Measuring Informality of Employment in Urban India-The Indian Journal of Labour Economics

In recent years, there has been an effort to clearly define informality along two axes, the legal status of the enterprise, that is, the informal sector, on one hand, and the job status of the worker, that is, informal employment, on the other. However, we argue that a strict duality of definitions hides the core characteristics and insecurity faced by the workers. While each of these perspectives reflects one or the other part of the informal economy, a recent view is that it is much more heterogeneous and complex than a sum of these parts (www.wiego.org). While the dualistic definition of the informal sector is useful to emphasise the stark contrast, two nuances have been added to the debate. First, there are strong inter-linkages between the formal and informal sectors, and second, there is more of a continuum of employment relationships in the economy rather than a dualistic structure.

In this paper, we measure informality in employment in India by using alternative definitions of the informal sector and informal employment. We use both secondary and primary data for the analysis. We conclude that the ILO enterprise definition is useful for policies to upgrade the informal enterprises, understand the causes of low productivity in the sector and the impact of backward and forward linkages of firms on the growth of the informal enterprises, while the worker definition is useful for policies on labour regulation and social protection. However, employment relationships form a continuum, and several definitions and estimates help unravel the insecurities faced by workers and would better help to frame economic and social support policies for these workers.

This article is part of a special issue on informal employment in China and India with special editors, Jeemol Unni and Alakh N. Sharma.