Question

"It is necessary to generate more employment in the formal sector rather than in the informal sector."
Justify the given statement with valid arguments.

Hint:

While the informal sector plays an essential role in providing employment, prioritizing formal sector jobs enhances social security, economic stability, and overall quality of life.

Answer 1

The statement emphasizes the importance of creating more employment opportunities in the formal sector as compared to the informal sector. Below are some key reasons for this:
1. Job Security and Benefits:
Jobs in the formal sector generally offer more security compared to the informal sector. Formal sector employees enjoy benefits like health insurance, paid leave, retirement benefits, and job stability. In contrast, informal sector workers lack such benefits and face job insecurity, making their livelihoods more vulnerable to economic fluctuations and uncertainties.
2. Better Working Conditions:
Employment in the formal sector often comes with regulated working hours, proper work conditions, and adherence to labor laws, ensuring a safe and healthy working environment. In contrast, informal sector workers may have to work long hours in unsafe conditions, with little to no protection or legal recourse.
3. Higher Wages and Standard of Living:
Formal sector jobs tend to offer better wages and a higher standard of living due to fixed salaries, regulated pay, and legal protection against exploitation. In the informal sector, wages are often low, unregulated, and inconsistent, leading to lower income levels and reduced quality of life for workers.
4. Contribution to Economic Growth:
Employment in the formal sector leads to higher productivity, which in turn contributes positively to the economy. Formal sector businesses are often more efficient, competitive, and technologically advanced, promoting innovation and economic development. Informal businesses, while significant in numbers, tend to be less productive and are not always subject to the same regulations, leading to inefficiencies and slower growth.
5. Tax Revenue and Public Services:
The formal sector is a significant contributor to government tax revenue. As formal sector employees are subject to income tax, the government is able to fund public services and infrastructure development, benefiting the entire economy. Informal sector workers, however, contribute less to tax revenue, limiting the resources available for public welfare programs.
6. Social Security and Labor Rights:
Employees in the formal sector are entitled to various social security benefits, such as pensions, unemployment insurance, and maternity leave, which provide a safety net in times of need. Informal workers, on the other hand, are often excluded from such protections, leaving them vulnerable to economic shocks.
In conclusion, generating employment in the formal sector ensures better working conditions, improved social security, higher wages, and a stronger contribution to national economic development. Therefore, prioritizing formal sector employment is crucial for sustainable economic growth and social well-being.