"Globalization has pushed the labour into informal organization of work." Substantiate your answer with suitable examples. (UPSC CSE Mains 2016 - Sociology, Paper 1)
- Globalization has led to the reduction of employment in the formal sector of the Indian economy in a number of ways. One of the main ways is through increased competition from foreign companies, which has led to the closure of many domestic firms and the loss of jobs.
- Additionally, the growth of the service sector in India, which is often more capital-intensive and less labor-intensive than the manufacturing sector, has also led to a reduction in formal sector employment. Additionally, automation and technological advancements have also led to a reduction in employment in the formal sector. Another significant factor that has led to a reduction in employment in the formal sector of the Indian economy is the growth of the informal sector.
- Globalization has reduced formal sector employment for the following reasons-
1) Globalization exposes technologies globally, leading to robotics and other technology replacing manpower.
2) India has 2% skilled labour compared to 96% in South Korea. Due to technology, unskilled labour was forced out of the formal sector, leading to informalization.
3) Globalization pushes subcontracting to the informal sector due to cheap wages and production costs. It boosted contract labour and cut formal sector jobs.
4) Globalization increased industry rivalry, shifting employment/industrial units from non-competitive to market-favoured economies. Recent examples include the textile industries in Vietnam and Laos.
- High informalization reduces the tax to GDP ratio. India’s rate is 16.6%, while OECD countries have over 30%. Social security plans are limited to the formal sector. A large number stay uninsured. It reduces economic efficiency. Informalization of labour has hurt development. So, there is a need to provide social security to these informal workers.
- As globalization has led to increased economic growth and development in India, many people have been able to start their own businesses and work in the informal sector, rather than seeking formal sector employment. This has led to a decrease in formal sector jobs, as many people are now working in the informal sector.
- Overall, Globalization has both positive and negative impacts on employment in India. On one hand, it has led to economic growth and development, which has led to an increase in jobs in the informal sector. On the other hand, it has led to increased competition and automation, which has led to a reduction in jobs in the formal sector.
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