Transcript KannanTD3

Global Economic Crisis and the
Informal Economy in Developing
Countries
Crisis as Opportunity to address
Decent Work and Development
K.P. Kannan
(Till recently) Member
National Commission for Enterprises in the
Unorganized Sector, Govt of India and
Professor, Centre for Development Studies,
Kerala, India
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Drawing from recent Indian experience
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Reports of the National Commission on
the Informal Economy (called NCEUS)
TEN Reports culminating in the final and
overarching one titled The Challenge of
Employment in India: An Informal
Economy Perspective
www.nceus.gov.in
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The defining characteristic of employment in
DgCs is Informality (India)
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Workers in the Informal Sector (86%)
Informal workers in the Formal Sector (6%)
Informal Workers in the economy (92%)
Similar scenario in S Asia & SSAfrica; Close to
SE Asia: LA may be more urban.
For DgCs as a whole IE varies between 50 to
95% of workforce incl.agriculture
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Definitions and composition
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Informality = absence of employment and social
security
Self employed (56% incl. S&M farmers)
Irregular (casual) workers (28%)
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Crisis and Informality
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Already in a state of crisis
First to be hit adversely
In India surveys confirm, but no gen crisis yet.
But livelihood crisis is a continuing one (40%).
Pre-existing shock absorbers (NREG, MDM for
sch children, Loan Waiver, NRHM, EdnfAll,
Rural Rcn + Stimulus pkge =~$55 bn ~ 6% of
GDP
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Informality, Poverty and Vulnerability
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80% of IWs poor and vulnerable
(<2PPP$ per cap per day)
Close association with low social status,
education, rural, migrant and agricultural.
Incidence of informality higher for
women workers.
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Response to Crisis
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« We are all Keynesians now ». Are we?
Most responses are primarily monetary;
Fiscal responses addressed to
increasing AGG Demand
What about gainful employment with
decent work?
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Close association of informality of work
with poverty and vulnerability in DgCs
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Four ideas from an IE perspective:
The idea of a Social Floor for IWs
The idea of Public Employment on demand –
State as Employer of Last Resort (ELR)
(Eg.NREG-India, Argentina, SA&Kenya)
Small Enterprise Development
Skill formation & upgradation
All these warrant a targeted approach to
groups as distinct from a generalized approach
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Elements of the Social Floor
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A national minimum wage below which no min wage
should be set
A national minimum social security to take care of
contingencies
A national minimum conditions of work
All these are predicated on the primary obligation of a
developmental state to ensure access to food, education,
health and housing to all citizens qua citizens.Limited
relevance of CCT, CT ok for certain groups.
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Public Emp and as ELR (Eg:NREG)
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On demand
Payment of a minimum wage
To link with capital formation
Labour intensive but with a judicious blending
of technology (ILO can provide valuable TA)
Gives scope for strengthening rural (esp Agr)
productive capacity, green jobs, women,s
participation, enhances self esteem as opposed to
CCTs and so on.
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Small Enterprise Development
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Specially benefits self employed at the
lower end esp.women
Access to credit, technology and
marketing
A Group Approach eminently suitable (in
clusters, artisans and crafts people)
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Skill Development
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IWs mostly with low education/formal
skills
Need to combine functional literacy with
SD
Negotiating skills for artisans and crafts
people
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Increasing Effective Demand as against
Aggregate Demand
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AD through fiscal/monetary stimulus
ED throu targeted Pub Emp Policies
AD often targets industries
ED targets un/under employment
AD gives scope for increasing inequality and/or
destructive (military) Keynesianism
ED gives no such scope (demand driven)
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Contd…
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AD – Non-poor benefits more
ED - Poor esp working poor benefits (demand
driven)
AD basically supply side
ED demand driven
AD – Increasing overall demand
ED: Distributed demand, hence less inequality
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Contd..
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AD: response to crisis, short term
ED: ELR permanent, Increases supply of wage
goods (esp.food) with long gestation
Targeted ED of this kind expands the domestic
market, less dep on export, employers/ind
benefits as opp to wage defln that could
shrink the domestic market
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Recommendations to the CoW/ILO
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To advance the 4 issues flagged here in the GJP not as a
short term response but as a foundational one for Dev
with Decent Work.
ILO pioneered in identifying and understanding
informality in the world of work. Time for a second step
(Expert Group/Commission?) for developing a
perspective and an agenda for transforming informality
into DW and its linkage with development.
Special focus on organising the unorganised for a
legitimate voice and representation at national and
international policy making fora.
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