Legal reforms for the self-employed: three urban cases.

AuthorChen, Martha Alter
PositionBy Invitation - Abstract


The need to balance job creation with basic protection for workers--to make economic growth inclusive--is a major challenge for the early 21st century. In India, as in most countries, labor laws rest on the assumption of a clear employer-employee relationship, and commercial laws rest on the assumption of incorporated enterprises with documented accounts. But eighty per cent of the urban workforce in India is informal, and half of urban informal workers are self-employed (Chen & Raveendran, 2011, updated 2014). The mismatch between the existing legal frameworks around employment and the existing employment structure creates a major challenge for policy makers and calls for significant legal reform.

At the beginning of the 21st century, employment grew at a faster rate per year in urban India than in rural India (Chandrasekhar & Ghosh, 2007). As of 2004-05, over half (54%) of the urban working age (15+) population was in the labor force, either actively working or actively seeking work: 79 percent of men and 24 per cent of women (ibid). But since 2004-05, there has been a marked slowdown in employment growth in both rural and urban India. By 2011-12, just under half (49%) of the urban working age population was in the labor force: 76 per cent of men and 21 per cent of women (Chen & Raveendran, 2011, updated 2014). This slowdown in employment growth was accompanied by a decline in self-employment, which had been growing. By 2011-12, the shares of self-employment and wage employment in total urban employment had reverted to their 1999-00 levels: at 42 and 58 per cent, respectively (ibid).

However, the urban informal workforce was almost evenly divided between self-employment (51%) and wage employment (49%) in 2011-12. There are three main categories of the self-employed: employers (who hire others), own account workers (who run single person or family enterprises without hired workers), and unpaid contributing family workers. In 2011-12, 38 per cent of the urban informal workforce (39% of men and 31 % of women) were own account workers; 11 per cent (8% of men and 20% of women) were unpaid contributing family workers; and only 3 per cent of men and 0.5 per cent of women were employers (ibid).

This article examines what laws and regulations impinge on--and what legal reforms are needed for--three groups of informal self-employed in urban India: home-based workers, street vendors and waste pickers. In 2011-12, these three groups combined represented one-fifth of the total urban workforce in India: home-based workers (15%), street vendors (4%) and waste pickers (1%). Home-based work was particularly significant for women: representing almost a third (32%) of the female urban workforce. The article describes the conditions of employment and work processes of these three groups, and introduces key organizations of these workers in India. It then examines the legal demands of these organizations of workers. Finally it draws out some lessons for legal reforms for the self-employed in India and elsewhere. This article draws on findings and recommendations from three multi-country initiatives led by the global network WIEGO (Women in Informal Employment: Globalizing and Organizing): an on-going program to improve official national statistics on informal employment around the world; a 2012 study of urban informal workers in 10 cities/9 countries (including waste pickers in Pune and home-based workers plus street vendors in Ahmedabad); and a multi-year project on law and informality in four countries (Ghana, India, Peru and Thailand). Many of the sector-specific findings, as well as recommendations of the 10-city study and the 4-country project, are common across the different cities and countries. In other words, what is detailed below about legal reforms for home-based workers, street vendors and waste pickers is not unique to India.

Home-Based Workers

Home-based workers produce goods or services for the market from their own homes or adjacent grounds and premises: stitching garments and weaving textiles; making craft products; processing and preparing food items; assembling or packaging electronics, automobile parts, and pharmaceutical products; selling goods or providing services (laundry, haircutting, beautician services); or doing clerical or professional work, among other activities. Although they remain largely invisible, home-based workers are engaged in many branches of industry and represent a significant share (14%) of the urban workforce in India, particularly among women workers (32%).

For home-based workers, whose home is also their workplace, housing is an essential productive asset. Inadequate housing is a commonly cited problem by home-based workers. A small house hampers productivity: as the home-based worker cannot take bulk work orders because she cannot store raw materials and her work is interrupted by competing needs for the same space of other household members and activities. Poor quality housing allows goods and raw materials to be damaged. Monsoon rains force home-based workers to suspend or reduce production, as equipment, raw materials or finished goods get damaged when roofs leak or houses flood; products (e.g. incense sticks) cannot dry due to leaks and humidity; and orders are reduced due to decreased demand and/or difficulties associated with transport during the rains (Chen, 2014).

When the home is also the workplace, basic infrastructure services are essential for the productivity of work, especially electricity and water. The accessibility and cost of public transport is also a key factor for home-based workers who commute to markets on a regular, if not daily, basis to buy raw materials and other supplies, to negotiate orders, and to sell finished goods. A recent study of home-based workers in Ahmedabad (India), Bangkok (Thailand) and Lahore (Pakistan) found that transport accounted for 30 per cent of business expenses; and of those who had to pay for transport, one quarter operated at a loss (ibid). The distance between the home-based worker's home and the market, contractor, or customers she deals with is critical, affecting the cost of transport. When home-based workers are relocated to peripheral areas they often have poor access to public transport and their transport costs rise sharply.

There are two basic categories of home-based workers: independent self-employed workers who take entrepreneurial risks; and sub-contracted workers who depend on a firm or its contractors for work orders, supply of raw materials and sale of finished goods. This second category of home-based workers, the sub-contracted workers, is officially referred to as "homeworkers". Since they are not directly supervised by an employer, provide their own workspace and equipment, and cover many of the non-wage costs of production including power and transport, homeworkers are often classified as self-employed. However, because they are dependent on a firm or its contractor for work orders, raw materials, and sale of finished goods, they are sometimes classified as wage workers. In reality, subcontracted home-based workers--or homeworkers--occupy an intermediate status in employment between fully independent self-employed and fully dependent employees (Raveendran et al, 2013: 2). Also, many self-employed home-based workers are not fully independent: as they have limited access to capital, knowledge of markets, bargaining power, and control in commercial transactions.

Because they work at home, both groups of home-based workers tend to remain isolated from other workers in their sector (apart from those in their neighborhood) and to have limited knowledge of markets and market prices. These factors limit their ability to bargain for more favorable prices and piece rates or to negotiate with government for basic infrastructure and transport services.

While home-based workers are present in most branches of economic activity, they are concentrated in manufacturing, trade and repair services: in India in 2011-12, 73 per cent of women home-based workers were in manufacturing, 14 per cent in trade, 4 per cent offered education services, and 3 per cent provided lodging or ran small eateries (Raveendran et al, 2013). Among women home-based in the manufacturing sector, 29 per cent produced hand-rolled cigarettes (bidis), 26 per cent stitched or embellished garments, 22 per cent wove textiles, 6 per cent produced food or beverages; 7 per cent produced wood or cork products (mainly incense sticks), and 5 per cent made furniture (ibid). Compared to women home-based workers, a lower percent of men home-based workers were in manufacturing (41 %) and a higher percent were in trade (35%) and other services, including repairs (6%) (ibid).

Home-based workers and their activities are affected by government policies and practices, notably land allocation, housing policies, basic infrastructure services, and public transport. This is because their homes are their workplaces; and they have to commute to markets and transport supplies/goods to and from their homes. Legal reforms should support policy interventions that upgrade settlements with large concentrations of home-based workers to ensure they have adequate shelter, water, sanitation and electricity. If and when home-based workers and their families have to be relocated, efforts should be made to ensure the relocation sites have, from the outset, adequate shelter, basic infrastructure, transport services, and access to markets.

Home-based workers also need legal rights and protections against unequal and, often, exploitative value chain practices and relationships. Home-based workers have limited scope for negotiation or leverage: due in large part to their isolation in their homes but also to exclusionary urban policies or practices and to unequal or exploitative value chain dynamics. To demand and secure their rights, home-based workers need...

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