What are Formal Sector?
All Public Sector Establishments and All private sector establishments having 10 workers or more are called Formal Sector
What is Informal Sector?
All establishments other than Formal Sector and Workers working in it are called Informal Sector
Example - Owner of small enterprises, farmers, labourers etc
Which Sector employs more labour - Formal or Informal?
Informal Sector
Informal Sector employs 94% of total workforce
Only 6% are employed in formal sector
How is the gender vise distribution of Formal and Informal Sector?
Key points
Majority of workforce is male (both in formal as well as informal sector)
However, share of women is higher in informal sector rather than formal sector
Write a Short Note on Formal Sector Employment
Important Points about Formal Sector
Who collects Data on employment in formal sector?
It is Collected by Ministry of Labour of Central Govt through Various Employment exchanges in India
Who is major employer in formal sector?
Government is main Employer
Many people work in Govt Departments as well as Govt Companies (Public Sector Enterprises)
In 2012, out of 30 million formal sector employees, 18 million employees worked in formal sector
What is benefit of working in formal sector?
People working in formal sector get social security benefits like PF, ESI etc
Peole receive Retirement benefits like PF, Gratuity
They also get regular income and job security
What are problems being faced in Informal Sector?
- Employees do not have regular income
- They do not get protection or regulation from govt.
- Technology used in informal sector is outdated
- Informal Sector enterprises do not maintain any accounts
What Steps govt have taken to promote informal sector?
Govt has taken steps of:
- Modernisation of Informal Sector Enterprises (By encouraging use of new technology)
- Provision of Social Security measures to Informal Sector (Getting them Registered for PF/ESI Schemes)
What is PF?
- PF is a scheme where
- Some amt is contributed by Employer
- Some amt is contributed by Employee
- Total Amt with Interest is Received by Employee on Retirement/ Death etc
- It is compulsory if no of employees are more than 20
What is ESI?
- It means Employee State Insurance
- It is like an insurance for free treatment of employees if they fall sick
- Here also, Some amt is contributed by employee and some by employer
- It is compulsory if no of employees are more than 10
NCERT Questions
Question 6
An establishment with four hired workers is known as ____ (formal/informal) sector establishment.
View answer
informal
All the Public Sector and private sector establishments having 10 workers or more,
are called Formal Sector.
Since here the establishment only has 4 hired workers, it is known as informal sector.
Question 18
Is it necessary to generate employment in the formal sector rather than in the informal sector?
Why?
View answer
All Public Sector and private sector establishments having 10 workers or more are called
Formal Sector.
People working in formal sector get social security benefits like PF, ESI etc
People receive Retirement benefits like PF, Gratuity
They also get regular income and job security
On the other hand,
Employees in informal sector do not have regular income
They do not get protection or regulation from govt.
Technology used in informal sector is outdated
Informal Sector enterprises do not maintain any accounts
So, yes it is necessary to generate employment in the formal sector rather than in the informal sector.
Question 22
How will you know whether a worker is working in the informal sector?
View answer
A worker is working in the informal sector if:
- The enterprise has employed less than 10 workers
- The workers does not get social security benefits like PF, ESI etc
- Worker does not have a regular income or job security along with retirement benefits like Gratuity
Other Books
Question 1
What do you mean by formal and informal sector?
Discuss the conditions of workers in each of these sector.
View answer
All Public Sector and private sector establishments having 10 workers or more are called Formal Sector.
People working in formal sector get social security benefits like PF, ESI etc
People receive Retirement benefits like PF, Gratuity
They also get regular income and job security
All establishments other than Formal Sector and Workers working in it are called Informal Sector.
Example - Owner of small enterprises, farmers, labourers etc
People working in informal sector do not get social security benefits like PF, ESI etc
They do not receive Retirement benefits like PF, Gratuity
They do not get regular income and job security