What are the linkage points between globalisation and the growth of the informal sector? How have these affected the nature and functioning of the working class?

Linkages between Globalisation and the Growth of the Informal Sector

Several key linkages explain the growth of the informal sector in the context of globalisation:

• Increased Competition & Cost Reduction: Globalisation intensifies competition, forcing firms to reduce costs. Outsourcing, subcontracting, and casualisation of labour are common strategies, leading to a rise in informal employment.
• Trade Liberalisation & Agricultural Distress: Trade liberalisation often exposes domestic industries, particularly agriculture, to global competition. This can lead to job losses in the formal sector and push workers into informal activities for survival. The agricultural sector, facing competition from subsidized imports, has seen a significant increase in informal employment.
• Structural Adjustment Policies: Structural adjustment programs (SAPs) imposed by international financial institutions (like the IMF and World Bank) often involve privatization, deregulation, and austerity measures. These policies can lead to public sector job losses and a decline in social safety nets, pushing more people into the informal sector.
• Rise of Global Value Chains (GVCs): GVCs often rely on informal suppliers and subcontractors, particularly in developing countries, to reduce costs and maintain flexibility. This creates a demand for informal labour.
• Technological Change & Digital Platforms: While technology can create formal employment, it also facilitates the growth of the ‘gig economy’ and platform work, which often lacks the protections and benefits of formal employment.

Impact on the Nature and Functioning of the Working Class

Globalisation-induced growth of the informal sector has significantly altered the nature and functioning of the working class:

• Precarious Employment: Informal workers face precarious employment conditions – lacking job security, benefits (health insurance, pensions), and legal protection.
• Wage Stagnation & Declining Bargaining Power: Increased competition and the availability of cheap labour in the informal sector suppress wages and weaken the bargaining power of workers.
• Erosion of Labour Standards: The informal sector is often characterized by poor working conditions, long hours, and unsafe environments. Labour laws are often poorly enforced in these settings.
• Increased Vulnerability: Informal workers are more vulnerable to economic shocks, such as recessions or natural disasters, as they lack social safety nets.
• Changes in Skill Requirements: Globalisation demands new skills, but informal workers often lack access to training and education, leading to skill gaps and limited opportunities for upward mobility.
• Rise of Self-Employment & Entrepreneurship (of Necessity): Many workers are forced into self-employment in the informal sector due to a lack of formal employment opportunities. This often involves low-income activities and limited growth potential.

Nuances and Regional Variations

The impact of globalisation on the informal sector and the working class is not uniform across regions. Several nuances exist:

• Regional Disparities: The growth of the informal sector is more pronounced in regions with weaker institutional capacity and limited access to education and infrastructure.
• Sectoral Differences: The impact varies across sectors. For example, the garment industry and construction are particularly reliant on informal labour.
• Gendered Impacts: Women are disproportionately represented in the informal sector, often facing lower wages and greater vulnerability.
• Role of Migration: Migration, both internal and international, can contribute to the growth of the informal sector as migrants often take up informal jobs due to limited opportunities in the formal sector.

Data on Informal Employment: According to the Periodic Labour Force Survey (PLFS) 2022-23, approximately 88.6% of the workforce in India is employed in the informal sector. (Source: Ministry of Statistics and Programme Implementation, 2023 - Knowledge Cutoff)