The unorganized sector as the name suggests refers to that sector where government rules and regulations do not apply whether it’s related to working conditions or payment to workers or doing the way of business. In simple words unorganized sector is like a jungle just like in a jungle there is no rule and the stronger animal survives and dictates the terms in the same way in case of unorganized sector people who have power and money dictates the terms to other people. The unorganized sector is more prevalent in developing nations as compared to developed nations, lets look at some of the advantages and disadvantages of the unorganized sector –
Advantages of Unorganized Sector
Wider Reach
The first and foremost advantage of unorganized sector is that it has a wider reach in the sense that in the case of rural areas where there are no industries and the organized sector it is an unorganized sector that keeps working and thus helps the locals to take the advantage of growth achieved by the sector. In simple words, the government’s failure of giving an organized sector throughout the country is made up by an unorganized sector.
Employment
Another benefit of this sector is that it gives employment opportunities to the local people who are unqualified for the organized sector because in case of rural areas where people are dependent on agriculture is a seasonal aspect and for rest of the time they need some job or work to take care of their families which is what is provided by the unorganized sector.
Contribution to GDP of the Country
In the case of the unorganized sector since it is scattered all over the country and employs millions of workers all over the country this sector indirectly contributes to the GDP of the country because the money paid to millions of workers in the unorganized sector come back in the economy as an increase in consumption by these people leading to increase in economic activity and growth of the country.
Disadvantages of Unorganized Sector
Exploitation
The biggest drawback of unorganized sector is that workers working in this sector are exploited because there are no labor laws which applies to this sector and hence workers have to work for long hours without any paid leaves, there is no provision for pension and other benefits rather workers are kept on daily wages and so on.
Black Money
In the case of the unorganized sector, all transactions are done in cash and not through banking channel which gives a scope of black money because cash transactions cannot be accounted and hence there is no question of any taxation thus helping rich people in evading taxes which is a loss to not only the government but also to the citizens of the country as this money never comes in the real economy of the country.
Illegal Activities
Since the government has little control over the activities of the unorganized sector there are many instances where illegal activities or business is carried by this sector which poses a great risk for the community as a whole. In simple words imagine a situation wherein boxing match fighters can hit an opponent anywhere and there is no rule or penalty than that boxing match gets turned into a deathmatch in the same way in the absence of government rules and regulations unorganized sector can do any business as there is no fear.
As one can see from the above that unorganized sector has pros as well as cons, however, the government should try to ensure that the unorganized sector gets converted into an organized sector which makes it easy for the government to control their activities, however, that should not be at the cost of people working in those unorganized sectors.