Q. Is there a connection between labour migration and informal sector? Justify your answer with reference to Indian context.

Model Answer:

Labour migration and the informal sector

Labour migration and the informal sector in India are closely intertwined, shaping urban economies and social structures. This relationship stems from complex socio-economic factors and has significant implications for development.

• Rural-urban migration, driven by push factors like rural poverty and pull factors such as perceived urban opportunities, fuels the growth of the informal sector in Indian cities.

• The dual labour market theory helps explain this phenomenon. Urban economies are divided into a formal primary sector with stable jobs and an informal secondary sector with precarious employment.

• W. Arthur Lewis’s model highlights how surplus rural labour migrates to urban areas. However, in India, limited formal opportunities mean this labour is often absorbed by the informal sector.

• Migrant workers commonly engage in informal activities like construction, small-scale manufacturing, street vending, and domestic work. The Economic Survey of India indicates that over 90% of the workforce is in the informal sector, a significant portion being migrants.

• The informal sector’s low entry barriers suit migrants lacking formal qualifications and social networks. However, this results in vulnerability to exploitation, lack of job security, and absence of social benefits.

• The COVID-19 pandemic starkly exposed this link, with millions of informally employed migrant workers losing livelihoods and facing severe hardships.

In conclusion, labour migration and the informal sector in India are intrinsically linked due to economic structures and labour market dynamics, necessitating nuanced policy approaches.