Informal Will be the New Normal in the Future World of Work

Technology-led disruptions are likely to make informality an enduring, if not accelerating, condition of Indian labour markets, requiring new and imaginative approaches to social protection.

Passengers of Vistara Airlines will soon be greeted by ‘Rada’, an intelligent robot, that will address queries, scan boarding passes, and gather customer feedback. Rada is a ‘Made in India’ effort, designed by the Tata Innovation Centre, aimed at developing a simple and cost-effective robot to carry out basic human interaction. Innovations such as these will certainly improve consumer experience and boost productivity. But, these are also likely to displace existing jobs and ways of working –particularly entry level, low-medium skilled jobs. New higher-value jobs will be created, but these will be fewer in quantity and require a different set of skills.

The impact of emerging technologies on the future of work is a growing policy concern around the globe. Yet, global narratives need to be localised – technology trajectories and their impact will be shaped by local socio-economic conditions. In India, for example, most of the labour force is engaged in the unorganised sector and millions still lack access to older, more basic technologies. Women’s participation in the labour force is one of the lowest in the world and old issues of class, caste, and religion still impede people’s access to technology gains. What impact are technologies associated with the Fourth Industrial Revolution (4IR) likely to have on the future of work in India?

With many of these technologies still at an emergent stage, longitudinal studies of impact are not possible. We spoke to a cross-section of people from industry, government, civil society, policy, and academia to develop a set of propositions about the likely impacts.

Our research suggests that the adoption of 4IR technologies is going to have a minimal impact on net employment numbers, particularly as most of the workforce is engaged in the unorganised sector. Yet, technology-led disruptions to the world of work are likely to make informality an enduring, if not accelerating, condition of Indian labour markets, requiring new and imaginative approaches to social protection.

The adoption of 4IR technologies is likely to be in select niches within the organised manufacturing and service sectors, primarily because of the relative cost of laboor and infrastructural constraints. Capital-intensive manufacturing industries are more likely to adopt 4IR solutions. The automobile sector, for example, is estimated to buy 60% of all industrial robots sold in India, and the labour force across a number of production units has already shrunk significantly. Work processes within the service sector, particularly those that involve routine and repetitive tasks, also have high automation potential. Adoption rates are likely to be highest in select sectors, such as financial, legal, IT and BPO services. Hiring has already slowed down in the IT & BPO sectors, and estimates suggest that India is likely to experience a 14% decline in the workforce by 2021. However, these niches within organised manufacturing and services have traditionally not been large-scale employment generators. The IT sector, for example, employs only 3.7 million people, despite contributing over 9% to the gross domestic product. The impact of 4IR technologies on net employment numbers is thus likely to be minimal.

But, with over 80% of India’s labour force engaged in the unorganised sector, the more pressing policy question, and the one that gets lost in global narratives, is the impact of 4IR on informal and unorganised work. Our research suggests that the the unorganised sector is unlikely to feel the impact of emerging technologies associated with 4IR in any significant way. The cost of 4IR technologies, particularly in relation to the cost of labour, will make adoption unlikely in the near future. Most enterprises within the unorganised sector still have limited access to basic, older, technologies – two-thirds of the workforce are employed in enterprises without electricity, relying heavily on manual labour.
Comprising small enterprises, daily wage and self-employed workers, the unorganised sector lacks the financial capital, supporting infrastructure and requisite skills to support the adoption of advanced technologies.

Yet, informality is likely to be enabled and reproduced in the future world of work. Already, even within the organised sector, over 68% of workers do not have a formal contract, access to social protection or job security. Our research suggests that non-standard forms of employment are likely to replace the limited share of regular employment within the organised sector, creating new forms of informality even within the organised sector.

The increasing technologisation of production with the adoption of advanced robotic is likely to increase the reliance on contractual workers. File photo of robots assembling a car in a Maruti factory. Credit: Special Arrangement

In the manufacturing sector, the increasing technologisation of production, with the adoption of advanced robotics and other industry 4.0 technologies is likely to increase the reliance on contractual workers. Recent studies show that this is an already observable trend, with the increase in contract workers accounting for approximately 47% of the total increase in employment in organised manufacturing. Contract-based work is also increasing across the services sector. Digital platforms and new communication and data sharing solutions are making it easier to break down work into smaller tasks and then outsource it to the most cost-effective bidder across multiple geographies.

Informality is also being reproduced via the platform economy. Labour aggregator platforms such as cab hailing services like Ola and Uber are enabling the registration of service work, but workers continue to lack access to formal social protection mechanisms and employment conditions continue to be precarious. Unlike in industrialised economies, where platform economies are predominantly resulting in a shift from formal work to gig work, in India, the platform economy is in fact contributing to the reproduction of informality. Indeed, new entrepreneurial opportunities are being created through the platform economy, yet sustained benefits will only be available to those who have the requisite skills, aptitude, and social safety nets.

Crucially, pathways out of informality are also likely to be further restricted in the future world of work. The manufacturing route may no longer be available to India as the availability of advanced automation technologies ushers in a process of premature de-industrialisation; absorbing India’s unskilled to low-skilled labour will thus become even more difficult. Entry level jobs within the organised service sector, another pathway out of informal work within the unorganised sector, are also likely to shrink as businesses adjust their work processes to adopt new technological solutions. Traditionally, regular employment in the organised sector was the way out of poverty and informality. However, the steady disappearance of regular, formal employment, and the simultaneous increase of non-standard forms of employment and gig work is likely to restrict the movement of labour out of informality.

Robust and new forms of social protection that are specifically suited to addressing old and new forms of informality will be required. Platforms, for example, can be leveraged to deliver social protection to otherwise unregistered workers. Equally, meaningful and significant investments will be needed in education and skilling, to equip youth entering the workforce to leverage new digitally enabled opportunities. In India, older challenges around investments in human capital are far more urgent and insurmountable than new challenges posed by automation and other advanced technologies. Unless these old challenges are addressed, inequities are likely to increase between the few bright sparks that are able to leverage new digital technologies and the millions others who are still struggling to secure decent work.

This article is based on Tandem Research’s report, Emerging Technologies & the Future of Work in India, supported by the International Labour Organisation. Urvashi Aneja is Founding Director, Tandem Research and Associate Fellow, Chatham House. @tandem_research; @urvashi_aneja