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This article is written by Sidra Khan, a student of Amity University, Noida. The article discusses the definitions of the unorganised sector, problems faced by the workers and social welfare schemes.


The concept of the informal or non-organized sector began to attract worldwide attention at the beginning of the 1970s, when the International Labor Organization underlined the development strategy that is based on economic growth and employment through its World Employment Missions in Colombia, Kenya, Sri Lanka and the Philippines. Unorganized sector workers in India make up approximately 93% of the country’s total workforce. Unorganized workers in India are confronted with serious problems from job uncertainty to dangerous working conditions. The aim is to talk about the term ‘informal economy’ and the situation and the steps that governments have taken for the welfare of workers in an unorganized industry.

Hence in the Indian economy, the unorganized sector plays a key role and requires particular attention. In this chapter, an attempt was therefore made to explore the problems and challenges that workers in the unorganised sector face to eliminate barriers in the unorganized sector to provide employees with at least a minimum basic social security.

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Unorganised sector

Over the years, the unorganized industry has gained traction. In all official documents and analyzes, the word ‘unorganized industry’ is widely used in India. Changes in trade and technology, combined with increased links across the world, have posed a threat to worker income and are especially in the developing country as the unorganized sector is rapidly expanding because of poor quality employment, and India is not an exception to that. There are many different problems in the unorganized sector. There have been many attempts to define this vast segment in different aspects to establish specific criteria for the identification of unorganized enterprises in the sector. However, the issue starts with describing the region itself in a detailed way.

Definition of unorganised sector and unorganised worker by 15th International Conference of Labour Statisticians 

Unorganised Sector: ‘The unorganized sector is made up of every unorganized private company owned by individuals and households engaged in the sale and production, with fewer than 10 employees, of products and services conducted in a proprietary or collaboration manner.’

Unorganised Workers: “The unorganized labour force is composed, without employers’ employment / social security services, of people working within unorganized companies or households excluding ordinary workers, who receive benefits under the social protection scheme.

Definition of unorganised sector and unorganised workers under the Unorganised Workers Social Security Act, 2008

Unorganised Sector: It means an undertaking owned by individuals or self-employed employees engaged in manufacturing or selling products or some form of service and employing less than 10 staff in the business.

Unorganised Workers: It means a house-based worker, independent worker or unorganized sector wage-earner and includes an organized sector worker not subject to any of the acts referred to in Schedule II of the Act.

Features of the unorganised sector

  • Low organizational level; low in size, usually hiring less than 10 employees, and mostly from the immediate family;
  • Heterogeneity in functions;
  • Entry and exit easier than formal sector;
  • Typically limited capital investment; little to no labour-capital division;
  • Often labour-intensive jobs, requiring low-level skills; as workers learn on the job, there is generally no formal training;
  • Labour agreements focused on casual work and/or social relationships as opposed to formal contracts; sometimes, the relationship between employer and employee is unwritten and informal with little or no rights;

Informal or unorganized sector workers dominate the Indian labour market and account for about 90 per cent of the Indian total workforce. The unorganized industry of India is one of the largest, if not largest, in the post-industrial world. Informal jobs characterizing the non-organized sector include both informal (small or unregistered) independent employment and wage employment performed in informal as well as formal sector companies without clear contracts of employment.

Unorganized sector workforce

India’s workforce accounts for approximately 92% of the unorganized group, with the entire farm sector falling under the informal category, while only one-fifth of the non-farm employees are in the organized sector. Estimates suggest that the proportion of the informal sector is gradually declining in non-farm sectors, as we move up the income ladder. Regardless of the economic class, however, the share of the unorganized workforce remains flat for the agricultural sector.

Share of labour input on unorganised sector

In the informal sector, people often do multiple jobs; an individual is often seen as a sign of weakness in work pursuing multiple jobs. One or two jobs can hardly generate enough income for survival. It thus requires the knowledge of the size of the class of people who are forced to take several jobs just to live on the problem of how these conditions of job insecurity can be mitigated. In India, CSO’s National Accounts Division (NAD) is trying to get a sense of various employment for both formal and informal EUS NSSO employment. It may be noted here that NSSO can estimate the number of jobs per employee in combination with the Usual Principal Status(PS) and the Usual Subsidiary Status(SS), but it can not estimate jobs for employees in more than one SS job as the EUS schedule has not yet been developed to capture this particular aspect; however, this is the sole source of employment.

Problems of unorganised sector

In comparison to the organized sector, this sector has not tasted the advantages or benefits of the organization. Many of them have become unseen victims. The difficulty begins with the unorganized industry itself being identified or defined. It is not possible to define the sector by one or primary criterion. Although this sector plays a crucial role in the economy in terms of employment, a significant segment of the workforce was still neglected. Therefore, an attempt was made to address the vulnerability problems of unorganized workers: 

  • Incapacity to secure even minimum wages

The Supreme Court of India held that the employer of salaries below the statutory minimum salary level was equal to forced labour and forbidden under Article 23 of the Indian Constitution, while economic coercion could lead one to volunteer to work below the statutory minimum salary. The wage levels and earnings of workers have been studied in most studies of working conditions in the unorganized sector, and the daily wages below the minimum wage rate are determined. However, the current situation shows that the Minimum Wages Act is limited in scope and efficacy. In the world.

Casual workers in the unorganized sector are typically the least covered and with the lowest income level. Nothing can decide the wages for the huge informal sector through the interplay of market forces. The pay structure in the various States or Federal territories is not standardized. This also refers to other occupations which do not involve all employees because of the applicability of the act. Therefore, if a state government refuses to include a specific job within a particular sector, the Minimum Wages Act shall not cover all jobs of that sector.

  • Absence of a suitable physical environment at work

Failure to provide sanitary services affects workers’ welfare. In most industries in the unorganized sector, the sanitary conditions in the lack of proper toilet facilities are so precarious. The equipment like washing, urinary and toilet installations at work is low. It could be said that the workers in the industry have not been provided with such facilities. Besides that, there are very poor physical circumstances like space, lighting or ventilation.

  • Revenue loss resulting from accident

A job or other injury is a significant problem for migrant workers as a result of income loss. This also means extra medical revenue, hospitalization, etc. The loss is much larger when the accident leads to partial or permanent disability. When a breadwinner dies, the family needs to borrow money, spend savings or sell properties, and the income loss is irreversible.

  • No Trade Union or Labor Union knowledge

Not many, but most, are unaware of the existence of the Trade Union and its rules. The primary purpose of the Trade Union establishment is to settle the dispute that might arise between the employer and the employee. Trade Union means a trade union, registered under the Trade Unions Act,1926 for the time being. Trade Union which is analyzable in the following ingredients.

  • Long working hours

During long working hours the social and family lives of workers in general and of women workers, in particular, have a serious impact. We have little desire to engage in cultural or social events. You don’t even take proper care of your kids. Long working hours beyond labour standards are common in India in the unorganized sector. There is no fixed working time in the agriculture sector because there are no laws which can act as a guideline for farm workers’ working conditions. For non-agricultural sectors such as fireworks, gaming, power stations, etc. the workers began working very early at 6 a.m. And go on till late at night.

The work is organized in the loom sector so that the wages are calculated on a 12-15 hour daily basis. The Factories Act of 1948; the Minimum Wage Act of 1948; and the Shops and Establishment Act provide for the obligation of no adult worker to work for more than 48 hours a week. However, these working hours rules have also been ignored. There is also almost no constraint on hours of service.

  • Health and occupational risks

The key cause for detrimental effects on the health conditions of workers is working conditions in the unorganized sector. Low nutrition intake, because of low wages, relentless physical labour raises unorganized workers ‘ health difficulties and presents risks to their lives. Lack of healthcare resources often forces poor workers to forget it or to become indebted. As far as home staff are concerned, most studies have reported health problems mainly related to respiratory problems due to tobacco dust and body ache by inhalation due to the peculiar position which needs to be preserved throughout the working period.

Working conditions can be called terrible in some industries such as the fish processing industry, the tobacco and the salt pan sector for employees in general, and women employees in particular. In tobacco processing units, employees will do all the jobs, including plucking, scrubbing, sorting and labelling, whilst they are surrounded by heaps of tobacco deemed to be unsafe. The nebula of small tobacco particles is located so deep that the workers can not even see one another’s faces. The owners of the factory do not look after the workers properly. They do not provide you with things such as an apron, displays, closer-mouth, shoes, etc.

Salt pan workers, who constantly work in salty water, are also shown to suffer from skin disease. The reflection of light from the heap of salt causes severe eye problems. Agriculture workers suffer from certain specific health risks due to the widespread use of fertilizers, insecticides, pesticides and mechanization products. Applicators, mixers, loaders of pesticides are at risk of exposure to toxic substances. As there are no reports on farm-related incidents and injuries, the agricultural sector is unorganised.

Staff in unorganized industries, including fireworks and fireworks, leather and construction industries, etc., are therefore dangerous and endangered. Missing limbs and amputations often occur when staff use unguarded or insufficiently secured machinery. Workers in many industries of the unorganized sector also reported occupational disease and diseases.

  • Insecurity resulting from illness

Many studies show health risk to informal workers as the primary risk. Several studies have shown that health safety risks and crises are endemic to informal workers. Health stress activities dominated the outflows of 48% of a household annually, while rituals and marriages represent 30 per cent. Poor informal workers’ vulnerability increases when they are fully paid without any subsidy or assistance for their medical care. A variety of studies have shown that the lack of funding for treatment sometimes leads to inadequate health care or debt or a bad payment. Poverty was a major factor in the absence of healthcare.

  • Failure to ensure old age

Building workers and contract labourers have not reached most of the provisions regarding the provisional fund. The ages of employees in the unorganized industry are a major concern. Agricultural workers and builders are afraid that old age can not work. Insecurities will arise for the large proportion of old people who are expected to be present in the future due to various reasons such as adult workers’ inability to support their family’s needs, inadequate public health facilities and increased cost of private health facilities of older people, etc.

  • Lack of bargaining power

Mainly because of analphabetism and lack of knowledge is an organisation, at least unionization of Organisationen workers. The lack of workers’ rights and legal status has, among other reasons, tended to adjust the prospects of employees despite the increased recognition of the informal industry and the contribution of gross domestic product. This is because of the lack of organization or least organization because they can not express or disagree with the position of employers to protect their interests. The main barriers to self-organisation are the long hours of work, the social alienation of refugees, the high rates of unemployment, analphabetism and the lack of education.

  • Failure to enforce social security measures

Many times, a worker is not able to operate economically. Because of biological conditions, e.g. modernity, illness or age; personal disasters such as widows or an accident; social or natural disasters such as unemployment, flood, fire drought, high unemployment or industry closure. In these danger periods, the worker needs assistance as social security to survive the crisis and resume work afterwards. To shield unorganized workers from contingent and poverty, social security policies are indispensable. For cases of crisis such as unemployment or health problems, no steps are being enforced to cover risks and ensure that living standards are maintained.

  • Poverty and Debt

Unorganized sector workers had a much greater rate of poverty in the organized sector than their counterparts. Regardless of low wages and precarious jobs in the unorganized market, employees can not fulfil their basic needs and other social and cultural obligations. It is also the case that in different countries an rise in debt is a major cause of suicide. As the wage rates are very poor, poverty and economic problems are worse.

  • Job insecurity

Informal sector workers often do several jobs and the pursuit of several jobs by a person can be seen as an indication of insecurity in the workplace. One or two jobs can hardly generate enough income for survival. For example, farm labour jobs are irregular and unconfident. They are largely unemployed and hungry due to their availability of jobs only for about three months and the remainder of the nine months. Jobs are therefore available in agriculture for fewer days a year. In India’s National Rural Workers Employment Assurance Law, Mahatma Gandhi 2005 aims to guarantee job security by ensuring a minimum of 100 days works in the country’s backward districts, which can perform manually. Informal workers are still at risk of job loss, however, as nature and location are different.

  • Vulnerable Labour Groups 

The construction group of the First National Labor Commission, as well as the Second National Committee (2002), observed that in quarries, brick-kilns and large buildings a bondage system has been established and is extended by child labour from generation to generation. 

In addition to migrant workers, bonded workers and child labourers are the most marginalized and abused groups. Bonded labour requires a partnership between debtor and creditor. The creditor provides the workers with a loan and bonds it until the debt is reimbursed. Debt repayment is structured in such a way that the servant will not repay the service of his employer in his lifetime. It is this feature that distinguishes unpaid forced labour from bonded labour. Not just the mortgage, but also the terms and conditions in a related partnership. The terms of the debt shall be calculated and interpreted unilaterally by the master of the lender. This is a case of exploitation and it is illegal detention not to allow contract workers to move.

  • Insecurity from natural disasters

Many natural disasters such as floods, drought, famine, earthquakes and so on have devastating effects on the informal sectors. Also, to wipe out the informal sector’s productive base, natural disasters can affect the limited domestic assets of the private sector.

For most informal sector workers, working and living conditions are inseparable. Poor infrastructure and lack of basic facilities contribute to poor conditions of employment. Better infrastructure and better basic services for informal workers can lead to improvements in working conditions. Organizing informal workers will help to address issues relying on their working conditions, as they can take initiatives in self-help and link employees to the institutional structure providing services.

To order to strengthen incentives for labour law enforcement to the informal industry, steps should be taken to increase awareness of the fluid nature of workplace relations and to amend workers’ laws following informal sector circumstances.

Lockdown in India: most affected is unorganized sector

The unorganized sector in the country was affected by Corona. These are people who either work on a contract or are employees who give daily wages to their families. The government does not even know the size of this unorganized sector. In 2019, 93 per cent of the country’s total workforce was unorganized, according to the Economic Survey report. This figure is 85% in 2018, a report by NITI Aayog. This unorganized sector has a great influence on the economic performance of the country. No concrete provisions are still in place to protect it, however. The 2017-18 Periodic Working Force Survey, published last year, states that 71 per cent of the informal (non-agriculture) regular / salary employees are those who do not have a written employment contract.

There are 54.2% who are not paid for a vacation. Not only that, but 49.6% of them are even not eligible to undergo social security. There is not only a large but uncertain area in the unorganized sector. This lock-down is also likely to impact the agricultural sector, which operates in the country’s largest unorganized sector.

Social welfare schemes for unorganised sector

A detailed analysis of the problems of unorganized sector workers showed that social security is required to reduce the vulnerability of unorganized sector workers. Although the government has made efforts to ensure a minimum level of social security for poor unorganized workers by passing the Unorganised Workers’ Social Security Act, 2008 proved to be inadequate. 

The increase in informal jobs has led to formal jobs being reduced as a result of their quality of life. To resolve these adverse effects, a solid basis for a minimum degree of social security needs to be provided to ascend the vertical ladder of occupation that will improve their financial status. The hour needed to effectively implement social security programs for informal workers as the target groups are, instead of examining what kinds of social-security measures are required for the multi-faceted needs of non-organised sector workers.

There are, therefore, several major social welfare schemes in the context of an unorganized Social Security Act (2007) including Aam Aadmi Bima Yojana (Life Assurances), Rashtriya Swasthya Bima Yojana (Health Insurance) etc., both nationally and nationally, to provide the most vulnerable sector in society with social security.

Challenges and opportunities 

  • Lack of awareness

The biggest problem is the lack of awareness and information that is a major obstacle to most social security programs funded by the government. Awareness and awareness ensure that beneficiaries are comfortable with the nature and advantages of the programs. The States should, to promote a successful implementation of programs, take responsibility for generating information about the schemes and delivery system.

  • Social Security Convergence Schemes

The multiplicity of social welfare programs administered at central and state level by different governmental bodies entails uncertainty and the issue of duplication of resources, the preservation of records, and also the ability to double or multiple benefits by way of coercion reaching the same individual through various schemes. Every scheme’s management entails enormous administrative costs.

  • Beneficiaries Target

The definition of an ‘unorganized worker’ in the Unorganized Worker Social Security Act of 2008 gives a general sense, and therefore the real challenge is the identity of these unorganized workers in the sector. State governments acting through the State Social Security Administration representative should be empowered to determine targeted beneficiaries and criteria for entitlement to the scheme. While the regime is open to all unorganized sector workers, State governments must decide on target groups in their own country to avoid overlapping between the national scheme and the schemes provided by the State.

  • Failure to follow up properly

Since the informal sector surveys lack proper follow-up measures, the response rates for future services are reduced. As a framework for planning and implementing the support action plans and technical cooperation, the survey findings will also be used wherever possible. The analysis shows that there is almost unanimously the deficit in delivery in most of the social security programs, including the assessment studies in programs carried out by the India Planning Committee. Such a shortfall covers:

  • Lack of state-governed distribution infrastructure;
  • Deficient organizational capacity on the part of the distribution agencies;
  • Failure to identify program beneficiaries;
  • Incidence of corrupt practices, rent-seeking from agencies of administration and delivery and elite capture of schemes;
  • Lack of people’s knowledge about program information as well as their entitlements.
  • To build easily accessible and easy schemes

The purpose of the plans or schemes is to ensure the targeted groups receive immediate and automatic benefits. There have been numerous concerns over adherence to social security programs, such as old-age pension programs, widows schemes, or social assistance in the event of the family breadwinner’s death. The existence of large numbers of schemes for the same purpose causes much uncertainty at beneficiaries level as to just what they are entitled to. Hence, the challenge was to design simple and easily accessible social security schemes under one umbrella for the target groups. 

Also, in addition to the Mahatma Gandhi Rural Employment Programme, in the context of extended job opportunities, the challenge is to increase employment opportunity by generating employment as the informal sector employees are subject to additional threats, such as seasonal work to exit poverty and fiscal vulnerability. Instead of a survival benefit system or minimum pension scheme, suitable programs are needed to meet the economic needs of deprived families by linking them to training or programs for work.


The unorganized sector employees should be granted pension during the rainy season, maternity leave benefits, accidents relief, natural mortality allowance, education assistance for children for higher education. Unique schemes for helping unorganized workers to their specific demands and needs should be developed by central and state governments.

The contribution of unorganized workers to GDP is almost 50%. Yet the law has overwhelmingly endorsed programs of welfare (social security) for the organized workforce. Therefore, social security measures should cover all unorganized workers to bring the country to full development, social security measures cover only 6% of unorganized workers. This is also a tool for the identification of real benevolent workers that the Government can encourage unorganized workers to report. The government should raise awareness of the unorganized Workers’ Welfare Fund and the welfare programs that are supplied by the State Fund.


The overwhelming majority of employees in the country are from an unorganized sector, including the agricultural sector, the construction, shops, road sellers, small-scale service providers, salt pans, domestic work, rework, beedi industries, etc. Unorganized workers function without sufficient benefits in extreme conditions. For both economic and social growth, security and support for unorganized sector workers are very important. Government laws to protect these workers should be enforced strictly and those who misuse them should be harshly punished for real growth.


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