Expansion of Informal Workforce, Lack of Social Security & India’s Labour Market Reforms

The Changing Nature of India's Labour Market

India’s labour market is undergoing structural transformations characterized by:

  • Rising informal employment, with nearly 92% of workers outside formal protections.
  • The rapid expansion of gig and platform work, where over 1 crore Indians work as independent contractors for digital platforms like Zomato, Swiggy, Uber, and Amazon.
  • Labour reforms aimed at formalizing employment, through the Code on Social Security (CoSS), 2020 and digital welfare initiatives like e-Shram.
  • Persisting challenges in social security coverage, with many informal and gig workers lacking pensions, health benefits, and wage protection.

Key Focus Areas of this Analysis:

  1. Expansion of Informal Workforce in India
  2. Social Security Deficits and Challenges for Workers
  3. India’s Labour Reforms: The Code on Social Security, 2020
  4. The Gig Economy: Policy Interventions & Social Security Initiatives
  5. Critical Analysis: Strengths, Weaknesses & Implementation Gaps
  6. Future of Labour Policy & Recommendations for Reform

Expansion of Informal Workforce in India

Key Statistics on Informal Employment

Indicator Data Source
Total Workforce in India 520 million NSSO, PLFS (2023-24)
Informal Sector Employment 92% of total workforce Ministry of Labour
Gig & Platform Workers (2025) 1 crore NITI Aayog
Projected Gig Workers (2029-30) 2.35 crore NITI Aayog
Women’s Labour Force Participation (2025) 41.7% Ministry of Labour

Sector-Wise Distribution of Informal Workers

Sector Workers Employed (in Millions) Nature of Informality
Agriculture & Allied Activities 152 Daily wage labourers, seasonal work, lack of contracts
Construction & Real Estate 50 No safety provisions, no wage security
Manufacturing & Textiles 40 Contractual jobs, lack of social benefits
Retail, Logistics, & E-commerce 30 Gig workers, no fixed salaries
Transport & Delivery Services 25 Platform-based gig work, no job stability

Reasons for Informalization of Labour in India

  • Regulatory Arbitrage: Employers prefer contractual hiring over permanent employment to bypass EPF, ESIC, and other benefits.
  • Low Formal Job Creation: Despite GDP growth, job creation in the formal sector remains stagnant.
  • Rise of Digital Platforms: The gig economy (Zomato, Uber, Swiggy, Amazon, Ola) promotes short-term contracts over full-time employment.
  • Labour Code Simplification: The labour code reforms reduced worker protection in some sectors, allowing for more flexible hiring but weaker social security enforcement.

Social Security Deficits & Challenges for Workers

Lack of Social Security: Core Issues

Issue Impact on Workers
No Fixed Wages Gig workers earn fluctuating incomes, sometimes below minimum wage.
No Pension or Provident Fund No long-term financial security for informal workers.
No Health Insurance 70% of informal workers lack access to medical benefits.
Lack of Job Contracts Many workers are fired arbitrarily without compensation.
Occupational Hazards Construction, gig delivery, and factory workers face high accident risks.
Expansion of Informal Workforce

Gender Disparities in Informal Work

Indicator Male Workers Female Workers
Informal Work Participation Rate 78% 92%
Average Monthly Wage (₹) ₹12,000 ₹7,500
Access to Maternity Benefits 12% 3%

Labour Market Reforms: The Code on Social Security, 2020

Key Features of the Code on Social Security (CoSS), 2020

Provision Impact
Legal Recognition for Gig & Platform Workers First-time formalization of gig economy workers.
Aggregator Contribution to Social Security Platforms like Zomato, Swiggy, Ola, Uber must contribute 1-2% of annual revenue for worker benefits.
Universalization of ESIC & EPFO Extends health insurance and pension schemes to gig workers.
E-Shram Portal Integration 30 crore+ informal workers registered for social security benefits.
Mandatory Maternity & Health Benefits Gig workers now eligible for PM Jan Arogya Yojana & PM Shram Yogi Mandhan.

Implementation Challenges of CoSS, 2020

Challenge Explanation
Lack of State-Level Enforcement Labour is a Concurrent List subject, requiring state cooperation for full implementation.
No Clarity on Gig Worker Rights Many gig workers are still classified as independent contractors, limiting their legal protections.
Low Awareness Among Workers Many informal workers don't know about their entitlements under CoSS.
Weak Regulatory Oversight No strict penalties for companies failing to comply with social security provisions.

The Gig Economy: Policy Interventions & Social Security Initiatives

Government Welfare Schemes for Gig & Informal Workers

Scheme Coverage & Benefits
e-Shram Portal Digital registration of 30 crore+ informal workers for social benefits.
Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM) Pension scheme for informal workers (₹3,000/month post-retirement).
Employment Linked Incentive (ELI) Scheme ₹20,000 crore budget to create formal jobs in the gig sector.

Pilot Programs for Gig Worker Welfare

  • Aggregator Modules on e-Shram: Zomato, Urban Company, Blinkit onboarded for worker social security.
  • Expansion of ESIC & EPFO: Gig workers now included in health & pension schemes.

Critical Analysis: Strengths, Weaknesses & Implementation Gaps

Strengths of Labour Reforms

  • Formal Recognition of Gig Workers
  • Expansion of Social Security (ESIC, EPFO)
  • Aggregator Responsibility for Worker Benefits
  • Government Commitment to Digital Inclusion (e-Shram)

Key Weaknesses

  • No Clear Employee Status for Gig Workers
  • Weak State-Level Implementation
  • Lack of Awareness Among Workers
  • No Strict Penalties for Non-Compliance

Future of Labour Policy & Recommendations for Reform

Policy Recommendations

Issue Reform Suggestion
Social Security Expansion Universalize healthcare & pension benefits for all workers.
Stronger Regulatory Framework Introduce penalties for non-compliance by gig platforms.
State Government Coordination Faster adoption of labour codes at the state level.
Gig Worker Unions & Collective Bargaining Allow gig workers to negotiate wages & benefits.

The Future of India's Labour Market

  • 50% of India’s workforce will be gig/informal by 2030.
  • Stronger legal protections & social security will be essential for sustainable job growth.
  • The next decade will determine if India achieves full labour formalization.

India's labour market is transforming rapidly, but worker protections lag behind economic growth. While labour reforms & digital inclusion are promising steps, implementation challenges & policy gaps must be addressed for a fair and secure workforce.

India must build a robust social security net to ensure fair work conditions in the era of gig and informal employment.