Labour (im)mobility and monopsonistic exploitation of workers in the urban informal sector: Lessons from a field study

Abstract

It is well-recognised in labour economics that employers in monopsonistic competition have market power to set wages below the productivity of workers if workers are immobile, which causes monopsonistic exploitation of workers. Monopsonistic exploitation is propelled by employers’ expectations about the degree of (im)mobility of workers and therefore by ex post mobility of workers. It hence begs a question of what determines the relative (im)mobility of informal workers, which has significant implications for monopsonistic exploitation and working poverty in the urban informal sector. From our field study of urban and peri-urban labour markets in Bangladesh, by modifying the method of stochastic frontier analysis, we explain the behavioural foundation to the relative (im)mobility of informal workers. We thereby unravel the effects of individual and household characteristics, sociological, institutional factors and household ties (including worker’s kinship) on the relative immobility of a worker that can, in turn, explain monopsonistic exploitation and working poverty widely prevalent in the urban informal sector of South Asia.