EconomicsCBSE Class 12 · Employment: Growth, Informalisation and Other Issues

Jobless Growth, Casualisation and the Formal and Informal Sectors (Class 12)

Updated 17 October 2026 · Fact-checked

Jobless growth means GDP grows faster than employment, so output rises without proportionate jobs. Casualisation is the shift of workers to casual wage work. The formal sector has all public establishments and private ones with 10 or more hired workers; the rest is informal. In 2019-20 only about 11% of workers (59 of 535 million) were formal.

Notice the widening gap between GDP and jobs (jobless growth), and that only 11 of every 100 workers in 2019-20 had formal sector jobs.

Illustration drawn for QuestionBuddy.

Understand Jobless Growth, Casualisation and the Formal and Informal Sectors

Jobless growth. Between 1951 and 2023, GDP grew faster than employment. Employment growth was rarely above 2% a year (only around 1999-2005 and 2022-23 did it exceed 2%). From the late 1990s employment growth fell back to the levels of the early planning period, widening the gap between GDP growth and employment growth. The economy produced more goods and services without generating proportionate employment: this is jobless growth.

Casualisation. The movement of workers from self-employment and regular salaried jobs into casual wage work. Casual workers face job insecurity and have no social security, so casualisation makes workers more vulnerable. NCERT Table 6.3 shows the casual share rising from 23.2% (1972-73) to 31.8% (1993-94), then falling to 30.0% (2011-12) and 19.9% (2023-24) as self-employment (58.4%) and regular jobs (21.7%) gained.

Formal (organised) and informal (unorganised) sectors.

Basis	Formal sector	Informal sector
Definition	All public sector establishments and private establishments hiring 10 or more workers	All other enterprises and workers: farmers, agricultural labourers, small enterprise owners, self-employed without hired workers, casual labourers working for more than one employer
Security	Social security (provident fund, gratuity, pension, maternity benefit)	No regular income, protection or social security
Pay	Higher earnings	Low earnings; can be dismissed without compensation
Law and unions	Protected by labour laws and unions	Weak or no protection
Technology and records	Modern, formal accounts	Outdated technology, often no accounts

NCERT: in 2019-20, only about 59 million of 535 million workers (about 11%) were in the formal sector. Of about 30 million formal workers in 2012, 18 million were in the public sector and women were about one-sixth.

Informalisation. Planners expected the informal share to fall as the economy grew. Instead, the workforce has become more informal because of the growth of casual work and informal enterprises even within the formal sector. With ILO support, the government has begun to modernise informal enterprises and extend social security.

Neighbouring topics. WPR, status of employment, unemployment types and government employment programmes have separate pages.

Jobless Growth, Casualisation and the Formal and Informal Sectors: key facts

Share of formal sector: Formal share (%) = formal workers / total workers x 100; NCERT: 59 / 535 x 100 is about 11%.
Informal workers: Informal workers = total workers - formal workers; Use the same unit.
Employment elasticity: Employment elasticity = employment growth rate / GDP growth rate; A low value indicates jobless growth.
Compound growth: Value after n years = initial x (1 + g)^n; g as a decimal.

How to answer Jobless Growth, Casualisation and the Formal and Informal Sectors questions

Questions ask for definitions (jobless growth, casualisation, formal and informal), differences between formal and informal sectors, and calculations on shares and growth gaps.

1Define the term in one sentence, then give its consequence.
2For differences, tabulate at least four bases with both sectors.
3For shares, divide formal workers by the total and multiply by 100; subtract to get informal.
4For growth gaps, compute both growth rates and compare, or compute employment elasticity.
5Link jobless growth and casualisation: output grows but job quality and security do not.

Jobless Growth, Casualisation and the Formal and Informal Sectors in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Jobless growth

Suppose a country's GDP grows 7% a year for ten years, but because factories adopt machines, its employment grows only 1.5% a year. At the start GDP is 100 and there are 500 million workers.

Compare the growth of output and jobs over ten years.

Try it first, then show the solutionSolution

GDP after 10 years = 100 x (1.07)^10 = 196.7, a rise of about 96.7%.
Workers after 10 years = 500 x (1.015)^10 = 580.3 million, a rise of about 16.1%.
Output has almost doubled while jobs rose by only a sixth.

Answer: GDP rises about 96.7% but employment only about 16.1%: growth without proportionate jobs, i.e. jobless growth.

Memory hook: More output, not more jobs.

Formal and informal work

Imagine two cousins: one is a clerk in a government office with provident fund and pension, and the other works as a daily-wage mason for different contractors, with no leave or insurance.

Which sector does each belong to and what is the difference in security?

Try it first, then show the solutionSolution

The clerk works in a public sector establishment: formal sector, with social security.
The mason is a casual labourer working for more than one employer: informal sector.

Answer: Clerk: formal, secure; mason: informal, insecure.

Memory hook: Formal means protected; informal means exposed.

Tricks to remember Jobless Growth, Casualisation and the Formal and Informal Sectors

Short memory aids. Say each one aloud once, then use it on a question the same day.

Ten is the line
Private firm with ten or more hired workers is formal; fewer is informal.
Use it when: Defining formal sector.
2% ceiling
Employment growth rarely above 2% a year while GDP grew faster: jobless growth.
Use it when: Jobless growth.
Casual is the weak link
Casualisation means moving to casual jobs: no job or social security.
Use it when: Casualisation.

Jobless Growth, Casualisation and the Formal and Informal Sectors: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Formal sector definition · 1 mark · MCQBoard level

Which of the following belongs to the formal sector?
(a) A private workshop with 6 hired workers
(b) A private factory with 25 hired workers
(c) A farmer working on his own land
(d) A self-employed street vendor

Try it first, then show the solutionSolution

Private establishments with 10 or more hired workers are formal.

Answer: (b) A private factory with 25 hired workers

Example 2: Jobless growth and casualisation · 3 marks · Short answerBoard level

Explain 'jobless growth' and 'casualisation'. State one consequence of each. (3 marks)

Try it first, then show the solutionSolution

Definitions and a consequence each.

Answer: Jobless growth is growth of GDP without proportionate growth of employment, as employment grew rarely above 2% a year while GDP grew faster; consequence: unemployment and underemployment persist despite output growth. Casualisation is the shift of workers from self-employment and regular jobs to casual wage work; consequence: workers face job insecurity and lack social security.

Example 3: Formal sector share · 4 marks · Short answerHarder board level

In 2019-20, NCERT reports about 59 million of 535 million workers in the formal sector. (i) Find the formal share. (ii) Find the number and share of informal workers. (iii) If 18 of the 30 million formal workers in 2012 were in the public sector, find the public sector share and the private share of formal workers. (4 marks)

Try it first, then show the solutionSolution

(i) 59 / 535 x 100 = 11.03%, about 11%.
(ii) Informal = 535 - 59 = 476 million; share = 476 / 535 x 100 = 88.97%, about 89%.
(iii) Public share = 18 / 30 x 100 = 60%; private = 12 / 30 x 100 = 40%.

Answer: (i) About 11%. (ii) 476 million, about 89%. (iii) Public sector 60%, private 40% of formal workers (2012 figures).

Example 4: Employment elasticity · 4 marks · Short answerHarder board level

Suppose in Decade A, GDP grows 6% a year and employment 2.4% a year; in Decade B, GDP grows 8% and employment 1.6%. Find employment elasticity for each decade, the gap between GDP and employment growth, and say which decade shows jobless growth. (4 marks)

Try it first, then show the solutionSolution

Decade A: elasticity = 2.4 / 6 = 0.40; gap = 6 - 2.4 = 3.6 points.
Decade B: elasticity = 1.6 / 8 = 0.20; gap = 8 - 1.6 = 6.4 points.
Lower elasticity and a wider gap in Decade B: jobless growth is stronger.

Answer: Elasticity 0.40 in A and 0.20 in B; gaps 3.6 and 6.4 points. Decade B shows a clearer case of jobless growth.

Example 5: Informal sector and policy · 5 marks · Long answerHOTS / competency

Suppose a city's economy grows fast, but most new jobs are casual and in small workshops with no pension or leave. Using NCERT's discussion, explain why this is called informalisation, describe two problems faced by informal workers, and suggest two policy measures. (5 marks)

Try it first, then show the solutionSolution

Informalisation: planners expected the informal share to shrink with growth; instead workers move into casual and informal jobs.
Problems: no regular income or social security; can be dismissed without compensation; outdated technology and low earnings.
Policy: extend social security to informal workers; modernise informal enterprises with credit and technology (with ILO support, as NCERT notes); skill training to move workers to formal jobs.

Answer: Growth is accompanied by more casual, informal employment instead of formal jobs. Informal workers lack security and earn little. Extending social security and modernising informal enterprises are key policies.

Where students lose marks in Jobless Growth, Casualisation and the Formal and Informal Sectors

The slips examiners see most often, and what to write instead.

Mistake: Defining the formal sector as 'government jobs only'
Ignoring private establishments.
Wrong working
Formal sector = public sector jobs.
Right working
Formal sector = all public sector establishments plus private establishments with 10 or more hired workers.
Do this: Remember the 'ten workers' rule.
Usually costs: 1 mark.
Mistake: Confusing jobless growth with unemployment
Both involve few jobs.
Wrong working
Jobless growth means GDP is falling.
Right working
Jobless growth means GDP grows faster than employment; jobs do not rise in proportion.
Do this: Compare the two growth rates.
Usually costs: 1 mark.
Mistake: Subtracting percentages incorrectly in share sums
Mixing millions and per cent.
Wrong working
Informal share = 535 - 11 = 524.
Right working
Informal workers = 535 - 59 = 476 million, i.e. 100 - 11.03 = 88.97%.
Do this: Keep numbers and shares apart.
Usually costs: 1 mark.

Exam tips

Quote 'about 59 million of 535 million, about 11%' for the formal sector in 2019-20.
In differences between formal and informal sectors, give at least four bases and write both sides in every row.
Use the casual-share trend (23.2% to 31.8% to 19.9%) to show you know that casualisation reversed recently.

Practice questions on Jobless Growth, Casualisation and the Formal and Informal Sectors

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
Casualisation of the workforce means:
(a) rise in the share of regular salaried workers
(b) shift of workers from self-employment and regular jobs to casual wage work
(c) growth of government employment
(d) fall in unemployment
Hint
Casual means no security.
Answer
(b) shift of workers from self-employment and regular jobs to casual wage work
Q2 · 4 marks · Short answerBoard level
Distinguish between formal and informal sectors on any four bases. (4 marks)
Hint
Definition, security, pay, protection.
Answer
Definition: formal has all public establishments and private ones with 10 or more hired workers; informal has all other enterprises and workers. Security: formal workers get provident fund, gratuity, pension; informal workers have no social security. Pay: formal earnings are higher; informal are low with dismissal possible without compensation. Protection: formal workers have labour laws and unions; informal workers have little.
Q3 · 3 marks · Short answerHarder board level
In a year, an economy's GDP grows 7.5% and employment 1.5%. Find employment elasticity and the gap. If employment elasticity had been 0.4, by how much would employment have grown at the same GDP growth? (3 marks)
Hint
Elasticity = employment growth / GDP growth.
Answer
Elasticity = 1.5 / 7.5 = 0.20; gap = 7.5 - 1.5 = 6.0 points. At 0.4 employment growth = 0.4 x 7.5 = 3.0%.
Q4 · 4 marks · Short answerHarder board level
Of 200 million workers in an economy, 24 million are in the formal sector, and 15 million of these are in the public sector. Find the formal share of workers, the informal workers in millions and per cent, and the private formal workers as a share of all workers. (4 marks)
Hint
Subtract before taking the share.
Answer
Formal share = 24 / 200 x 100 = 12%. Informal workers = 200 - 24 = 176 million = 88%. Private formal workers = 24 - 15 = 9 million = 9 / 200 x 100 = 4.5% of all workers.
Q5 · 1 mark · Assertion-reasonHOTS / competency
Assertion (A): Casualisation makes workers more vulnerable.
Reason (R): Casual workers do not enjoy job security or social security.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.
Hint
What do casual workers lack?
Answer
(a) Both A and R are true and R is the correct explanation of A.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.What is jobless growth?Show answer
GDP growth without proportionate employment growth.
2.What is the minimum size of a private establishment to count as formal?Show answer
10 or more hired workers.
3.What share of workers was formal in 2019-20?Show answer
About 11%.
4.What was the casual share in 1993-94 and 2023-24?Show answer
31.8% and 19.9%.
5.Name two social security benefits in the formal sector.Show answer
Provident fund and pension (also gratuity and maternity benefit).

Jobless Growth, Casualisation and the Formal and Informal Sectors: frequently asked questions

What is informalisation?

The growth of informal employment in the workforce, contrary to the expectation that the informal share would shrink with growth.

Why does jobless growth occur?

Output expands through higher productivity, capital-intensive methods and services with few jobs, so employment does not rise proportionately.

Who are the informal workers?

Farmers, agricultural labourers, small enterprise owners and workers, the self-employed without hired workers and casual labourers working for more than one employer.

Are the elasticity and growth figures in the sums official?

No. Growth rates in the sums are assumed; the formal-sector figures and casual share trend are NCERT data.