Wages of unorganized sector workers in India: What NSS survey data can tell us?

AuthorRamaswamy, K.V.
PositionBy Invitation - Abstract


Unorganized sector is the source of work and livelihood for workers in almost every sub-sector of India's industrial economy. Their working conditions, earnings and social security issues have received much attention (NCEUS, 2008). The reasons are well known. Unorganized workers belong to the uncovered sector without access to employment security benefits and more likely to bear the brunt of negative economic shocks due either to global or domestic economic conditions. The NCEUS report argues that about 79 percent of the unorganized workers were living below Rs.20 per day. They constitute India's working poor. The impact of economic policy reforms on unorganized sector workers in particular is a much debated issue. There are few systematic studies. One study based on Non Directory Manufacturing Establishments (NDME) for the period 1985 to 2001 argues that real wage of informal sector workers has risen during the post trade liberalization period (Marjit & Kar, 2009) (1). Similar result of positive growth rate of real annual earnings in directory manufacturing establishments (DME) and NDME in the 1990s was observed in another study (Ramaswamy, 2003). Their focus is on manufacturing. Manufacturing is a relatively small segment of nonagricultural (NAG) sector; the other segment is services including construction. It is important to note that NCEUS argument is using an absolute standard and studies of real wages are more concerned about the growth of real income of unorganized workers and in many cases with wage inequality relative to organized sector workers. Both the dimensions are important as long as one is clear about the reference in context.

Focus Question & Data

How are workers in the unorganized sector in India doing? In this paper we are concerned with growth of real wages of wage-labor in the unorganized sector in India excluding agriculture. We attempt to examine two standard worker categories, namely, regular workers and casual workers. Within each of these two types of labor, the real wage change overtime in the case of male and female workers within sectors is the subject of our analysis. Our analysis is based on the results of two recent NSS surveys of informal sector and conditions of employment in India 61st round (2004-05) and 66th round (2009-10). We estimate real wages by deflating nominal wages by the consumer price index for industrial workers (CPII) with 1999-2000 as the base year.

The selected period is one of greater trade integration and globalization of the Indian economy and of economic shocks including the global economic crisis as well as domestic economic growth (positive shocks). During this period Indian economy was growing at 8.7 percent per annum (real GDP at 2004-05 prices) and its real per capita income growth was 7 percent per annum (GOI, Economic Survey, 2011-12). Similarly growth rates of real output of three relevant sectors for our study are 9.4 percent (industry, this includes manufacturing and construction), 10.4 percent (trade, hotels, transport and communication) and 12 percent (finance, real estate and business services). Does this high growth period made a difference to the wages of unorganized sector workers in India particularly in the manufacturing and services sectors?

Unorganized Sector: Definition & Implications

The NCEUS (2008:3) defines the unorganized sector as follows: "The unorganized sector consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers". This definition closely conforms to the concept of informal enterprises in the NSS surveys (NSSO, 2012). The NSS surveys follow the framework given by the International Conference of Labor Statisticians (ICLS) in their 15th and 17th meetings (NSSO, 2012:20). Here informal sector is defined as unincorporated proprietary and partnership enterprises including producers' cooperatives. However the actual survey coverage excluded those working in cooperative societies. Hence the survey data matches the definition of NCEUS mentioned above.

The NSS quinquennial surveys of unorganized sector enterprises follow the enterprise approach. Here data is gathered from a sample of enterprises (which do not hire workers on a regular basis) and establishments (which employ at least one worker on a fairly regular basis).Establishments is further divided into OAME, NDME and DME as we mentioned in the introduction. The surveys of unorganized enterprises sometimes cover trade, services along with manufacturing but exclude construction. They are known to suffer from statistical problems like changing sampling frame, recall or reference period and in some cases small sample size at disaggregated levels. They could still be useful to get information on change at the aggregate sector levels. However, we will not use them in this paper.

Another useful approach is the employment approach of NSS employment and unemployment surveys. Here the sampled workers report the type of enterprise in which they work. Data is gathered from workers working in all enterprise types including government, public and private enterprises. However workers who are reported to be employed in unincorporated proprietary and partnership enterprises are considered belonging to the informal sector. The NSS informal enterprises surveys make special effort to gather information on a wide variety of aspects like the existence of contract, working conditions etc. The two NSS survey reports that we use in this study for the year 2004-05 and 2009-10 follow the same reference period. Information on wages is collected from regular wage workers and casual laborers in the current daily status (CDS).That is each day of the 7 days preceding the date of survey. This enables us to do a consistent comparison over time.

Trade & Globalization

Major areas of reform included the removal of reduction of tariff levels and their dispersion, removal of licensing and other non-tariff barriers on all imports of intermediate and capital goods, elimination of trade monopolies of the state trading agencies and the...

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