional notion of the modern factory or office, as a result, has been altering in such a manner that for many the home is becoming the workplace.

All of this change has not gone in favor of the individual worker. The nature of employment has become more informal with only limited availability of social security measures to the workers.

In the last two decades, there has been rapid growth in the gross domestic product, but without simultaneous increase in employment opportunities.

This has forced the government to take up initiatives in generating employment opportunities particularly in the rural areas.


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