The service sector: migration, technology and productivity

Abstract

PurposeThe purpose of this paper is to study the characteristics of the workers in the informal economy and explore the reasons for workers migrating from rural to urban area. The authors also explore and enumerate various reasons why the migrants choose to work informally and study whether internal migrants treat this sector as temporary or transitory before moving to the formal sector. The authors reconnoitre the issues in coverage of factors in unregistered service, this research is carried out at a smaller scale of operations of the service enterprises having a minimum of three (or more) employees, which poses significant issues in the enumeration. This work further emphasises on the reasons why people migrate and choose the informal sector (IS) and to estimate the contribution of technology towards productivity of this sector.Design/methodology/approachBuilding on empirical data collected through interviews with the migrants, who are now part of the informal service enterprises of Delhi and peripheral areas, this paper presents the results of a survey conducted in 2017. This research is based on appropriate scale driven by the instrument of choice by the sampling of units. Data were collected by conducting field survey using structured questionnaire. By performing the estimation at the unit rather than the industry level, the authors reduce difficulties of mis-measured output and inputs, thus, potentially obtaining a more accurate estimate of technologies contributions towards the firm productivity.FindingsThe small service enterprises are making poorer value addition towards measured productivity due to the factors such as lack of equipment or technical know-how. The authors find that marginalisation thesis holds true only partially and the rest are in this sector by choice, considering it as an opportunity. Maximum number of entrants had been attracted by opportunities in this sector itself; actual and potential mobility from the informality towards formalisation is quite low; education is one of the important determinants for entrepreneurs shifting from informality towards formalisation.Research limitations/implicationsThe research is limited only to informal service enterprises located in Delhi, the national capital of India and the peripheral areas.Practical implicationsBy identifying the factors, proper policy measures can be designed which will be in a focused direction to reduce the size of the IS and to improve the working condition of the migrants who are part of this sector. The estimation is at the unit level using primary data.Originality/valueThe estimation is at the unit level using primary data, the research contributes to the literature on informal service sector, and this sector needs more intensive large-scale studies in order to design policies which can result in betterment of the society as a whole, benefiting the segment that needs immediate attention from government and society as well.