Overlapping Dimensions of Informality in Urban India

Informality – broadly defined as that which falls ‘outside the purview of the state’ – is a key feature of India’s growing cities and towns. This paper examines the relationship between informality in employment and housing. In particular, how does a household’s informality in employment affect its housing outcomes? The conceptual framework developed identifies key features of informal employment, and proposes mechanisms through which they can make a household more likely to live in informal housing. The empirical analyses using the India Human Development Survey support the proposition that households with more informal employment types are more likely to live in informal housing due to factors such as low income, volatile income, low employment security, high opportunity cost of time, and barriers in the housing and financial markets. In the short-term however, households who do experience a change in employment type (proxied by primary source of income), are observed to have relatively small reductions in the likelihood of being housing deprived. This suggests that changes in housing outcomes may be slow and subject to frictions. Complementary barriers may also need to be alleviated for improvements in employment conditions to affect housing outcomes. Results also highlight how factors such as education and social group (caste and religion), which are closely tied to both employment and housing outcomes in the Indian context, play a significant role in driving the overlap. The main findings are robust to two alternative measures of employment informality. This suggests that when data are scarce, the coarser measure, primary income source, can reasonably capture differences in household level employment that matter for housing outcomes. This paper’s main argument, that the precarity of informal employment makes households more likely to live in informal housing, implies that part of the solution to informal housing lies in employment conditions. This provides yet another argument for strengthening social protection and policies promoting decent employment. Solutions to address employment related barriers in the housing and financial market are also important. Finally, this paper makes the broader assertion that urban informality is multidimensional: a considerable share of households face informality, precarity and exclusion in multiple facets of their lives. Therefore, more integrated efforts to reduce the burdens that informality places on the residents, are crucial for inclusive, equal, and resilient cities.