Our recent report on the shrinking informal sector in India has rightly sparked debate. While it is clear that the formalization of the Indian economy measured in terms of GVA is progressing at a rapid pace in terms of general direction, that of the formalization of informal employment may have just taken up the challenge after the launch of ‘E-Shram portal. It is now estimated that around 28% of workers in the unorganized sector have registered with the website, with West Bengal, Uttar Pradesh, Bihar, Odisha and Jharkhand accounting for almost 70%.
It can be noted that after registering on the E-Shram portal, unorganized workers will receive a digital e-Shram card, a universal account number which will be acceptable nationwide and they will not be required to register. register in different places to get social information. security benefits. In addition, the government also plans to link the national database for unorganized workers under the E-Shram portal with Unnati, a proposed job search portal.
Given that the E-Shram portal is a real-time employment portal for registering informal workers, this raises the question of how such data on informal employment could be juxtaposed with employment surveys such as as PLFS and CMIE. It will also help us to understand whether a fundamental change is also needed in the definition of informal employment in India. In India, informal employment is defined as a person who is not eligible for at least one social security benefit from the provident fund (PF), pension, gratuities, health care benefits or benefits. maternity. Formal employment, on the other hand, is one that receives at least one social security benefit.
To understand the link between the real-time E-Shram portal and the PLFS and CMIE survey, we looked at the state-by-state records of the E-shram portal and mapped it to the unemployment rate and the number of workers who did not. do not have a job. but do not want to work, according to CMIE. It makes sense to hypothesize that if the number of registrations on the E-Shram portal is considerably high in a state, this would ideally imply that people are willing to register on the job portal because ( a) they may not have a paid job or (b) they are keen to obtain Social Security benefits or both. This would therefore imply that the State would ideally have a low unemployment rate, if we take the example of Gujarat, Karnataka or Telangana as a base case, where E-Shram registrations and the unemployment rate. unemployment are positively linked. However, when we mapped the registrations with the unemployment rate across states, it yielded mixed results, which require detailed explanation. In all of our analyzes, we ideally make a fundamental assumption about the accuracy of the survey results.
First, in states like West Bengal and Odisha that have the most E-Shram registrations, the unemployment rate is significantly low, contrary to what we had assumed. We believe that this could again imply that (a) an informal workforce does not necessarily imply higher unemployment, or (b) the formalization of the informal workforce is proceeding at a satisfactory pace or (c) people are unwilling to work in the formal sector. employment because they may already be the beneficiaries of a large benefit guarantee or the wages are not remunerative. West Bengal and even Odisha have already introduced universal / limited income guarantees that may have resulted. Interestingly, in the United States recently there was news that there weren’t enough truck drivers, perhaps for the same reason. Bihar, Uttar Pradesh and Jharkhand, the other 3 states at the top of the E-Shram portal, are spawning the trend, with Uttar Pradesh increasing the labor force and Bihar and Jharkhand experiencing high unemployment, like us. had supposed it.
However, states like Maharashtra, Andhra Pradesh and Gujarat have also seen a significant percentage of the workforce unwilling to work. This could indicate that migrant workers have not yet rushed back to these states!
Given these contrasting trends in the Indian labor market, we now strongly recommend examining existing definitions of the informal workforce, especially after the pandemic. While it is easy to criticize any data that shows faster-than-expected formalization as a figment of the imagination and to characterize it as politically motivated as the existing debate in the public domain shows, now is the time to formulate recommendations to improve the conditions of our workforce. In this context, E-Shram data which is portable between states might be just the start of such a process.
The author of this article is Dr Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.
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