Q. What is the difference between formal and informal sectors?
Solution:
The formal sector and informal sector are two parts of the economy, and they differ in several ways:
Formal Sector: This includes businesses and jobs that are legally registered and follow government rules. Workers in the formal sector have written contracts, fixed working hours, and benefits like health insurance, paid leave, and pensions. Examples are large companies, banks, and government offices. The formal sector contributes to the country’s taxes, and workers get fixed salaries.
Informal Sector: This includes jobs and businesses that are not regulated by the government. Workers in the informal sector do not have official contracts, and they do not receive benefits like health insurance or pensions. Examples include street vendors, small shopkeepers, and casual laborers. While informal jobs help people earn a living, they often lack job security and legal protection.
In summary, the formal sector is organized, follows legal rules, and offers more security, while the informal sector is unregulated and offers more flexible but less secure work.
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