{"id":106,"date":"2018-08-02T11:26:20","date_gmt":"2018-08-02T11:26:20","guid":{"rendered":"http:\/\/socp07.epgpbooks.inflibnet.ac.in\/?post_type=chapter&p=106"},"modified":"2019-01-02T04:49:30","modified_gmt":"2019-01-02T04:49:30","slug":"106","status":"publish","type":"chapter","link":"https:\/\/ebooks.inflibnet.ac.in\/socp07\/chapter\/106\/","title":{"rendered":"Urbanization and the informal economy"},"content":{"raw":"
\"epgp<\/a>\r\n<\/span><\/div>\r\n
\r\n\r\n \r\n\r\n \r\n\r\nI.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>Introduction<\/strong>\r\n\r\n \r\n

The bewildering variety of \u201chigglers\u201d, vendors, hawkers, waste pickers and rickshaw pullers on city streets and bazaars would appear to be an immemorial feature of urban landscapes in the global South. Yet into the 1970s, policymakers had no term for this group of workers and little comprehension of their unique contributions or tribulations. Policy recognition of the \u201cinformal sector\u201d has often been halting and achieved through sustained advocacy by unions, associations and workers\u2019 groups.<\/p>\r\n \r\n

This module traces the conceptual evolution of the \u201cinformal\u201d as a category of urban livelihoods, both internationally and in India, and relates it to alternative lenses on informality in habitat and as mode of urbanization. These latter\u00a0perspectives are examined in greater detail in Module 4.2 and 4.3. This module asks: what is the genesis of the idea of the informal sector? How can it be defined and measured? What processes encourage its rise and what are its spatial ramifications? Examining alternative frameworks that seek to explain the informal economy \u2013 the dualist, the legalist and the structuralist \u2013 this module highlights the salience of processes of <\/span>informalisation in the Indian context. It places these trends against the larger backdrop of <\/span>labour history in India, and the longstanding role of <\/span>labour contractors \u2013 jobbers, <\/span>sardars and the like (Roy 2008, Chandavarkar 2002).<\/span><\/p>\r\n\r\n<\/div>\r\n

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To understand why the informal economy is so central to Indian urbanization, consider that even in 2010, nearly four-fifths<\/em> of urban employment was informal. Overtime, India\u2019s workforce has been becoming more rather than less informal. An analysis of three rounds of the National Sample Survey in 1999-2000, 2004-05 and 2009-10 data by the economists Martha Chen and G Raveendran (2012) showed that \u201cjust under 80 per cent of all urban workers (79% of men and 81% of women) were informally employed\u201d (Chen and Raveendran 2012, p 5). This category included \u201ca) informal wage employment and self- employment in informal enterprises (i.e. unincorporated and unregistered or small enterprises) and b) informal wage employment for formal enterprises and households\u201d (Chen and Raveendran 2012, p 4), according to the internationally accepted definition (see also Sood 2013). Furthermore, Chen and Raveendran (2012) showed that in 2009-10, over 40% of the urban workforce was self-employed (p 8), and even of the wage workers, 67% or two-thirds were informal. Street vendors comprised about 11% of total urban employment in 2009-10 (Chen and Raveendran 2012, p 20).<\/p>\r\n \r\n

It is evident that informal employment cannot be ignored in any examination of Indian cities and their economies. The next section sketches out the evolution of the concept from its origins in the 1970s.<\/p>\r\n \r\n\r\nRecognizing the Informal<\/strong>\r\n\r\n \r\n

The genesis of the term informal sector can be traced to the ascendance of economic development as a national and international policy priority and the emergence of an international development policy architecture anchored in the United Nations and organizations such as the International Labour Organization (ILO) (Bangasser 2000). To understand why informal forms of work and self-employment took so long to come to the attention of policymakers, it is important to return to the most influential economic development paradigms of this era after World War II and before <\/span>1970s.<\/span><\/p>\r\n\r\n<\/div>\r\n

\r\n\r\n \r\n\r\nStructural Transformation and Urbanization<\/em><\/strong>\r\n\r\n \r\n

In classic models of economic development, such as those outlined by the noted economist W Arthus Lewis, urbanization is linked to structural transformation, ie, a decline in the economic importance -- employment and output -- of agriculture, fishing, mining and other primary sector activities and a corresponding increase in employment and output contributions of manufacturing, trade and services activities. The \u201ctraditional\u201d sector \u2013 ie, the rural or primary sector \u2013 was believed to harbour unlimited reserves of underemployed workers. This workforce could be induced to migrate to the modern sector located in urban centre with the promise of a higher wage. In essence, such \u201cdualistic\u201d models predicted the absorption of large numbers of rural migrants into high paying \u201cmodern\u201d sector jobs.<\/p>\r\n \r\n

However, by the mid-1960s, high levels of unemployment and underemployment were all too visible in third world cities. Contrary to the predictions of the Lewis model and others, analyses of employment data in developing countries showed that \u201cthere were many fewer \u2018modern\u2019 jobs than there were people wanting to fill them\u201d (Bangasser 2000: 4). Economists such as Hans Singer argued the dualism in labour markets \u2013 ie, structural differentials in wages across the modern and traditional sectors \u2013 showed characteristics of persistence, with high levels of \u201ccasual and intermittent employment, as well as disguised or open unemployment\u201d (Chen 2012, p 2).<\/p>\r\n \r\n

It was in response to these empirical anomalies that the ILO\u2019s World Employment Program (WEP) came about. Of the many WEP country missions, the 1972 Kenya country mission of the WEP was the one to give recognition to the \u201cinformal sector\u201d. The credit for coining the term \u201cinformal\u201d, however, goes to the anthropologist Keith Hart, who offered an extensive analysis of \u201cinformal\u00a0income opportunities\u201d, both legitimate and illegitimate among migrant groups in northern Ghana (1971, p 69).<\/span><\/p>\r\n\r\n<\/div>\r\n

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However, while Hart largely equated informality with self-employment, the WEP suggested a bigger set of features to define informal sector activity: small scale of enterprise; self-employment, and\/or family ownership; reliance on indigenous resources; labour intensive activity; low capital requirements; labour-intensive technology; low skills; ease of entry into the activity, operation in unregulated, competitive markets, among others (Bangasser 2000: 10).<\/p>\r\n \r\n\r\nII.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>Perspectives on the Informal Sector<\/strong>\r\n\r\n \r\n

Though this definition captured many aspects of the observed reality, \u201cthe informal sector universe remains vague because of multiple criteria: each criterion can be used to define a universe of its own. Consequently one is not certain about the universe to which the term. . . refers\u201d (Sethuraman 1981, p 16). The definitional ambiguity also limited attempts to estimate the size and extent of the informal sector.<\/p>\r\n \r\n

Broader conceptualizations of the informal sector, beyond those offered by the ILO WEP, have also been proposed in the literature. For instance, in discussing the contrasting roles of the informal sector in East Asian and Latin American development, Gereffi and Cheng (1992) offer three independent characterizations of the informal sector (see Sood 2008). These include:<\/p>\r\n \r\n\r\n\u00d8\u00a0 Social marginality: labour dislocation and concentration in service sector activities defines the economic nature of informality.\r\n\r\n\u00d8\u00a0 Lack of state regulation. The genesis of the informal sector lies in the strategies adopted by employers to avoid state regulation of the labor process.\r\n\r\n\u00d8\u00a0 Small firms. Both social marginality and absence of state regulation are conditions that more often prevail in smaller establishments.\r\n\r\n \r\n

Other frameworks have also emerged to explain the informal sector. Chen (2012) lists the following as a few of the schools of thought on the informal sector, among others:<\/p>\r\n\r\n