H3 Policy Brief: Connecting two aspects of Habitat III – Rural-Urban Linkages for Sustaining Opportunities in the Informal Sector

By Amartya Deb

Photo: A traditional market to sell rural produce in Aizawl city, Mizoram (India); Photo Courtesy: Post-graduate students (2013), Dept. of Regional Planning, School of Planning and Architecture, New Delhi.

Summary:

Pronouncing the agenda of an inclusive approach to planning at Habitat III, the discussion largely focused on rural-urban (RU) linkages and informal sector separately. But, there also exists an opportunity for cities to address the interdependency between the two areas. This brief illustrates a few important RU linkages for the sustenance of informal sector. The informal sector benefits from the flow of knowledge, money, people, and goods (both processed and unprocessed) between rural and urban areas. Informal transport plays an important role in identifying and connecting areas of opportunities, whereas small and medium size industries offer opportunities in the form of employment. Although there are prevalent concerns associated with the informal sector such as poor working conditions and lower wages, RU linkages help the vulnerable rural population diversify their occupation through employment in Small and Medium-sized Enterprises (SMEs) operating within cities and in their peripheries.  Government policies often end up raising barriers, threating the very existence of these links that can result into disappearance of opportunities in the informal sector. The policy brief explores a few such critical linkages, namely: trading of goods, efficient transportation and outsourcing of work by organized sector that are key to the survival of informal sector. It identifies threats and challenges along with approaches that the public sector must take to preserve these linkages.

Key words: Informal Sector; Rural-Urban linkages;

1        Introduction

Urban and rural areas share many linkages that help both to prosper. For instance, the urban is dependent on the rural areas for the raw materials, water resources, waste disposal and a market for products like automobiles (tractors), chemical products (fertilizers) along with a myriad of other products that in turn, support the day-to-day life of rural families. Rural-Urban (RU) migration is recognized as one of the three main drivers of urbanization (United Nations, 2015). Apart from mutually reinforcing markets and reciprocal exchange of processed and unprocessed goods (Akkoyunlu, December 2013), urban areas are also destinations of huge migration streams, especially from the surrounding rural areas. The migrants remit money back to the rural areas to facilitate the trickle-down effect of the wealth from urban to rural areas.

In 1970, Harris and Todaro suggested that people move from villages to cities with an expectation to earn more. However, formal jobs in cities today require a high level of skills with formal educational qualifications. In such situations, the non-regulated and non-taxed informal sector plays an important role in absorbing the low-skilled non-farm labour surplus. The seasonal migration between the rural and urban areas is well known, as the construction industry in the urban areas especially benefit from labour supply during the off seasons in agriculture. A large share of the workers that migrate to the cities are not registered, due to undocumented or informal methods of employment in the construction industry. In Gujarat (India) only 6% of the 1.2 million construction workers were reported to be registered for the year of 2012  (Express News Service, 2014). With the slow growth of formal sector, it is critical to save the informal sector from failing as millions of livelihoods depend on it.

2        Rural-Urban (RU) links and informal economy

2.1       Trading locally produced goods and ancillary employment

The existing relationships of migration, goods exchange and employment between the rural and urban especially help the informal sector. For example, KR market in Bangalore where food and other products are traded is a good example of an important node that acts as a link between rural and urban areas. These goods are generally grains and vegetables, hand-made items like garments, pottery, toys and other decorative items along with ceremonial items and raw materials like cloth and bamboo which are produced locally by SMSEs in the rural regions around the city. Traditional markets (like KR market) offer jobs to low skilled rural workers who migrate every day, a large number of whom are not registered. One can find thousands of people informally employed in hawking, vending and offering services like packaging and carrying goods within the market area. Scavengers make a living from the waste generated in the market area. It is an example of many such markets that exist in the cities of developing countries. Often smaller informal markets in the many neighbourhoods around the city are linked to other major traditional markets in the city (like the KR market in Bangalore) where they procure their goods at a whole-sale or lower rate. Thus for any planning intervention it is important to consider the network of flow between the informal and traditional markets rather than studying them in isolation.

Traditional markets like KR market in Bangalore are old, dilapidated and can be considered as underutilizing valuable land. Thus, it is common for the government or the private owners of these market areas to reconstruct buildings and upgrade infrastructure. However, often these developments come at a cost which the informal sector cannot afford. If left to free market, after development of an area, it will be susceptible to corporations and wealthy enterprises that can pay more to use the spaces. The disappearance of low cost economies from the market will not only render the rural commuters jobless but also destroy the links it has with informal markets around the city.

2.2       Small scale Industries and outsourcing by organized sector

The special session on informal sector at Habitat III highlighted a strong link between the formal and informal sector. Enterprises in the formal sector (e.g. corporations) often outsource labour to the small scale enterprises in and around the city to help cut costs and maximize productivity in manufacturing. Small and medium enterprises in the peri-urban areas that look for wage based informal labour offer employment to rural workers in the nearby areas. Other small-scale manufacturing firms like those in the garment industries that are located in the peri-urban areas of Bangalore employ seasonal migrants as wage based labour. These are critical links of income and occupation diversification for the poor in the region. While the lack of regulations on wage and safety standards for the informal workers is a concern, it is also a reason why large sections of the urban poor population find employment to support their families. This relationship between the formal and informal enterprises has played an important role by employing not only migrants from rural areas who come to the cities for economic opportunities, but also jobseekers from villages around them who commute every day for work.

Firms forced by governments to formalize and improve the working conditions of the informal workers often raise barriers and costs for them to continue operating – leading to what is termed as ‘over-regulation’. UN DESA argues over-regulation as one of the threats to the link between formal and informal sector (Chen, July 2007).

 2.3       Transportation – connecting the appropriate areas of opportunity

The development and expansion of transportation networks have been significant link for rural population seeking employment in urban areas. With growing connectivity people are able to commute from farther away. It is not uncommon to find people commuting 200km everyday on local rails in India to access work into cities markets. While on one hand commuting on this scale can be considered detrimental to the environment, it remains essential for the poor to access jobs for their survival. Living in cities away from one’s social ties can be expensive both psychologically and economically. Areas where public transportation is not frequent tend to develop privatized agencies which are often informal in nature (Cervero, 2000). The self-employed auto-rickshaws of India and tuk-tuks of Thailand are but examples of a number of innovative transportation solutions the informal sector has contributed across developing countries.

Having said that, basic health and safety considerations are often absent in the occupation and the informal transportation workers are often harassed along with requiring to bribe police and other criminal groups to protect their livelihoods. More importantly, unilateral local governmental policies related to routes, route bans and restrictions can affect their income severely.

3        Conclusion

While policy makers feel the need to promote a formal economy, discussions at Habitat III fully acknowledge the innovative role of the informal sector. For example, in one discussion at the conference Shivani Chaudhry (from Housing and Land Rights Network, New Delhi) voiced that the connotation of illegality attached to informal sector can have negative implications on people’s lives, such as eviction and criminality. Informality thus needs to be recognized as a practice that provides basis of survival for millions and is a reality of cities today. However, the informal sector is vulnerable to policy and instrumental change. Thus, when planning cities for inclusiveness, planners and policy makers must be sensitive to the conditions that allow informal activities and practices to thrive. Urban-Rural linkages play a critical role in generating and sustaining opportunities in the informal sector. Disappearance of these links can cause inefficient distribution of wealth between cities and its surrounding areas. The brief identifies how government policies and planning efforts can threaten the survival of these linkages. Both rural and urban residents access jobs that are in informal nodes like the traditional markets and local enterprises. Caution must be taken by the policy makers to safe-guard these linkages as they serve livelihoods in the informal sector. There are also potential for creating new linkages such as knowledge transfers and must be tapped. Ultimately, opportunities created by RU linkages can be growth ladders for the people engaged in the informal sector.

4        Policy recommendations

  • The government must make every effort to conserve local and traditional markets against gentrification and disappearance. They serve as important nodes for small scale rural enterprises and provide employment opportunities in the informal sector for both urban and rural population. Regulatory mechanisms by appropriate policies and zoning are one way to protect the livelihoods of the vulnerable population in these areas.
  • The low cost of operation of SMEs that often operate informally from the peri-urban and rural areas around the city is responsible for the links it has developed with the organized sector in urban areas. There is scope for exploiting the link between corporates and informal sector for efficient knowledge transfers so as to provide growth ladders for informal economies in rural and urban areas.
  • Informal workers need to be respected in order to help them grow out of their poverty. Social protection of their human rights can be considered more important than economic regulations which often end up raising barriers instead of facilitating. Providing identity cards and redefining informal sector as ‘independent self-employed workers’, as explored by the panel at Habitat III, can help both productivity and esteem of the workers in the sector.
  • Preserving access of peri-urban and rural areas to markets in urban areas through affordable and efficient transportation is critical. The informal transportation service providers not only identify and connect areas of opportunity but also provide employment to small scale entrepreneurs. They can be made partners with the government under regulation.

5        References

Akkoyunlu, Ş. (December 2013). The Potential of Rural–urban Linkages for Sustainable Development and Trade. s.l.: NCCR Trade.

Cervero, R. (2000). Informal Transport in the Developing World. Nairobi: UNHABITAT.

Chen, M. A. (July 2007). Rethinking the Informal Economy: Linkages with the Formal Economy and the Formal Regulatory Environment. UNDESA, Department for Economic and Social Affairs. New York: United Nations.

Express News Service. (2014, July 28). Only 6% of 12 lakh construction workers registered in Gujarat: CAG. Retrieved October 29, 2016, from The Indian Express: http://indianexpress.com/article/india/gujarat/only-6-of-12-lakh-construction-workers-registered-in-gujarat-cag-2/

United Nations. (2015). Issue Paper and Policy Units of Habitat III., (pp. 25-26). Nairobi.

 

About the author

Amartya Deb (adeb1@sheffield.ac.uk) is Allan and Nesta Ferguson Scholar at University of Sheffield pursuing his masters in Cities and Global Development. He holds a master’s degree in planning (with specialization in regional planning) from School of Planning and Architecture, Delhi.

 

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