Self-employed or Paid Employed: Who can Earn more among the Slum Dwellers and Why?

From Progress in Development Studies

It is necessary to create employment opportunities in cities to solve the problems related to the livelihood improvement of the slum dwellers. Job creation in the formal sectors of a developing country like India may face the challenge of resource constraints of the government. Also, in the absence of proper skill, education and knowledge of the slum dwellers, the scope of their employment opportunities in the formal sector is limited. The slum dwellers of the developing countries are mostly employed in the informal sectors (Davis, 2006).

Informal jobs are considered as the last resort in the developing countries where the workers are ready to accept any wage level (Radchenko, 2017). But the efforts to expand the informal economy as a development resource are recommended by Meagher (2016). This mandates to understand the role of extremely diverse and unregulated informal employment in offsetting the poverty of the slum dwellers. However, the contribution of the prior literature in this aspect remains unclear (Gulyani, Bassett, and Talukdar, 2014).

Now, the question arises as to which informal employment needs to be promoted by the government for the improved livelihood of the slum dwellers—self-employed or the paid-employed jobs.

Along with socio-economic and political stressors, the limited decent jobs are also detrimental for the livelihood of the slum population who migrate for better employment opportunities to lead a better life. They need to struggle to find high quality remunerative paid jobs which accounts for only 15 per cent of the labour force, including contract wage employment (Fox et al., 2017). Being faced with restricted paid jobs, they are often forced to engage in self-employed jobs, which are mostly unincorporated businesses run by household enterprises and unpaid family members.

Due to its significant role in employing and earning for people who would otherwise be unemployed, it is often claimed that self-employment is beneficial (Fox and Gaal, 2008). In the context of urban sectors, this study finds an increase in self-employment in developing countries (Kingdon et al., 2006). Past studies found that countries with more low-paid workers have high capital yields due to more self-employed jobs (Banerjee and Duflo, 2005). Moreover, the more the number of self-employed workers in a country, the more the increase in wealth, and the better the functioning of credit markets and investment opportunities (Blanchflower and Oswald, 1998; Evans and Jovanovic, 1989; Magnac and Robin, 1996).

There is a failure in understanding the heterogeneous characteristics of the slum dwellers regarding their socio-economic and demographic characteristics at an individual level (Patel et al., 2014; Sandhu, 1989; Seeley, 1959; Stokes, 1962; Van Vliet, 1987). This is probably due to the variation in informal jobs and their earnings. In this context, it is important to understand the concept of a living wage (level of income for subsistence needs), which varies with different social, economic and demographic characteristics (Boushey et al., 2001; Sklar et al., 2001). The wage varies substantially across provinces of a country or within countries. Therefore, to perceive the utility of income of the slum dwellers, it is necessary to analyze the source and determinants of their income across informal types and whether it varies across regions.

In this study, as an illustrative case, the slum residents of the Indian state of West Bengal, who rely largely on informal sector employment, are considered. Methodologically, this is a micro-level study, where an individual is considered as a unit of analysis. It is attempted to analyze empirically what kind of employment options the slum dwellers have and with what kind of options of employment they are better off in offsetting poverty.

Analytically, the focused questions in this study are: What are informal jobs and associated income levels of the slum dwellers across districts of West Bengal? Whether any significant differences exist among the respondents’ characteristics across these jobs? What are the role of gender and education in getting employment to these jobs and associated income level?

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Article details

Self-employed or Paid Employed: Who can Earn more among the Slum Dwellers and Why?\
Shashwati Banerjee, Kishor GoswamiFirst
Published October 23, 2019 Research Article
DOI: 10.1177/1464993419870961
From Progress in Development Studies