Stark reality of the self-employed
For all of independent India’s recorded history, a majority of the workforce in the country has been self-employed. However, it is only in the past few years that self-employment has been touted as an answer to India’s employment challenge.
Till the Periodic Labour Force Survey (PLFS) of 2017-18, official employment data did not capture earnings of the self-employed. The PLFS for the first time has captured such earnings and the picture isn’t pretty. Most of India’s self-employed are not job creators, contrary to claims made by several ministers over the past few years, and have poor earnings.
As much as 70% of the self-employed were own account workers, an official categorization of self-employed workers who run their own establishment or enterprise (with or without partners) without hiring any worker, while 26% were unpaid helpers who assist household members in running their enterprise, but do not receive any regular wage or salary. Only 4% of the self-employed were employers (who run their enterprise by hiring workers).
The latest data has a silver lining though. Between 2011-12 and 2017-18, there was a rise in the share of own account workers (7.3 percentage points) and employers (1 percentage point) among the self-employed and a fall in the share of unpaid helpers, which can be considered a positive development. To ensure comparability with the earlier survey, only the data from the first visit of the PLFS has been used here.
A majority of the self-employed (60%) were engaged in agriculture. Most of those engaged in non-agricultural activities were in trade, manufacturing, transport and storage.
The data showed that motor vehicle drivers were among the better-paid workers within the self-employed with median reported earnings of ₹10,000. This includes Uber and Ola drivers, who are captured in official statistics, contrary to what some NITI Aayog officials believe.
The median reported earnings of astrologers and fortune-tellers ( ₹8,000) was lower than that of drivers but higher than that of food processing workers ( ₹2,500), textiles and garments workers ( ₹5,500), and street vendors ( ₹7,000). It is worth noting that these earnings are self-reported and hence may suffer from under-reporting.
The median reported earnings of own-account workers was ₹8,000 per month, while that of employers was almost double at ₹15,000.
However, as noted earlier, employers constitute a very small proportion of the self-employed. The median monthly earnings for all self-employed workers was ₹8,000. This is lower than the median earnings of regular workers in the country.
Only about 10% of the self-employed reported earnings more than ₹20,000 per month and only about 1% reported earnings more than ₹50,000 per month.
Median earnings from self-employment was 1.5 times higher in urban areas than in rural. More striking is the gender earnings gap in self-employment—the median earnings of men was 2.5 times higher than that of women.
The median monthly earnings of self-employed women was ₹3,000 in rural areas and ₹4,000 in urban areas. This was lower than the earnings of casual women workers in both these areas. A whopping 65% of women engaged in self-employment earned less than ₹5,000 per month, and 90% had monthly earnings of less than ₹10,000.
This is partly driven by the skewed gender pattern of self-employment. The categories of own account workers and employers, who are largely responsible for decision making, were dominated by men whereas women were a majority among unpaid helpers.
The share of the self-employed in the workforce remained stagnant between 2011-12 and 2017-18 at 52.2%, the data showed. However, the workforce itself shrank over this period, and the share of the self-employed in the total population declined by 2 percentage points. Among major states, the shares of the self-employed in the workforce was high among some of India’s poorest states: Chhattisgarh (66%), Rajasthan (65%), Uttar Pradesh (64%), and Jharkhand (61%).
In contrast, the shares of the self-employed were relatively lower in some of India’s most prosperous states: Tamil Nadu (33%), Kerala (38%), Haryana (44%), and Andhra Pradesh (45%).
Most self-employed enterprises (89%) were small ones, with less than six workers (hired or family members). Only about 3% of enterprises had more than 10 workers.
On the whole, more than half of Indian workers are engaged in self-employment and most of these self-employed workers operate on a very small scale without hiring workers or as unpaid helpers in their family enterprises.
The average reported earnings of the self-employed, particularly the women among them, is extremely low. This large section of the workforce is also bereft of job security.
The data shows that India’s self-employed are a precarious and vulnerable lot. The job creators among the self-employed are few and far between.
Ishan Anand teaches at Ambedkar University Delhi, and Anjana Thampi was a researcher at IWWAGE, LEAD at Krea University.
Disclaimer: This blog first appeared as an article in The Mint on 01 October 2019.
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