Employment — Growth, Informalisation and Other Issues

The full picture

Employment is not simply about having a job; it is about the quality of that job. India has one of the world's largest workforces, but over 90% of its workers are in the informal sector — think of the vegetable seller outside your colony gate, the carpenter who repairs furniture at home, or the daily-wage labourer at a construction site. They all work, yet they earn no provident fund, receive no sick pay, have no written contract, and can be dismissed any day without notice. Understanding this distinction between formal and informal employment is the starting point of this chapter.

Economists classify employment in two ways: by sector and by type. The three broad sectors are agriculture (farming, fishing, forestry), industry (manufacturing, construction, mining), and services (trade, transport, banking, IT, education). At Independence in 1947, about 70% of India's workforce depended on agriculture. Today that figure is roughly 40–45%, industry employs about 25%, and services about 30–35%. This shift looks like progress, but the services boom is concentrated in cities and in skilled work. Most migrants from villages who arrive in Delhi or Mumbai cannot walk into a software company; they enter informal construction, street vending, or domestic work instead.

Within every sector, jobs can be formal or informal. Formal employment means the worker is registered under labour laws, gets a written appointment letter, and the employer contributes to schemes like the Employees' Provident Fund (EPF) or Employees' State Insurance (ESI). Informal employment covers everyone else — unregistered, unprotected, unrecorded. India's formal sector creates relatively few jobs each year, far fewer than the crores of young people entering the workforce. This gap is called the employment challenge or jobless growth problem: the economy grows, GDP rises, but the new wealth is not being converted into enough decent, secure jobs.

The problem is not just unemployment — it is also underemployment. Unemployment means a person is without any work and is actively looking for it. Underemployment means a person has some work but not enough — either they work fewer hours than they wish, or their job does not match their skills. A B.Sc. graduate working as a delivery boy, or a farmer who cultivates her plot for three months and sits idle for nine months, are both underemployed. India's official unemployment rate is around 3–5%, which sounds low. But this figure only counts those without jobs AND still actively applying. It leaves out the millions who gave up searching, and the millions more who are underemployed. The real employment distress is far deeper than that single number suggests.

Rural India carries the heaviest burden. About 65–70% of India's population lives in villages, and most of them depend on agriculture. But arable land is limited and is further fragmented as it passes from parents to children. A family farm that once fed five people now has to support fifteen. Neither the land nor the farm income can stretch that far, so family members migrate to cities. The city cannot offer them all formal jobs, so they join the urban informal sector — as construction workers, auto-mechanics, domestic servants, or push-cart vendors. Without MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act, 2005), which guarantees 100 days of paid manual work per rural household per year within their own gram panchayat area, many rural families would face destitution during the lean agricultural season between harvests.

The government has also launched the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) to give free skill-training to young workers, hoping that a mobile repairer trained in advanced electronics or a welder certified for industrial work can find better-paying formal jobs. These schemes acknowledge a hard truth: employment is not just an economic metric — it is the mechanism through which growth reaches ordinary people. An economy that grows at 7% a year but creates only casual, low-wage, informal jobs fails to reduce poverty or inequality. NCERT's chapter pushes you to see employment as the central link between growth, equity, and human dignity.

An Indian example

Consider Sunita Devi, who migrated from a village in Uttar Pradesh to Delhi after her family's 2-acre plot could no longer feed six people following subdivision. She found work as a domestic helper in three households, earning about ₹12,000 a month in total. There is no written contract, no EPF deduction, no paid sick leave. One winter she fell ill with typhoid and could not work for three weeks — she earned nothing during that time and had to borrow ₹8,000 at high interest from a neighbourhood moneylender to cover rent and her daughter's school fees. Her employer, Priya — a software engineer — works for a company that deducts 12% of her salary for EPF, gives 15 days of paid sick leave a year, and provides health insurance. When Priya had dengue, she rested at home for two weeks on full pay, her daughter's school fees were not at risk, and her savings stayed intact. Sunita and Priya both work in the same city, in the same service sector, earning not wildly different monthly sums — but one single health event created a gap in financial security that could take Sunita a year to recover from. That is what the formal–informal divide really means in practice.

Common misconceptions to watch for

• Wrong belief: India's unemployment is low because the official rate is only 3–5%, so there isn't really an employment problem. Correction: The official rate counts only people with no job who are actively applying for one. It misses discouraged workers (who stopped searching), underemployed people (working part-time or below their qualification), and seasonal workers. The real scale of employment distress is far larger than this figure suggests.
• Wrong belief: Informal sector jobs are temporary; once the economy grows more, workers naturally move into formal, secure employment. Correction: For most informal workers, informality is not a stepping stone — it is a permanent condition. Without contracts or benefits, a single health emergency can wipe out savings and force children out of school; those children then enter the same informal jobs as their parents, repeating the cycle across generations.
• Wrong belief: Since India's economy has shifted from agriculture to services, and services is now the largest sector by GDP, rural employment problems must have eased. Correction: Services growth is concentrated in cities and in skilled, educated workers. Rural areas still depend on agriculture, which is growing slowly while the rural population rises. The surplus rural labour migrates to cities but enters the informal urban sector — construction sites, domestic work, street vending — not the air-conditioned service-sector jobs that drive GDP numbers.