Daily Current Affairs for UPSC

Issues relating to Informal Labour Market

Syllabus - Social Issues [GS Paper-2]


India’s informal labour market, which accounts for over 400 million workers, is in need of a structural shift to formal employment, according to the Indian Staffing Federation (ISF). 

Informal Labor Market in India

The informal jobs sector absorbs over 85 percent of the overall labour force in the county and plays a role in the economic progress of the nation. This sector suffers from weak/broken business relations, that is, there is no social security, contracts, and other rights of workers.

Need for Structural Shift

The ISF has reiterated the importance of achieving structural change that would lead to decent work in quality employment for all while expanding the take-off jobs for workers. It may be observed from this shift that it is necessary to tackle income disparities and growing poverty in the nation.

Formalisation of Informal Workforce

The ISF has proposed a vision paper titled “India@Work: a book titled “Vision Next Decade,” a book before proposing an important plan of the government for expanding the informal sector and applying the codes legally in India. Some of the recommendations in the paper include the following: Need to eliminate employment barriers, promote the labour codes, and require social security for the working people.

Benefits of Formal Employment

Employment in the formal sector has its advantages as it offers employees certain basic privileges including medical care, pensions, and insurance. It is also a way of having compliance to the legislation and rules regulating employment to give workers safer working conditions.

Challenges in Formalising Informal Labour

The challenges that come with the attempts at regulating the informal labour include the following; the workers are ignorant of their legal rights, the costs involved in regulating the markets are huge and drastic changes in the labor market have to be effected. Notably, there is some imperativeness on policy reforms and rewards to push employers to adopt any formality in their hiring.

Way Forward

To address the challenges faced by informal labor, there is a need for a multi-stakeholder approach, involving the government, employers, and workers. The government can provide incentives and support for formalisation, while employers can invest in their workers’ skills and well-being. Workers, on the other hand, need to be aware of their rights and demand better working conditions.


In conclusion, India’s informal labor market requires a structural shift towards formal employment to ensure equitable opportunities and sustainable livelihoods for all workers. The ISF’s vision paper provides a blueprint for formalising the informal workforce and implementing labor codes in the country. However, the process of formalization faces several challenges, and a multi-stakeholder approach is necessary to address these challenges and ensure a better future for informal labor in India.

Source: The Hindu

UPSC Mains Practice Question

Q. Examine the key issues related to the informal labour market in India. Discuss the socio-economic implications of these issues and suggest policy measures that could improve the working conditions and economic security of informal workers.

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