Myths And Realities About Informal Sector

By Author: Amit Singh
Total Articles: 25
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The Informal Job sector has by and large a wide ranging categories. Informal job sector is a bi-product of two different nature of activities:

1) Coping Strategies (Survival activities): This includes casual jobs, insecure/one-time jobs, unpaid jobs, multiple job holdings.

2) Unofficial earning strategies (illegality in business): Avoiding labor norms & regulations made by Govt., tax evasion, escaping state regulations.

“Neither everything is organized in this sector nor regulated, there are many misconceptions surrounding it. Also, it is commonly believed that grey collar sector is neither taxed nor monitored by any form of government. Unlike the formal sector economy, activities of the informal sector are not included in the gross national product (GNP) and gross domestic product (GDP) of a country.” These and many more myths further misguide the masses.

Here are four most common pre-conceived notions regarding the entry level job sector:

Myth: National employment statistics do not include people who work as domestic workers, home-based workers, street vendors or waste pickers.

If ...
... employment statistics are to be believed, contribution of people working as domestic helpers, delivery personnel, rag pickers, street vendors, and many more is recorded. The challenge, however, is to classify the kind of work they are doing. In other words, it is not difficult to capture the number of workers that are employed in this sector, it is difficult to specify their categories of work. Domestic workers, for that matter, are often identified as employable category under official national statistics yet they are misclassified.

Myth: The Grey Collar job sector doesn't contribute to the economy

According to facts, formal sector contributes only 10%-12% of the gross economy, rest is contributed by the informal job sector. Workers belonging to this category are the major players in a wide array of industries including restaurants, travel & tourism, construction, transport, manufacturing & trading. Figures clearly depict their contribution to the economy, which is large. Unfortunately, due to lack of awareness people are drifting away from the entry level job sector considering them insignificant for our economy while the reality is different.

Myth: Informal sector economy is only comprised of traditional activities.

This conception exists because people often judge the sector by the way it looks, less educated and lowly working conditions. Not all blue collar jobs belong to traditional and handicraft industries. Depending upon the level of training, skills, and experience, workers are given opportunities in manufacturing & trading units of big brands where their role is wide and includes transportation, assembling & packaging or manufacturing, trading and product delivery.

Myth: Informal employment applies only to developing countries.

Initially, the statistical definition of informal employment was applied to developing countries only. Yet it is increasingly recognized that there are employment arrangements in developed countries that fit this definition and would be identified as informal employment in developing countries. A substantial share of the labour force in developed countries works under arrangements which provide reduced benefits and limited access to social protection: in own- account self-employment; temporary (or fixed-term) employment including temporary agency work, on-call, or contract company work; and some forms of part-time work.

Myth: The Informal economy will not last in the future.

Most of the population of developing countries enter into the service sector through blue collar jobs. The sector requires less qualifications and have higher chances of gaining wide experience. Thus the demand of informal sector workers will only increase in the foreseeable future.

Myths are fun as long as you don't mix them with facts and as the facts suggest, the future of informal job sector is only bright in developing as well as developed countries.