Urban Informal Sector: Concepts, Indian Evidence and Policy Implications

Author(s): Meera Mehta

Source: Economic and Political Weekly, Vol. 20, No. 8 (Feb. 23, 1985), pp. 326-332
Published by: Economic and Political Weekly
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 Urban Informal Sector
Concepts, Indian Evidence and Policy Implications
Mleera Mehta

Despite the failure of the 'modern' sector to absorb labour supplies from the rural areas, large-scale unemploy-
ment has not been rampant in the metropolitan centres, as would be predicted by competitive models. The surplus
labour unable to gain entry into the 'modern' sector has been generally found to be absorbed by the rest of the
urban economy which has been loosely termed as the informal sector. It is only in the last decade that this sector
has become a focus of research in the area of urban labour markets.
This paper attempts to trace the conceptual developments in this emerging area of concern and to identify the
different policy implications as well as the issues for further research.
INTRODUCTION of the urban economy which has been the accelerated growth policy were not
loosely termed as the informal sector. It operating, at least not quickly enough.
RESEARCH efforts in urban employ-
is only in the last decade that this has This led to a search for alternative solu-
ment and urban labour markets in the
become a focus of research in the area of tions. One such attempt came through the
past have most often focused on the
urban labour markets. ILO country missions in Kenya, Colutm-
organised sector with an emphasis on in-
The present paper attempts to trace the bia, Sri Lanka and Philippines, as well as
dustrial employment. However, it is ob-
conceptual developments in this emerging several city studies. (ILO, 1970, 1971, 1972,
vious that a large share of the benefits
area of concern. The different policy im- 1976a; Joshi et al, 1980; Lubell, 1974;
from the growth of this sector have ac-
plications on the basis of this and the Sethuraman, 1976a, etc). The major
crued to a small and exclusive growth of
issues for further research are also achievement of the country missions was
people. The different socio-economic
identified. to shift the emphasis from a development
groups within an urban area have general-
strategy based mainly on economic
ly shared in highly unequal proportions. ORIGIN OF THE CONCEPT
growth whereby employment was obtain-
A large section of the urban poor are
ed as a residual to a strategy which focus-
generally completely excluded from this The theoretical basis of the concept
ed on employment as a prime objective.
sector and its benefits. assumes some dichotomy in the urban
Any attempt to identify relevant anti- economy arising out of the dualistic Most of the ILO's CouIlntry studies
poverty policies, will have to be based tendencies. The models of sectoral found a variety of structural imbalances
upon an understanding of the nature of dualism were put forth first by Lewis as being the basis of unemployment/
existing economic opportunities and the (1954) and Fei and Ranis (1961, 1964). In under-employment. One of these im-
associated labour market processes. In the their formulations, the modern capitalist balances, particularly! relevant to urban
past, the urban growth in India has largely sector is the dynamic one whose growth areas, was assumed to be caused by the
been due to migration from rural areas. is brought about by output expansion and discriminatory treatment of, or the lack
It has also been agreed upon by most re-investment of profits. The supply of of support for, the informal as against the
researches that the major motivation labour to the modern sector from the formal sector. These studies have tended
behind such migration has been economic surplus in the traditional sector is assum- to view this sector in a more-positive light.
in nature. The initial spurt to migration ed to be unlimited at constant real wages. They recognised their potential and pro-
may have come from the 'modern' sector The urban extention of the traditional sec- ductive role, . especially in terms of
in manufacturing, administrative and tor lends a dichotomous character to the generating employment and distribution
-ommercial establishments. However the urban economy. of income. The nature of policies thus ad-
output growth of this sector especially in The term informal sector to suggest vocated related to measures like, "ceasing
manufacturing, due to its capital intensive such a dichotomy was first used by Hart the demolition of informal sector hous-
nature, has failed to promote a propor- (1971). During his field work among the ing, reviewing trade and commercial licen-
tionate growth in labour demand. Initial urban workers in Ghana, he came across sing procedures, and intensifying technical
models, based on competitive markets and a large self-employed sector which provid- research and development work on pro-
distinguishing two sectors have failed to ed means of livelihood for new entrants ducts suitable for production or use in the
explain these developments (Lewis, 1954, to the urban labour force who were unable informal sector" (Moser, 1977).
Fei and Ranis, 1961). The 'push' factors to obtain employment in the formal sec- Borrowing the same model of the coun-
operating in the rural areas were strong tor. He then questioned the traditional at- try studies, the city studies also 'Laid em-
enough to send large supplies of labour titudes of treating this sector as being phasis on the productive role of this sec-
to urban areas. This has been attempted highly unproductive and constituting tor to generate growth and redistribution.
to be explained by life-time earnings and surplus labour. It was exactly this attitude The city studies did go beyond this
'expected income' of the potential which had relegated the whole range of generalisation to trace its local applica-
migrants (Todaro, 1969; Harriss and activities likely to fall in this sector to tions. For example, the Calcutta study
Todaro, 1970). However, despite the failure complete neglect both in terms of urban found that industrial and occupational
of the 'Modern' sector to absorb these research and policies. patterns were closely correlated with the
labour supplies, large scale un- For more practical purposes, the con- geographical and linguistic origins of the
employment has not been rampant in the cept was started gaining currency after its working population. A consequence of
metropolitan centres as would be wide usage in a number of country and particular patterns of migration was seen
predicted by competitive models. The so- city studies, carried out under the auspicesas the development of a highly fragmented
called surplus labour unable to gain en- of ILO World Employment Programme. urban labour market with a particular
try in the formal (modern) sector was In the early sixties, it was recognised that ty,pe of ethnic labour force participation
generally found to be absorbed by the rest the assumed trickle down effects under (Lubell, 1974).

Economic and Political Weekly

326 Vol XX, No 8, February 23, 1985

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 ECONOMIC AND POLITICAL WEEKLY February 23, 1985

In effect, the approach of country basis in dualistic concepts and has been have tended to come up mainly because
studies and city studies may be termed as used as a policy tool by ILO's target group of the lack of a clear theoretical basis for
a target group approach focusing on the approach. Despite the probably valid the concept as well as the wide spectrum
informal sector in terms of activities and criticisms of ILO's policy measures, their of economic activities that it covers. These
workers. The major criticism of this ap- emphasis on informal sector has had a often originate in different contexts and
proach has been the failure of the projects positive influence in shifting research em-are carried out under very different social
to operationalise their earlier contention phasis, to the whole gamut of complex ac-relations or production.
that "the employment problem could not tivities from which a large section of the
CHARACTERISTICS OF THE INFORMAL
be seen in isolation. Its position at the cen- -urban population literally derives its daily
SECTOR
tre of the whole development process bread. It is being recognised that research
meant that the employment strategies in urban employment and economy is not The increase ii research focusing on the
could only be made sensible within an confined to the modern manufacturing urban informal sector in developing coun-
overall development strategy" (Moser, sector alone. We turn to a review of such tries has simultaneously led to a greater
1977, p 30). Thus their recommendations studies, some with only theoretical ex- vagueness and inconsistency of definition.
have also been criticised for the failure to plorations and others based on empirical Obviously, the major reason behind this
consider their position within the total research which have viewd the informal state of affairs is the lack of a "clear em-
economic structure. sector in a variety of ways. These different pirical basis" for the concept. The term
The informal sector has its theoretical conceptualisations of the informal sector has been used alternatively to refer to the

TABLE: ESTIMATES OF THE SIZE OF THE URBAN INFORMAL SECTOR

Sr Author Study Area Total Estimated Size Critera Used Data Base
No Researcher (Reference Population as a Percentage
Population of Total
Year) Employment

1 2 3 4 5 6 7

1 Joshi and Greater Employment in unorganised sector Directorate of employment,

Joshi Bombay is a iesidual of organised sector Bombay Quarterly return,
(1976) 1971 5,971,000 49.51 which includes all public sector 1961, 1966 and 1971 with
1961 4,152,000 47.71 establishments and all privately corrections for 1961.
owned establishments with more
than 25 employers.
2 Deshpande Greater 12 112 -Same as above- I same-without
(1979) Bombay corrections
1961 4,152,000 51.3 42.0 II same as above with correc-
1971 5,971,000 50.4 39.5 tions for both 1961 and 1971.
3 Bose Calcutta For manufacturing all non-registered Census of India, 1971
(1978a) city units including non-household and Part III-A Establishment
1971 3,148,746 28.33 and household units (will less th,an Tables W B.
20 persons) and excluding registered
census and sample sector units. For
non-manufacturing, all units
employing 4 or less workers,
including iodependent workers
4 Papola Ahmedabad Workers in tnits with 10 or Census of India, 1971,
(1976) 1971 16,06,165 46.54 less workers and all unattached Part III-A. Establishment
workers Tables, Gujarat.
5 Bremani Valsad Dist. 75.05 Informal non-organlsed for Indians Guess.
(1977) Gujarat the entire district including
seasonal migrants
6 Majumdar Delhi Residual of workers in Directorate of Employment,
(1980) 1961 23,59,408 61.46 all units employing 10 or Delhi.
1971 36,47,023 53.86 more workers.
7 ORG Madras WVorkers in all establishments Census of India, 1971,
(1978) Metropolitan employing 10 or less workers and Part Ill-A Establishment
area 1971 25,00,000 50 to 707 unattached workers. Table, Tamil Nadu.

Sources: 1 Joshi and Joshi (1976), Table III 1, pp 48 Er.

2 Deshpande (1979), Table II, 15, p 66.
3 Bose (1978), Table 7, p 19.
4 Papola (1978), Table 1.1, p 12.
5 Breman (1977), p 183.
6 Majumdar (1980), Table 3, p 25.
7 ORG (1978), p 46.

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 February 23, 1985 ECONOMIC AND POLITICAL WEEKLY

enterprises and their characteristics, or alsQ, where, how, for how long, and for unregistered nature of enterprises, etc.
used as being synonymous with the urban what type of vork" The second category (iii) Those based on the employment
poor, or at other times to refer to the of criticism comes in terms of com- situation, or labour market processes
labour market. However, it is clearly im- parability of these different criteria as the like case of entry, self-employed or
portant to distinguish whether it is the ac- distinction based on one criterion does casual nature of work, lack of a for-
tivities or the people that are being not run parallel to that based on anothei mal contractual arrangement for
classified. criterion. Also, different criteria give dif- employment, etc.
Keith Hart (1975) based his dual model ferent boundaries which are not confin- Many of the studies in India have used
on one simple characteristic, namely the ed to one sector. Thus, these different some of these criteria for empirical
distinction between income opportunities criteria "do not cumulate in a clear and delineations of the two (or more) sectors,
in wage and self-employment. Employ- consistent stratification" (Breman, 1976, (Joshi and Joshi, 1976; Breman, 1977;
ment in the formal sector was correlated p 1906). Papola, 1978; Bose, 1978; Deshpande,
with wage employment while that in the A different view put forth by Weeks 1979; ORG, 1980 a; Harriss, 1981; and Ma-
informal sector wvith self-employment. (1975) stressed the factors which were jumdar, 1980). All of these studies have in
The ILO R-1ports, enumerated detailed external to the characteristics of the enter- some way or the other attempted to iden-
and specific characteristics of the infor- prise. He laid down specific emphasis on tify the informal sector for the city as a
mal sector to clearly identify the target the role of the state and based his two whole and estimated the proportion of
groups. These were: sector distinctions on, "the organisational work force in this sector. The Table il-
i) ease of entry; characteristics of exchange relationships lustrates the variety of estimates, criteria
ii) reliance of indigenous source of and the position of economic activity vis- used and the relevant data base.
inputs; a-vis the state" (Weeks, 1975, p 2). Weeks On the whole, it appears that the size
iii) family ownership of enterprise; claimed that the formal sector's growth of the informal sector in terms of employ-
iv) small scale of operation, and low was itself fostered by government mea- ment ranges from a minimum of 45 per
productivity, sures like tariff and quota protection for cent to a maximum of 75 per cent. The
v) labour intensive and adapted import substitution industries, import tax variation, to some extent, may be at-
technology; rebates on capital and intermediate goods, tributed to the difference in criteria used
vi) skills acquired outside the formal tax holidays, low interest rates, selective for defining the informal sector. Firstly,
school system; monetary controls and licensing measures,most of them have the criteria of size of
vii) unregulated and competitive which protected the formal sector. He the establishments as a distinguishing
markets; and however maintained that this did not characteristic. The cut off point actually
viii) lack of support and recognition make the informal sector static in any adopted has ranged from five (Bose, 1978)
from the government. sense. All the sectors were considered to twenty-five (Joshi and Joshi, 1976). The
Very clearly, the ILO emphasis has been
dynamic in the sense that they were con- second aspect generally considered is the
tinually adapting to external changes. self-employed nature of work. As done by
on enterprises supposed to be in the in-
"The significant question was to identify Papola (1978), all independent workers
formal sector. However, these particular
the structural conditiois under which were considered to be a part of the infor-
ILO characteristics have been questioned
dynamic change was "involutionary or mal sector. This has been questioned by
in two ways. Firstly, there are questions
evolutionary in nature"(Moser, 1977, Breman (1976), who rightly points out
regarding their relevance, especially rais-
p 38). Involutionary development that it is probably incorrect to include one
ed by those who have attempted field
reflected a static or slowly growing out- man professional firm or owners of small
work explorations. Particularly strong
put per head and capital accumulatioil workshops along with the so-Galled self-
criticism comes forth from Peattie (1980)
and evolutionary, where these were rapid. employed such as the street barber, shoe
and Breman (1976, 1977). Based on her
He found that a dynamic and evolving in- shiner or garbage collector. The third
work in Bogota, Columbia, Peattie ques-
formal sector was beneficial in many ways. criteria often used is the casual status of
tioned the assumptions regarding ease of
Further, he implicitly assumed that the the worker. In effect, these are t6reated as
entry, unregulated and competitive
linkages between the two sectors we.e "one-man firms in the sense of small en-
markets and the unorganised nature of ac-
benign and therefore needed to be pro- trepreneurs". Here the emphasis is on
tivities. She found that "a lot of orga-
moted further. distinguishing employment by the nature
nisation exists, and possibilities for new
On the whole, these characteristics, of contract as casual or regular. "Workers
entry are highly differentiated". In her
used to define or understand the informal in casusal employment may work with the
works, "what seems to characterise these
sector may be grouped into three same amount of capital (elasticity-of de-
occupations designated as the informal
categories as follows: mand), produce the same goods, and be
sector, is, therefore, not so much a lack
employed in establishments of the same
of formal structure, but a diversity and (i) Those related to the characteristics of
size (scale of operation) and yet not
complexity of structure" (p 24). Both the enterprise, like size, family owner- receive the same wage (or earnings) as the
Breman and Peattie attribute the preva- ship, source of inputs, labour inten-
regular workers do" (Deshpande. 1979.
lence of particularistic arrangements as sive technology, etc. In this category,
p 253).
being the basis for gaining entry. After the emphasis is on the context within
describing in detail, the ways of getting which people work, the stress being In talking of the characteristics of the
work in the informal sector in Valsad, a placed on the mode of production. informal sector in this manner, two im-
district in South Gujarat, Breman (1977) (ii) Those related to the nature of ex- portant considerations are generally
concluded that "the decisive factor in get- change relationship with the state and neglected. These refer first to the nature
ting employment ... is personal contact. the rest of the urban economy like of its growth and its relationship to the
The nature and extent of the network of unregulated and competitive markets, rest of the urban economy and secondly
contacts determines not only whether one lack of support and recognition from to the differentiations within the so-called
is incorporated into the work process but the government, lack of organisation. informal sector itself. We take up these

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 ECONOMIC AND POLITICAL WEEKLY Februarv 23, 1985

two issues in greater detail

ly unlimited access in the
to capital anid onnext
the two
enterprises served two distinct categories
sub-sections. establishment of brand name products of clientele. Firstly, as Bose (1978) has
through heavy advertising (Bienefeld, 1975,
found in Calcutta these enterprises were
RELATIONSHIP TO THE URBAN ECONOMY
p 56). "producing an inferior and cheaper pro-
In sharp contrast to the theoretical for- Bienefeld thus places great stress on the duct in a way which makes it accessible
mulations put forth by Weeks (1973) and exploitative character of these linkages to persons who can neither buy in large
the ILO stand on the potential for growth and attributes this rcason for the relativelyquantities nor transport for long dis-
of the independent informal sector, many involutionary character of this sector. tances". The other type serves "a small
of the field studies have stressed the 'ex- Bose (1978a) in a similar fashion iden- and individualised market (as in custom-
ploitative' relationship and the largely in- tifies the exploitative character of linkagesmade furniture and shoes) or where a
volutionary growth of this sector. The pro- in the urban economy of Calcutta. Accor- great deal of flexibility in marketing is ad-
ponents of this view take a pessimistic ding to Bose, the informal sector enter- vantageous (as in street vending and illegal
view of the ILO hnd Weeks' policy prises perform two basic funtions. First, occupations)". At other times, these same
measures. They tend to generally question they produce cheap goods for rural and enterprises were functioning as "distribu-
the validity of economic change without urban poor, "who are finding it increas- tion outlets or component suppliers for
political change. This view, has however, ingly difficult to purchase high cost, stan- very large firms". They however face the
been criticised sharply by King; that "in- dard industrial goods". This is based on price and credit problems much more than
tellectuals have discovered the plight of the low wages in this sector. The second the large sector. On the whole this work,
the working poor, only to decide rather function, also based on the same reason, as others referred above, points to the
rapidly that unfortunately nothing can be is to provide the larger units with huge preponderance of a variety of direct
done about it". (King, 1974, p 10). trading profits through an unequal ex- linages. The two sectOrs are neither ex-
It would be worthwhile to identify the change relationshp. Thus the poor in the clusive circuits, nor distinct compart-
nature of linkages between the formal and informal sector operate in a sepa,rate ments. Strong backward and forward
informal sector or amongst the different market both for resource inpuhs and out- linkages are quite typical, which are often
economic activities in the urban economy. puts, which is highly unfavourable to through very complex arrangements and
These may at the very basic level be them, the gains being appropriated by the extremely unfavourable to the smaller
classified into direct and indirect. The large sector. This is similar to Week's for- enterprises.
direct linkages may be in terms of resource mulations, except that Bose maintains that ORG (1980bk) in their study of informal
inputs from formal to informal sectors or the different markets are purposeful and sector in Madras, also looked at the
technology and market linkages, (Bose, directly profitable for large sector opera- backward and forward linkages for infor-
1978; Scott 1979). These may include tions and cannot be changed without a mal enterprises in manufacturing, trading
"direct incorporation through subcontrac- radical restructuring of the total economy. and service activities. They found that it
ting and outworkers as well as more com- Other research, including Bose's also was more in terms of resource inputs that
plicated procedures such as the utilisation shows that official programmes which aim a variety of linkages with large dealers
in retail distribution of 'agents' who put at stimulating industry in the informal were common. However, the activities on
up their own deposits thereby relieving the sector are of little practical use. "Neither the whole were more individual customer
mother company of many of the risks in- can increased aid by the state be expected oriented. Only the craft-based items, there
volved" (Moser, 1977). The indirect as long as the political system is were some links with other dealers. They
linkages refer to the demand for goods dominated by interests which are linked also studied the units which were assisted
and services generated in the informal sec- to the formal sector. The paradox of the by banks financially. The major difference
tor by a clientele whose income is depen- situation is that the recommended policy in these was in terms of a larger share of
dent upon the formal sector. changes will inevitably be detrimental to backward linkages lying with the more
an elite which is responsible for its execu- organised sectors. Surprisingly, despite the
DIRECT LINKAGES tion" (Breman, 1976, n 1874). larger size, easy credit, good returns on
After looking at the structure of capital and such advantages, the net in-
Many of the field studies have iden-
economic activity, in the informal sector come was still relatively low. It should
tified the nature of these relationships.
Papola (1972) concluded that though the have been interesting to see to what ex-
Bienefeld (1975) starts his paper based on
informal sector provided "a significant tent the linkages here are benign or ex
his research in Tanzania with a 'tenative
part of the goods and services in the urbanploitative and therefore result in the low
framework which assumes that:
economy and provided employment to income earning potentials.
many small scale operators are engaged in
practically the entire residual labour
a process of production and of technological SOCIAi. DEPEND-ENCY RELATIONSHIPS
force", its growth depends on the fortunes
development but that their ability to develop
cumulatively over extended periods is limited
of the formal sector. However, he did not
Besides these types of direct linkages in
look further into whether the linkages bet-
by their being exploited through the terms terms of market, technology and resource
ween the two sectors were basically ex-
of trade; by their dependence on large scale inputs, there exist social dependency rela-
ploitative or benign in character. He did
industry for inputs (often illegally obtained); tionships which have their basis in the lack
distinctly identify the informal manufac-
and by the fact that when the markets they of economic security. A complete lack of
serve grow beyond a certain size this will rrot
turing activities which are linked up ver-
public welfare or unemployment compen-
tically to the formal sector through market
be a gradual but accelerating stimulus to fur- sation, coupled with a highly irregular and
ther will-not-be-a-gradual development of
and technology linkages as the ones which
insecure nature of income, forces these
the forces o.f production. Instead it will trig-
promised better productivity and
people into either social dependency rela-
ger a discontinuous shift to international
earnings.
tionships or petty entrepreneurships.
technology which will incorporate this Based on her anthropological field ex- Breman's work in South Gujarat vividly
market by virtue of its efficiency and/or its
plorations of small enterprises in Bogota, illustrates these. He poinlts out that, "it
market power the latter based on effective-Colombia Peattie (1980) found that these should be realised that the poor try to in-

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February 23, 1985 ECONOMIC AND POLITICAL WEEKLY

crease -their security within the urban tion of its diverse parts. However, as he himself identified, the in-
system by entering into dependency rela- These type of doubts have been raised formal sector is highly differentiated. He
tions with social superiors, and in doing by many researchers and policy planners, places great importance on the diversity
so they accept a wide range of contrac- (Breman, 1976, ILO 1976; Papola, 1978; of earnings within the important com-
tual and semi-contractual commitments". Peattie, 1980). ponents of the informal sector. "The dif-
(Breman, 1976, p 1906). Similarly, Peattie ILO's (1976b) work on Sudan empha- ferentiation within the sector should be a
(1980) found people resorting to petty en- sised the informal sector as a "hetero- topic of further research. At the moment
trepreneurship for similar purposes. geneous, multidimensional or multi- we do not know how much upward mobi-
layered phenomenon". It distinguished lity in term of earnings, there is within the
INDIRECT LINKAGES
four sub-groups which were analysed sector" (p 675T. This latter view is also
The indirect linkages refer to those separately to conclude, supported by Standing (1977). He em-
generated by the goods and services pro- the picture that emerges for the informalphasises the need to look beyond the two
duced in the informal sector for a clientele sector in Sudan is that of heterogeneous and sector approach. However, he claims that
whose income is dependent upon the for- complex activities. At its most advanced level this need not imply the total irrelevance
mal sector. The building and furnishing where the majority of establishments exist, of a sectoral approach. It is useful if the
of middle class houses, repair services, we have the multitude of small manufactur- conceptual distinctions amongst several
traders of fresh vegetables, fruits, etc, and ing, service and commercial establishments sub-sectors facilitate, "a policy-oriented
of course the well-known domestic ser- employing a large number of people who are discussion of the dynamic interactions
vants; all these activities are dependent making a reasonable living and who are there between different sub-sectors and the
upon the income of a clientele who in turn to stay. Finally, we have the traditional petty changes that could be expected to follow
is dependent upon formal sector activities vendors who are in transition to and from specific developments" (p 37).
for their livelihood. Thus, only a growth formal sector jobs (ILO, 1976a, p 315).
Breman (1976), however, refutes this POLICY IMPLICATIONS
in the formal sector's productivity and
wages will create additional demand foi possibility based on his work in a district
The conceptual developments traced
these activities. However, here a parado- town in South Gujarat. He points out that
above also reflect different policy implica-
xical relationship arising out of the although it is easy to find the categories
tions. There are at least three distinctly
demonstration effect of formal sector at the extremes of the two poles of the
different viewsin this regard. The first
goods is likeLy to arise between the infor- labour force, within these two extremes
view places emphasis on the function of
mal sector production and formal sector there are 'gradations', and not 'waterlight
the informal sector as a buffer zone. The
wages. This growth would worsen the in- compartments'. He does not entertain the
proponents of this view do not consider
come distribution and induce a shift in the notion of a pluralist labour market either, it "feasible to accept that policies should
pattern of demand away from the infor- in which there are a great many separate be oriented towards maintaining ineffi-
mal sector's products. and identifiable sub-markets. He claims
cient and small scale activities which make
Thus one can confidently conclude that that the tendency to partition off a sec-
use of retrogressive technology" (Breman,
the informal sector is in no way an in- tor does not mean closed circuits. This is
1976, pp 187-9). Only the fastest possible
dependent and exclusive circuit. It is link-seen as an attempt to monopolise certain expansion of the formal sector is con-
ed to the formal sector and the rest of the occupational roles or activities for social sidered appropriate for raising the stan-
economy through a variety of linkages. equals in a situation of extreme scarcity
dard of living of the population. The
The possibility of growth of the informal(p 1905). Secondly, for the poor "work is theoretical works of Lewis (1954) and Fei
sector then depends on the nature and not the basis of a more or less indepen-
and Ranis (1964) and the earlier policy ap-
types of linkages that are operating in dent existence but the outcome of a com-
proach by World Bank illustrate such an
reality. Although a few studies have prehensive dependency relationship. In
branded these as exploitative, we feel the such circumstances, labour is fluid in * In operationalising the differentiation, Har-
issue is still open and certainly there is character, without any question of differen- riss's (1981) work on Coimbatore provides an
need for further research to identify not tiated and mutually exclusive sub- interesting case. He distinguished amongst
only the linkages of technology and markets". Lastly, he points out that "thethe workers in five major groups, namely, (a)
market but also the wide variety of social variety of criteria used for identifying permanent
the wage-workers/organised sector
relations of oroduction which comprise two sectors do not run parallel to cumu- workers, (b) short-term wage
the different modes of production. late in a clear and consistent stratifica- workers/workers in unreguilated
tion". Breman then goes on to refer to thisestablishments, (c) casual wage workers, (d)
DICHOTOMY OR FRAGMENTATION
as a fragmented labour market. disguised wage workers and dependent

One of the other major criticisms of the This view however has been rejected by workers/dependent producers and traders

informal sector or such dualistic concepts Mazumdar (1976). He questions the con- and (e) self-employed. He then identified the

is that it fails to distinguish the internal tention that "the characteristics which characteristics of the different sections of the
differentiations. In the words of Sinclair constitute the basis of the formal infor- work force, examined factors affecting 'en-
(1978, p 244): mal sector distinction represent a pattern try' to different forms of employment and

the informal sector tradition in develop- of continuous variation in a typical LDC mobility among them. He found differentia-
ment (and research) work has tended to labour market and therefore, the dich. tions amongst these by origin of workers and
otomy is unwarranted". As he rightly
obscure the difference (between the units and low mobility amongst different sectors.
workers) which comprise that mass. By lum- points out, the so-called continuum along Similar differentiations were adopted by
ping together the individuals, families and the relevant characteristics is itself a sub- Papola (1978) for his study of the informal
enterprises, which one intuitively believes to ject of research. He further argues that sector in Ahmedabad. He distinguished four
constitute that sector, one effectively even if the difference is one of degree, as major categories, namely, workers in small
precludcs analysis of its growth prospects long as it is distinctly marked degree, the establishments, independent workers, casual
while at the same time impeding investiga- concept remains, analytically relevant. workers in establishments and in households.

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 ECONOMIC AND POLITICAL WEEKLY February 23, 1985

"inherent disadvantage approach" favourable to the smaller enterprises. In shifting research emphasis to the whole
(Breman, 1976 footnote 18). It was in thetheir view only a 'radical restructuring of gamut of complex activities from which
early sixties that the failure of accelerated
the total economy can change these a large section of the urban population
growth policy was recognised by policy conditions. literally derives its daily bread. The con-
makers and the researchers the world over. ceptual developments in this field suggest
CONCLUSIONS
Although a late realisation, the World three basic areas of concern; namely, the
Bank report by Chenery et al put this ex- The informal sector has its theoretical characteristics of the informal sector, its
plicitly. They said: basis in dualistic concepts and has been linkages to the rest of the urban economy
It is now clear that more than two decades used as a policy tool by ILO's target group and the differentiations within the so-
of rapid growth in underdeveloped countries approach. ILO's emphasis on,the infor- called informal sector itself. Most of the
has been of little or no benefit to perhaps mal sector has had a positive influence in studies emDhasise the non-exclusiveness of
a third of their population. Although the
average per capita income of the Third
World has increased by 50 per cent since
1960, this growth has been very unequally SOCIALIST HEALTH REVIEW
distributed among countries, regions within An interdisciplinary quarterly of health care and medicine
countries and socio-economic groups (1974,
p xiii). The Review is being published with the aim of providing . platorm
The Second view, largely promoted debate on health care and medicine; of functioning as a communic
through ILO's studies under the World link for people working in health; of developing collectively, a rigo
Development Programmes emphasises the relevant and radical/marxist critique of health care and'medicine
"structural disadvantage" approach. The Vol I, No 2 (September, 1984): Focus-Women and Health
major premise of this view is that despite (Reprinted on overwhelming demand)
the advantages of the informal sector in
* Articles examining the nature of medicine, its history, its ideology
terms of "flexibility, viability and adapted
and offering an understanding of the ways in w~hich sexism operates
technology of productive activities", it is in current medical practice.
disadvantaged by unfavourable market
* A critical review of the amniocentesis controversy.
conditions and lack of government or
political protection. The policy orientation * Studies, examining the women-health-nutritiAn nexus against the
background of rural economy and imperialism.
is, therefore, obviously towards compen-
satory measures like better credit, * A case study of women workers in a drug company.
technical training and formation of co- * A report from a tribal area in Maharashtra on the practice of
operatives. This view and policy approach witch-hunting and the problems confronting activists in the area.
has been criticised by some critics who Vol I, No 3, December 1984: Focus-Work and Health
believe that the expect-i a,tcnnnmous
* Politics of health and safety-a critical exploration into the ideological
growth of the informal sector is iiot likely
underpirfinings of accepted notions of occupational health, of safety
to take place. The tew successful efforts standards and of the law concerning work and health.
probably are "the ones which have for- Illness and accident reporting-A radical analysis of why workers don't
malised another sector of the market to benefit from the existing recording systems, the laws and the institu-
the advantage of the enterprises now in tions. Questions the vast discrepancy between illness and accident
it and to the relative disadvantage of new reportedi andi the actual incidence rates demonstrated in a number of
comers or those left outside" (Peattie, studies.
1980, p 25).
* Hazards of ag. cultural work-A report based on a study conducted in
This leads to the third view which Punjab examining the socio-political roots of thresher accidents,
stresses the importance of the linkages of pesticide poisoning drug addictions ana others.
the informal sector to the rest of the urban * Plus, Discussions, Book reviews, newsclippings on health and
economy. The results of a number of medicine, book news.
studies have conclusively shown that the
informal sector is not an exclusive and in- Annual Subscription (four issues): For individuals: Rs 20; For institutions: Rs 30.
dependent circuit. It is therefore con- (From Vol II onwarads: Rs 24 and Rs 35 respectively)
sidered necessary to increase the produc- Please note: Subscriptions for four issues beginning with Vol I, No 4,
tion system as a whole. In Papola's (1978) will be at the old rates.
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the two sectors as interlinked and com-
USA, Europe, Japan and Australia: $ 20 annually Air Mail-(four issues)
plementary segments of an urban eco-
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nomy instead of juxtaposing one against
the other and evolving a strategy based on (For third world countries, please write and enquire)
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Within this broad approach, however, Jesani or Padma Prakash (Please add Rs 5 for outstation cheques) to
tfiere are two views. One regards these Socialist Health Review, C/O 19, June Blossom Society, 60-A Pali Road,
linkages as 'benign' and emphasises the Bandra, Bombay 400 050. Please write subscriber's address clearly.
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331

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 February 23, 1985 ECONOMIC AND POLITICAL WEEKLY

the informal sector from the rest of the Bulletin, Vol 6, pp 53-73. King, K, (1974): 'Kenya's Informal Machine
economy. The possibility of the positive Bose, A N, (1978): "Calcutta and Rural Bengal, Maker: A Study of Small Scale Industry in
growth of the informal sector with Small Sector Symbioses", Minerva, Kenya's Emergent Artisen Society'. in World
beneficial impact for weaker sections is Calcutta. Development, Vol 2, Nos 4/5, March.
considered dependent on the nature and Breman, Jan, (1976): 'A Dualistic Labour Lewis. W A, (1954): 'Economic Development
types of linkages that are operating in System: A Critique of the 'Informal Sec- with Unlimited Supplies of Labour', in
reality. tor' Concept', in Economic and Political Manchester School, Vol XII, No 2.
It is clear that the review has raised a Weekly, November 27, December 4, Lubell, R, (1974): "Calcutta: Its Urban
number of questions which should be the December 11, 1976. Development and Employment Prospects",
concerns of future research in this area. Breman, Jan, (1977): 'Labour Relations in the ILO
The issues for further research are far too
'Formal' and 'Informal' sectors: Report of
Majumdar, A, (1980): "In-Migration and In-
numerous to present an exhaustive ac-
a Case Study in South Gujarat India" in the formal Sector", BISR, Delhi.
count here. However, the following areas
Journal of Peasant Studies, Vol 4, Nos 3
may be considered quite important. First- Mazumdar, D, (1976): 'The Urban Informal
and 4.
ly, there is a need for more detailed studies Sector', in World Development, Vol 4, No
of activities and establishments in the in- Chenery H, et al, (1974): "Redistribution with 8, pp 655-679.
Growth", Oxford University Press. Mcgee, T G, (1971): "The Urbanisation Process
formal sector focusing on their internal
structure, nature of linkages and their Deshpande, L K, (1979): 'The Bombay Labour in the Third World", Bell and Sons,
economic viability. It is necessary to cap- Market', University of Bombay, Mimeo. London.

ture the internal differentiations within the Fei, J and Ranis, G, (1964): "Development of Moser, C, (1977): "The Informal Sector or Petty
broad umbrella of the informal sector and the Labour Surplus Economy: Theory and
Commodity Proddction: Autonomy .or
the response of different activities to dif- Policy", Homewood II1, Richard Erwin.
Dependence in Urban Development". DPU
ferent policies. The second major area of Geertz, C, (1963): "Peddlars and Princes: Social
Working Paper No 3.
research is with respect to detailed studies Change and Economic Modernisation in
Operations Research Group, (1978): "Economic
of labour market processes. The questions Two Indonesian Towns", Chicago.
Profile of Madras Metropolitan Area",
of effective access criteria for entrv into Harriss, J, ('1981): 'Urban Labouir, Urban Pover- Baroda, Mimeo.
the variety of economic opportuiiities, ty and the So-called Informal Sector-A ORG, (1980a): "An-Economic Profile of Ur-
patterns of mobility and levels and deter- Study of the City of Coimbatore', in Madras ban PoorSlum Dwellers of Madras",
minants of labour earnings will throw Mladras, Mimeo.
Development Seminar Series Vol X, No 10.
more light on the labour markets at the
Harriss, J H and Todaro, M P, (1970): 'Migra- ORG, (1980b): "Informal Sector Enterprises in
lower strata of the urban economy.
tion, Unemployment and Development: A Madras-A Profile and Strategy", Madras,
Lastly, it is necessary to expand the Two Sector Analysis', in American Mimeo.

scope of such studies to understand the Economic Review, 60, March, pp 126-142. Papola, T S, (1978): "Informal Sector in an
effect of city size, function and the con- Hart, Keith, (1973): 'Informal Income Oppor- Urban Economy: A Study in Ahmedabad",
textual historical development on the tunities and Urban Employment in Ghana', The Giri Institute of Development Studies,
above patterns. More studies in different in Journal of Modern African Studies, Lucknow, Mimeo.
urban areas which use workable, locally March. Peattie, L R, (1980): 'Anthropological Perspec-
relevant and yet comparable definitions of International Labour Organisation, (1970): tives on the Concepts of Dualism, the In-
sectors and activities would enable us to "Towards Full Employment: A Programme formal Sector, and Marginality in Develop-
gain a better understanding of the role of for Colombia", Geneva. ing Urban Economics', in International
the urban economy in these processes. Regional Sceince Review, Vol 5, No 1,
ILO, (1971): "Matching Employment Oppor-
pp 1-29.
While such research is extremely impor- tunities and Expectation: A Programme of
tant even for gaining a better understan- Action For Ceylon", Geneva. Scott, A M, (1978): 'Occupational Careers, and
ding of the processes of urban economic ILO, (1972): "Employment, Incomes and Economic Strategies of the Working Class
development, the major objectives must Equality: A Strategy for Increasing Produc- of Lima', abstract in Development Research
relate to an improvement in decision mak- tive Employment in Kenya", Geneva. Digest, No 1, Spring, IDS.
ing by policy makers. It is, therefore, not ILO, (1974): "Sharing in Development: A Pro- Sethuraman, S V, (1976a): "Jakarta, Urban
only essential to undeirstand how and why gramme of Employment, Equity and Development and Employment", ILO,
the urban economy develops in a par- Growth for the Philippines", Geneva. Geneva.
ticular manner, but we need to clearly ex- ILO, (1976a): "World Employment Programme: Sinclair, S W, (1978): 'Housing Preferences and
amine the impact of these developments Research in Retrospect and Prospect", the Urban Poor in Less Developed Coun-
on workers and households in the urban Geneva. tries', in Ekistics, June.
areas as well as the potential future supply ILO, (1976b): "Employment and Equity:.A Standing, Guy, (1977): 'Urban Workers and Pat-
from rural areas. The relevant policy direc- Comprehensive Strategy for Sudan", terns of Employment', in Kannapan, S (ed),
tions can thus only cmerge from in- Geneva. "Studies of Urban Labour Market
tegrating the findings of these different Joshi, Heather, (1980)- 'The Informal Urban Behaviour in Development Areas", Genev
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