India has to create more formal jobs: World Bank

• Making a case for creating more formal jobs, the World Bank in its draft World Development Report 2019 said in India the pay-offs in the formal sector are over twice as much as in the informal sector, which is among the largest in the world.

• The Bank said regardless of how work may be changing, for low and middle-income countries, it is persistent informality and low-productivity employment that poses the greatest challenge.

• In another draft report titled Systematic Country Diagnostic (SCD) for India, the World Bank said India needs to create regular, salaried jobs with growing earnings rather than self-employed ones, in order to join the ranks of the global middle class by 2047—the centenary of its independence.

=> Problem with the Informal sector

• The World Bank said informal workers show resourcefulness in handling the constraints they face, but the businesses they run are too small to raise the livelihoods of their owners.

• Informal firms are run by uneducated owners, serve low-income consumers, and use little capital—informal firms add only 15% of the value per employee of formal firms. They also rarely transition to the formal sector.

• The draft World Development report said that self-employment, informal wage work with no written contracts and protections, and low-productivity jobs more generally are the norm in most of the developing world.

=> Statistics

• The government on Wednesday released employment data from three social security organisations which showed India added some 3.46 million people to the formal workforce between September last year and February 2018.

• However, it does not give a clear picture on whether these are new jobs or a result of formalization of existing informal employment due to factors such as the implementation of the goods and services tax (GST).

• The lack of credible and periodic data on job creation in the economy has been a major weakness of India’s statistical system.

=> Suggestion for Improvement

• Improvements in infrastructure in towns and villages could encourage formal firms to establish themselves, near-poor workers.

• While small-scale informal enterprises are unlikely to formalize and grow, the owners of informal firms can obtain formal jobs

=> Background

• In a report titled ‘Jobless Growth?’ released earlier this month, the World Bank said to keep employment rates constant, India needs to create 8 million jobs per year as it adds 1.3 million to the working-age population every month.


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