SELF-EMPLOYMENT EQUALS SELF-EMPOWERMENT?
“Being an entrepreneur is not about self-employment–it’s about self-empowerment,” Thomson Dawson, author of the book The White Hot Center Manifesto. But is India achieving it?
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Tarini Dhar Prabhu
November 11, 2024
An oft-used quote is attributed to various celebrities, including Dhirubhai Ambani and author Tony A Gaskins Jr: "If you don't build your dream, someone else will hire you to helpbuild theirs.”This wisdom seems to have taken root in the psyche of the Indian populace in recent years with a surge in self-employment statistics. Reportedly, it increased from 52 per cent in 2018-19 to 57 per cent in 2022-2023 and 58.4 per cent in 2023-24 (Deccan Herald, October 16, 2024). During the January to April period, the proportion of self-employed people was 83.8 per cent, a significant increase from 55 per cent during the same period in 2016, according to The Centre for Monitoring the Indian Economy (July 25, 2023).
However, the increase is largely due to unfavourable circumstances that compel people to take to self-employment due to a lack of alternatives. The term “self-employed” refers to two kinds of workers – own-account workers or employers and those who are helpers in household enterprises. The number of women self-employed has significantly increased. Rather than reflecting better entrepreneurship, it reflects people being pushed into self-employment out of necessity.
What is the True Picture?
Sadly, the definition of self-employment is very loose, and it encompasses a vast segment of the populace, from the multi-millionaire startup entrepreneur (in dollar values) to the humble 'bai' (housemaid), a hallmark of every Indian household.According to the Periodic Labour Force Survey (PLFS) 2019-20, the category of helper in household enterprise witnessed the biggest increase compared to the category of own-account workers and employers. In other words, most self-employed people are not entrepreneurs creating jobs and hiring others.
Therefore, there is a degree of disbelief when the increase in self-employment is hailed as a sign of growing entrepreneurship. However, the growing self-employment in India is not due to preferences but due to compulsions stemming from the lack of employment opportunities in the country. Most of India’s self-employed are unpaid family workers or helpers in household enterprises. Critics point out that this is a crisis-led response to an economy that lacks adequate regular wages or salaried jobs.
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Most self-employed workers in developing countries, including India, are driven by necessity, lack of other opportunities, and the looming spectre of unemployment. This is evidenced by the fact that most self-employed workers in India are in the category of own account workers, meaning they run the business without hiring any workers. Employers don't even make up one-tenth of the total self-employed.
Global unemployment data shows self-employment is high in poor and developing countries. Countries with a low per capita income have a higher proportion of self-employed people. Therefore, even though the numbers show a decrease in unemployment, they don't show the poor quality of employment in India.
Unemployment in Disguise?
The connection between unemployment and self-employment at the macro-economic level can be explained through entrepreneurship's push and pull approaches. As per this, unemployment rates affect self-employment both positively and negatively. According to the "push" approach, also called the refugee effect, a rising unemployment rate compels an increasing number of workers to take to self-employment. As per the “pull” approach, also called the entrepreneurial effect, self-employment in the form of entrepreneurship encourages business, reducing unemployment, so unemployment is negatively related to self-employment.
The share of women in self-employment is significantly higher across rural and urban areas. In rural areas, 73.5 per cent of women are self-employed, while in urban areas, 43.2 per cent are self-employed (Deccan Herald, October 16, 2024). The share of helpers in household enterprises is much higher for women than men.
Women are more vulnerable due to social restrictions, lower educational qualifications, and restricted access to jobs. This illustrates that self-employment works as a survival strategy, pushing them into financially unstable sectors where earning potential is limited. In 2023-24, 43.2 per cent of women were working in household enterprises (Ibid). In other words, lack of wage employment and financial distress are pushing women to take up self-employment.
Source: https://www.theindiaforum.in/article/india-measures-unemployment
The Informal Sector
The term ‘informal sector’ has been debated much during the last decade for want of a universally acceptable definition.
As per the National Sample Survey Organisation's 2021 report, the Informal Sector may be broadly characterised as consisting of units engaged in producing goods or services to generate employment and income for the persons concerned. These units typically operate at a low level of organisation, with little or no division between labour and capital as factors of production and on a small scale. Where they exist, labour relations are based mostly on casual employment, kinship, or personal or social relations rather than contractual arrangements with formal guarantees.The informal sector and its workers, plus the informalworkers in the formal sector, constitute the informal economy.
As per the International Labour Organisation (ILO), despite high levels of economic growth during the past two decades, the informal economy in India still accounts for more than 80 per cent of non-agricultural employment. Informality is found in both the traditional informal economy and – increasingly – through the growth of informality in the formal sector. Limited employment creation in the formal economy means that for many people, the only alternative is to seek employment in the informal economy.
One of the main reasons for the lack of good jobs is that sectors driving growth, such as modern manufacturing and service industries, do not generate enough jobs. The jobs created fall far short of the number of workers shifting from agriculture and traditional livelihoods. Consequently, these individuals usually end up taking up odd jobs in sectors like petty retail, street vending, or construction, making casual labour and self-employment more prevalent.
Moreover, even amongst self-employed individuals running their own businesses, most such ventures lack financial capital, human capital, and specialised skills. This category includes taxi drivers, beauticians, real estate agents, brokers, astrologers, and other such professions. People in this group often grapple with financial insecurity. Policymakers should gear towards enabling the creation of higher paying wage-based employment opportunities and also look to cover the lack of benefits for self-employed people like health insurance and retirement plans.
Despite the high growth of the Indian economy, the quality of employment seems to be declining. Most of the growth is comprised of big businesses, while the sizable informal sector continues to face precarious conditions.
Employment in agriculture has increased, but the formalisation of the economy seems to be a far cry as increasing numbers flock to the fields for employment. It is worth noting that the term "self-employed" refers to a wide range of workers, such as a tea stall owner, a farm worker, and a practising doctor.
According to the Periodic Labour Force Survey, the all-India annual unemployment rate has been falling since the Covid-19 pandemic. Additionally, the Labour Force Participation Rate (LFPR) has increased. These positive signs of falling unemployment belie the fact that people are turning to self-employment jobs out of necessity.
Another factor contributing to the growing self-employment is the rise of the gig economy. The gig economy has risen globally, with a growing number of people working as freelancers, particularly through online platforms or being self-employed. India, too, has witnessed this trend due to the emergence of digital platforms, the demand for flexible work arrangements, and the expanding internet access enabled by developing digital infrastructure.
On a positive note, the continuing high demand for such services and flexible work is boosting entry-level job creation in tier-2 and tier-3 cities. Such jobs provide a helpful bridge to students entering the job market and often serve as a stepping stone to better-paying on-site jobs.
Yet, according to a NITI Aayog estimate, these gig workers made up only 2.6 per cent of the non-agricultural workforce or 1.5 per cent of the total workforce.
A Neglected Lot?
The unorganized sector and informal economy of India confronts a host of challenges. These include, the Lack of Regulation with no contracts, social security insurance or even the basic legal protection. Job Insecurity is rampant, income is irregular and uncertain. The sector is plagued with Low Productivity as little or no technology is used. Naturally, lacking proper asset recording, they lack any Access to Credit and Finance. As mentioned earlier, Gender Disparities are endemic and health and safety hazards are ignored with total impunity.
Under increasing social pressure due to vote bank politics, the successive government have been compelled to come out with various initiatives. These include, MGNREGA (landmark scheme that provides wage employment to rural workers), PMSYM (Pradhan Mantri Shram Yogi Maan-Dhan offering social security cover), e-Shram Portal (a national database for unorganized workers) and the expansion of ESI Scheme to the unorganized sector.
India needs to devise mechanisms for the informal sector and people engaged in the unorganized sector as it is the backbone of the Indian economy and thus needs adequate safeguards so that they can have a sense of security in the form of health insurance, flexibility in working hours etc.
Assessment
Increasing self-employment and falling unemployment may paint a rosy picture of a thriving entrepreneurial business climate. However
, growing
self-employment is largely due to people being pushed to take up jobs like unpaid roles in family enterprises or informal jobs like petty retail.
The gig economy, startups, and employers comprise
a
very
small
proportion of self-employed jobs.
Self-employed
jobs often come with financial insecurity and limited
scope for earning as compared to
better-paying wage-based jobs in the formal economy.
However, the stark reality is that in view of India’s scarce capital resources and abundant labour and natural resources, small-scale enterprises have an important place in the country's economic planning.
However, they need to be strengthened and given an acceptable modicum of ‘formality’ with some basic protection in terms of rights and guarantees and microfinancing.
References
https://iariw.org/wp-content/uploads/2022/08/Deb-IARIW-2022.pdf
https://www.downtoearth.org.in/economy/employment-enigma-india-s-high-rate-of-self-employment-gets-reflected-as-a-decrease-in-unemployment-rate-92696
https://www.indiatoday.in/india-today-insight/story/why-informal-jobs-rule-the-roost-in-india-hurting-development-2521932-2024-04-01
https://www.deccanherald.com/opinion/self-employment-and-its-precarity-in-india-3233786
https://www.policycircle.org/economy/rise-of-self-employment-in-india/
https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=20230725181444&msec=516
https://economictimes.indiatimes.com/budget-2024/economic-survey-2024/economic-survey-2024-57-3-per-cent-of-the-total-workforce-self-employed-18-3-per-cent-working-as-unpaid-workers/articleshow/111920479.cms
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