Informal sector workers and Bangladesh economy

1. A study on the workers of the Informal
sectors in Dhaka city
Md. Nazmul Alam Tuhin
Senior M&E Officer
HIV and AIDS Programme
ICDDR,B

2. WWhhaatt iiss IInnffoorrmmaall SSeeccttoorr??
 Informal sector is a very important economical area for any developing country.
This is a growing occupational sector for the less skilled people that ensures
considerable amounts of employment.
 Kith Hart’s (1973) classic paper, introduces the terminology “informal sector”,
based on a research in a low-income neighborhood in Ghana;
 “Informal sector provided a wide range of low cost, labor intensive,
competitive goods and services and recommended that the Kenyan
ggoovveerrnnmmeenntt sshhoouulldd pprroommoottee tthhee iinnffoorrmmaall sseeccttoorr ((222233--3322::11997733))
 Kabra (1995), stated thirty terms including the survival sector, non-structured
sector, and transitional activities have been and/or are currently used to describe
the informal sector.
 Amin (2002), compiled several terms which has been used to represent informal
sector/economy by different authors to make a viable definition of informal sector,
such as Non Formal sector (ILO-SAAT & UNDP :1998), Urban subsistence sector
(Cole & Sanders :1985), Non-westernized sector (Hackenberg: 1980), Lower-circuit
of urban economy (Santos:1979)

3. FFoorrmmaall VVss.. IInnffoorrmmaall SSeeccttoorr
 Informal economic unit is a different one then the Formal economic unit::
Informal Sector Formal Sector
Ease entry Difficult entry
Adopted technology Imported technology
Labour intensive Capital Intensive
Unregulated & competitive market Protective market
Traditional & indigenous inputs predominates Overseas inputs predominates
 Linkage of Informal sector (IS) with Formal sector (FS):
 Forward Linkage: FS uses goods from IS as their production input
 Backward Linkage: IS uses the services from FS (i.e. African informal sector)
 Technological linkage: Transfer of technological knowledge & skill
 Consumption Linkage: Interrelation between consumers of this two sectors
 Credit Linkage: FS invest on IS

4. Characteristics of Informal sector
 Two characteristics mostly signify to the informal activities (Roberts, 1976).
 They are labor intensive
 They avoid formal state supervision and regulation.
People engaged in IS Activities in IS Land & housing in IS
1. Absence of official protection
& recognition
2. Non coverage by minimum
1. Unregulated & competitive
market
2. Reliance of locally available
1. Unauthorized use of vacant
public or private land
2. Illegal subdivision or rental of
wage legislation & social
security system
3. Absence of trade union
4. Low income & wages
5. Little / No job security
resources
3. Labour intensive & adapted
technology
4. Absence of institutional credit
or other supports & protection
5. Ease of entry
land
3. Unauthorized construction of
structures & buildings

5. Methodology of the study
 Multiple data collection tools and purposive random sampling have
been used in this study. Target population for this study were
selected based on some criteria:
 Age of the worker and the entering age in the job.
 Workers who works in various workstations, which are mainly unregulated,
family owned, unregistered and unaware of their rights.
workers who are vulnerable  aanndd ddoo nnoott hhaavvee aannyy kkiinndd ooff ffaacciilliittiieess ssuucchh aass
job security, training, hazards insurance, retirement pension etc
 Workers who lack formalinstitutional skill and knowledgeeducation to be
able to enter in a formal job market.
 Socio-economic background of the Workers (lack of education, low social
and economical status).

6. Methodology of the study
…..contd …..
 Data collection tools ;
 Questionnaire
 In-depth Interview
 Case study
Close End
Open End
Semi structured
 A total of 154 samples were drawn from six different areas of Dhaka city, these
samples were drawn from six different types of occupation sector
 Areas: Mohammadpur, Shamoly, Rayerbazar, Hazaribag, Dhanmondi, Tejgaon
 Informal industries: Car workshop, Battery recycling workshop, Footwear industry,
Street vender, Scavenger, Transport labour

7. workers of the Informal Sector
 The study found 35 % the workers belongs in 6-13 years of age group.
 56 % reported they have entered the job at the age between 6-9 years (8 & 9 is the
most frequent job entering age for the IS workers). And only 6% entered at / after at
the age of 18.
Almost 40%  ddoo nnoott hhaavvee aannyy iinnssttiittuuttiioonnaall eedduuccaattiioonn,, 2288%% aatttteennddeedd tthhee pprriimmaarryy aanndd
only 6% went to secondary school.
 35% leave school just to support their family financial condition another 22%
parents did not showed interest in sending them to school, because they need to
earn.
 Reason for not entering in Formal sector is Lack of educational requirements (26%)
Contd…….

8.  30% joined in the job at that early age in order to support their family income. 18%
did not had any primary earner and another 21% says, they have served the family
interest
 The average income of the workers in the informal sector is 2639 taka and average
monthly savings are 165 taka only. And with an average 5 member family , 39%
reported of borrowing money from relatives quite often.
 The study ffoouunndd iinn mmoosstt ccaasseess tthheeyy hhaavvee ttoo wwoorrkk 1100++ hhoouurrss ((5588..44%%)) eeaacchh aanndd
every day, 46 percent has reported, they work almost 30 days a week. Their
opportunities of having governmental holidays, depends on the nature of the
employee or the owner
 The apprenticeship period in the informal sector is very important, in order to gain
skill and experience.82% claimed they were trained as apprentice, This study
found, most workers have to spend 5-7 years as an apprentice (34%). The
minimum period of apprenticeship is 2-3 years

9.  Job appointment system is not official. There is no formal
contract system, all contracts are based on verbal (informal)
or kinship based. Also advance payment of money sometime
becomes the medium of an ensured job. Due to informal
contract system informal sector is an easy entry for the
young and underage workers.
 the reason for employing children and 47 % answered they
aarree oobbeeddiieenntt wwoorrkkeerrss aanndd wwoorrkk ffoorr lleessss oorr nnoo mmoonneeyy.. 2233 %%
reported they employ young child because parents make
request.
 As for the future plan 74% wants to go abroad for a better
living standards and another 14% wants to start their new
business.
Child workers in a ternary
factory in Kamrangir char,
Dhaka

10. 7 8
5
14
7
1
11
6
3
14 15
4
12
19
3 3
19
1 2
20
15
10
5
0
Low (0-23) Medium (24-35) High ( 35+)
Car workshop Engineer workshop Welding
Scavenging Transport helper Street vender
Footware Industry Battery recycle workshop
 TThhee LLiivviinngg SSttaannddaarrdd IInnddeexx ((LLSSII))[[11]] sshhoowwss tthhee hhaarrddsshhiippss ooff tthhee wwoorrkkeerrss
day to day life. The study found, only 9 % respondent has the high
living standard. Among the rest of the worker 48% & 42% have
medium and low level of living standards. During the study it was found
the young workers are in the lowest stages of Living Standards Index.
Because they are the most easy to be exploited.
1] LSI indicates the quality of living standards of the people. It measures the livening
standards. LSI is based on several indicators; education, income, savings,
groceries purchasing facilities, frequency of meal taking, food satisfaction, medical
treatment facilities, necessary facilities and utensils. For the construction of the
index, fixed values have been assigned for each of these indicators.
A girl at the battery
recycling workshop in
Hazaribag

11. 46.1
72.7
38.3
57.8
46.1
90.9
22.7
27.9
31.8
24.7
36.4
7.1
14.3
16.2
3.24
2.6
22.7
13.6
1.9
5.8
11
5.8
Legal se curity
Sk ill ge neration
security
Work se curity
Income se curity
Employme nt
security
Labour market
security
High
Medium
Low
Very low
 Informal sector workers do not have any decent work[1]. This study follows the
seven di dimmeennssiioonnss ooff iinnddiiccaattoorrss ffoorr tthhee mmeeaassuurreemmeenntt ooff ddeecceenntt wwoorrkk[[22]] aanndd tthhee
study found, 54 % respondents have low level of decent work dimension score.
Only 5 % respondents have high level of decent work indicators. These decent
work indicators are not only necessary for the adult workers; it is applicable for
young and child workers too. However, the study found that child workers are in the
lowest segment with lowest level of decent work index.
 [1] The concept of “Decent Work” was defined in terms of four major pillars: Basic labour rights, Employment
rights, Social protection and Social dialogue. (Director-General’s Report: ILO, 1999).
 [2] Anker, R, I Chernyshev, P Egger, F Mehran and J Ritter (2002): “Measuring Decent Work with Statistical
Indicators”, International Labour Office, Geneva

12.  78 % Interviewed respondents experienced occupational hazards, This types of
phenomenon, is also responsible brining up the concept of child labour, 39%
respondents agreed they were forced to enter in the labour force because the
primary earner had an accidents.
 For medical treatment 24 % responded reported of going to local dispensary
compounder, 18 % goes to charity hospitals and 16 percent attend government
hospital. Shockingly, almost 35 % attend hokum kabiraji footpath doctors.
About  aaccccoommmmooddaattiioonn ppaatttteerrnn,, 6688 %% rreeppoorrtteedd ttoo lliivvee iinn rreenntteedd hhoouussee aammoonngg tthheemm
55 % are semi paka (Walls are made of brick, roof is tin shade). 22 % lives in
sublet, among which 51 % live in tin shaded (roof and walls) house. Only 2
respondents reported that they live in their own home.

13. Conclusion
 Data from the study clearly depicts the condition of the respondents, this can be
told that, they lack all the opportunities and facilities a better life can offer. Informal
economysector is the life line for the urban poor and those with less or no skill,
they are living their life with the help of informal sector and condition the workers
work in is not very comfortable.
 In work they are abused, exploited, in life they are burdened, they have no pension
scheme, no retirement policy, no accident insurance, not even a simple formal
contract. With the verbal, i innffoorrmmaall ccoonnttrraacctt aanndd mmaassssiivvee ssuuppppllyy ooff llaabboouurr,, tthheerree iiss
always a chance of loosing the precious job.
 They lack many of their fundamental labour rights. The informal economy embraces
a multitude of dispersed operational units and activities.
 Key differences between the formal and informal economy can be traced form the
angle of letter of appointment, working hours, wage rate and availability of legal
provisions.
 Proper state regulation and protection scheme should be introduced to help the
informal sector.