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OECD Report on Informal Employment

By Amigos IAS

Why is it in the news?

  • Organization for Economic Co-operation and Development (OECD) has released the report ‘Breaking the Vicious Circles of Informal Employment and Low-Paying Work’
  • The report delves into the enduring issue of persistent informal employment and the hurdles associated with transitioning out of this category.
Informal Employment

·       Informal Employment is broadly defined as remunerative work not bound by registration, regulation, or legal protection within existing frameworks.

·       It also includes non-remunerative work conducted within income-generating enterprises.

Key findings of the Report

  • Nearly 60% of the global workforce is engaged in informal employment. In low-income countries, this figure rises to 90%, highlighting the widespread prevalence of informal work.
  • Informal workers’ vulnerability is often passed on to their children due to inadequate education, skills, and social protection policies.
  • Lack of formalized work hampers the intergenerational improvement of socio-economic conditions.
  • Workers in developing and emerging economies face a dual challenge of informality and low-paying work, creating a cycle of economic hardship.
  • Breaking free from both aspects proves to be a significant challenge, hindering economic and social mobility.

India-Specific Observations:

  • Over 90% of India’s workforce is engaged in informal employment, pointing to the pervasive nature of this issue.
  • A strikingly high percentage, more than 96%, of workers aged 65 and older are involved in informal employment, emphasizing the enduring nature of informal work throughout a worker’s life.
  • Strong gender- and caste-based segmentation persists in India’s labour market.
  • Women, lower caste workers, individuals with less formal education, and rural workers are less likely to formalize their employment, exacerbating existing social disparities.

 Policy Recommendations

  • Alleviate Double Burden: Suggested measures include implementing remuneration policies that address income inequality, establishing effective minimum wage standards, and enhancing the bargaining power of low-paid informal workers.
  • Increase Formalization: Emphasis on ensuring comprehensive coverage by labour laws, social security measures, and tax regulations to incentivize and facilitate the transition to formal employment.
India’s Steps for Increasing Formalization

·       E-Shram Portal: A digital platform aimed at registering and tracking unorganized workers, enhancing their visibility within the formal economy, and facilitating their access to various welfare schemes.

·       Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM): A pension scheme targeting unorganized workers, providing them with a financial safety net in their old age.

·       PM SVANidhi: A scheme specifically designed to support street vendors, contributing to the formalization of their economic activities and integrating them into the formal economy.

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