Capital Wage Employment in Unorganised Sector

Topics: Unemployment, Economy, Employment Pages: 6 (2029 words) Published: December 4, 2012
As stated earlier the paramount importance of the unorganized sector can be seen in the NSS survey 1999-2000 – around 92% the Indian workforce (around 370 million workers) were employed in the unorganized sector against a standard of 60% in developing countries. NCEUS report in 2004/05 showed an increase in employment in the unorganized sector by 8.6 million, the corresponding figures in organized sector also showed an estimated 8.5 million increase. This meant that by 2005 the 92% workforce of unorganized sector diminished to 86% or 392 million, and according to 2011 NCEUS report the employment in organized sector showed first signs of progress since independence. So the bottom-line is more and more of the labor are now coming under the purview of the formal enterprises albeit in small steps over the last 5 years, however many experts feel the formalization should have happened a long time ago and the country's inefficient bureaucratic mechanism is the sole reason for procrastination of the inevitable formalization. This chapter would analyze the Unorganized sector from three perspectives 1.Capital -Role of MFIs in extending credit,

2.Wage disparity based on Gender and
3.Employment/Unemployment numbers in different sectors as well as employment categories. CAPITAL
Easy access to capital through rural micro-financial institutions has created a boom for self employed workers ,and about 57% males and 62% women of the usually employed come under this category. Despite the increasing financial inclusion of the rural India, low agricultural productivity has resulted in workers who were earlier part of agricultural sector to move out to other sectors- 81% of the male workers were in agriculture in 1977-78 , only 63% in 2004-05. MFIs

Microfinance has become the central system for extending financial services to unbanked sections of population. Microfinance Institutions (MFIs) in India consists of NGOs (registered as societies or trusts), Section 25 companies and Non-Banking Financial Companies (NBFCs). Commercial Banks, Regional Rural Banks (RRBs), cooperative societies and other large lenders. Financial inclusion is one of the primary objectives of MFI's. Some of the key features of microfinance include:- •No collaterals

Very short duration loans
Higher frequency of repayment of installments
high rate of loan default The obvious positive of extending credit to rural population is the improvement that is brought about in the quality of work due to access to better quality input in terms of capital. But on the other hand pressure for debt settlement can also lead to production of inferior goods for fast disposal in the market. So it is imperative that credit facilities is provided to only those who require. MFIs and Employment

An ILO survey of 46 MFIs in 24 different countries showed that 74% of MFIs had “the self employed” as clients. It is a myth that MFIs directly create employment, it only creates a scenario for employment growth by capital injection. It is the client or self employed entrepreneur who utilizes the funds given by MFI that ultimately has a bearing on employment. Although his/her employment decision will definitely be influenced by capital at hand. The "household enterprise" or unorganized sector is complicated in the sense that there is 'not so transparent' substitution effect taking place between the paid and unpaid employees. for e.g. A family run business may decide to hire from outside at market rate to supplement additional requirements of input and stable loan repayments, this is an ideal employment effect that a MFI can bring about. But there is no concrete evidence to study the addition or substitution in labor.

Rural India Wages (in Rs)Urban India Wages (in Rs)
56.53 (male)75.51 (male)
36.15 (female)44.28...
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