End labour informality

Published - June 06, 2014 12:43 am IST

The World of Work Report 2014 catalogues the impressive strides developing countries are making to catch up with advanced nations. But the International Labour Organisation study also contains important caveats on the cost from continuing sharp inequalities. Per capita income has grown on average by 3.3 per cent per annum in 140 countries over the past three decades, as against 1.8 per cent in the advanced economies. But this process of global convergence has by no means been uniform, as some least developed countries have performed well below the advanced economies. Such sharp variations are accounted for in terms of the presence or absence of quality jobs, the report contends. Vulnerable employment presents a formidable challenge, as more than half the workforce in the developing world — numbering 1.45 billion — is either self-employed or undertakes unpaid economic activity. That is to say, such a large population goes without a guaranteed income, social protection or adequate investments in the health and education of families, putting in jeopardy the future of coming generations.

Senegal, Peru and Vietnam are instances cited in the report where there has been an increase in the proportion of wage and salaried workers over the past two decades, leading to significant reductions in working poverty and higher productivity. Better wages did not merely cushion these countries from the impact of the global meltdown. Working in tandem with other determinants, they in fact enabled these economies to grow one percentage point faster than other emerging economies since 2007. Instructive is the finding that a sizeable proportion of wage-earners in a society help to reduce income inequality and under-employment in the workforce. The obverse is also true. Widening inequalities also produce adverse effects on economic growth in terms of low consumption, not to mention the detrimental effects on social cohesion and stability. A significant increase in regular wage employment in both rural and urban India over the two-year period ending in 2012, as reported by the latest round of the National Sample Survey Organisation, is indeed encouraging. The findings also point to faster growth in employment in the manufacturing and services sectors. It is critical for State governments to consolidate on this momentum. Not in the least because the developing world is set to account for 90 per cent of the total jobs to be generated in the next five years and India’s share in it may not be insignificant. Enforcement of statutory minimum wages across different economic sectors would be critical to strengthening the workforce as well as to raising overall productivity.

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