Coping with layoffs: 5 Lessons Formal Sector can learn from the Informal Sector

In this guest article, Rajesh A. R, Executive Director, LabourNet Services India Pvt Ltd, presents a perspective on how we can learn from the informal and unorganized sector to cope with layoffs. While speculating about the future of jobs and employment in formal sector, he shares five lessons that employees can learn to brace themselves for a fast-emerging insecure and unpredictable job market and its impact on full time employment.

When Suresh* came to my office to meet me, he wanted to discuss something very urgent. This was about the announcement regarding impending layoffs in his company. Apparently, he was most anxious and shocked at the thought of losing a well-paying full-time job in an MNC and a career path with a secure future. He has been leading a team that services overseas clients in the banking sector with customised IT solutions. As a Senior Manager, he never expected that his role would ever become redundant or irrelevant, leave alone getting laid off!

Suresh is one among hundreds of Indian mid- and senior- management professionals who might bear the brunt of cost-cutting, organisational restructuring and resizing. The loss of many cushy jobs in industries like IT and other formal sectors have been grabbing the headlines for quite some time now. Call it a business imperative or a fallout of global political and economic reforms, the job scene in the formal sectors may never be the same again due to these three key shifts:

1 . Several macro level changes in countries like USA, UK and other European countries will make it impossible for Indian businesses to get their current margins or employ the workforce for a fixed cost in full time roles.
2. Disruptive technologies like Robotics, Analytics and other constituents of Industry 4.0 have resulted in large scale automation and obsolescence of technical skills, leading to loss of many job roles.
3. India has to compete with other countries as a preferred outsourcing destination due to higher expectations in terms of salaries and benefits vis-a-vis availability of of more cost-effective workforce in those countries.

With reasons mentioned above, the Indian business landscape is bound to feel the tremors in the form of mass layoffs, restructuring and performance-driven corrective measures. What Suresh and professionals of his level are undergoing is definitely not a nice thing at a high point in their careers. For, they have been working in the formal sector, an organised entity that ensures full time job security, financial stability and social security. Employees of this sector are far removed from the vagaries of working in the informal sector that is synonymous with unorganized workforce, contractual work orders and small and micro enterprises.

The fear of layoffs and impending loss of jobs is deeply ingrained in the very nature of the informal sector – with no provision for a severance package! People working in this sector have been living on the edge with many risks and adversities. However, over the years, they have mastered the art of sustaining , surviving and thriving despite being vulnerable to economic dynamics. In fact, what Suresh would be going through at this point is something the informal workers go through everyday! But, look at the way they have adapted to the highly unpredictable ways of employment an ensured for themselves continuous work and contributed to job creation.

Lessons from the informal sector

The formal sector has a lot to learn from the way informal sector copes with harsh uncertainties and unwarranted circumstances. Unfortunately, the informal sector has always been underestimated and underrated for reasons like tax evasion, lack of social security, low wages and gender discrimination. As a result, we haven’t been able to see the positive side of this sector that works in absolute cohesion and collaboration since it provides employment to 85% of the workforce in India and contributes to 7.6% of GDP.

The informal sector is the heart of the Indian industry. Like the health of a heart is determined by reading the peaks in an ECG, the ups and downs in this sector indicate that it is vibrant energetic, and thriving, oblivious to the vagaries of job security and financial stability. Whereas the formal sector has got attuned to a structured and secure format with predetermined career paths and predictable growth patterns. Any change in this pattern is most unwelcome and thoroughly threatening.

A quick study of many industries in the informal sector reveal several truths about fighting adversity and overcoming fears and human limitations. We have a lot to learn from the way this workforce manages its growth trajectory through right skilling, networking and risk mitigation. Let’s look at five lessons that can help us develop a suitable coping strategy:

1. Build communities and networks

Let’s take an example from the Construction Industry which is highly unorganized but comes next to Agriculture in terms of employment potential. Look at the way this sector operates with labour contractors and supervisors who have devised their own ways to market themselves, get upskilled, find work, create networks and even become micro entrepreneurs. Even though their work is not guaranteed and their contractual terms could be very volatile they continue to strive to make things work.

2. Take up contractual and project based work

Informal sector works mainly with contractual work and project based employment and the workforce in this sector gets attuned to the nature of assignment. This is sound like the most undesirable thing to happen in the formal sector. Nevertheless, this could become the order of the day for many in the formal sector since, apparently, heavy dependence on outsourced work will not only lead to retrenchment but it will also demand a change of employee mindset in accepting less organised and volatile nature of work.

3. Remain relevant through right skills

Let’s look at the professional lives of carpenters and painters who form an integral part of the Construction industry. A carpenter with 5- 8 years of experience earns more than a software engineer and so does a Painter. See their career graphs – in most cases they would have started on their own, helping a senior member and would have moved up the ladder by acquiring the right skills. Skilling and continuous learning is not a choice for the workers in the informal sector. It is a basic requirement that defines their scope for getting better work and wages. As they become confident, they start forming small teams, get work from the sub-contractors, and assign it to the team members who are either semi-skilled or unskilled. Gradually some of them become micro-entrepreneurs providing employment and creating more jobs.

4. Fend for themselves

Don’t they fear loss of job or unavailability of work? How would they feed their families and fulfil social responsibilities in case of remaining jobless? How do they handle emergencies? The answers to these questions vary with the level at which they work. For most of them at the supervisor or manager level, these could be available as employee benefits but for the lower levels there may not be any such arrangement.

5. No scope for comfort zone

Unlike the workers in the formal sector, who have a greater tendency to get into comfort zones, the informal sector demands the workers to be on their feet. They should be ready to learn new technical skills and acquire new knowledge – this applies to both the manual workers and the supervisors. They don’t have the luxury of time and resources to enrol for formal training programs and they often learn on the job and find innovative ways of using new knowledge and skills.

With right skills and attitude the layoff phase could be turned into a positive sign for indigenous projects and opportunities for entrepreneurship. Instead of fearing the loss of a so-called ‘permanent job’, the employees can learn from the thriving nature of the informal enterprise and cope with the challenges by taking a lesson or two from the unorganized workforce.

(*Name of the person is changed for reasons of privacy)