Migrants and Informal Casual Labour Markets

Abstract

Internal migration in India is estimated to be at around 100 million people and short-term seasonal migration for work is estimated to vary between 80 and 140 million. Employers may benefit from the increase in the supply of labour, and middle-class households may benefit from the lower price of household services provided by the migrants and their families. Local residents with comparable skills to those of migrants may find that they have to compete for jobs in the labour market. Many regions implicitly differentially prioritize the interests of local residents and of migrants whilst filling vacant jobs, resulting in a tradeoff between welfare rights and openness to migration. Migrants take into account the tradeoffs of poor working conditions and unwritten and unenforceable contracts, with the higher income in the destination region, and all considered migrate. We provide a framework for understanding this socio-economic outcome. In many urban contexts, migrants and other low-skilled workers gather at some focal point such as a busy market place or crossroad in the morning and meet with potential employers who negotiate the type of work to be performed, the wage, and the number of hours that the worker has to work. Surprisingly, there has been a paucity of research on the employer–employee match in the daily urban casual labour market. Working days are usually long—between 12 and 14 h in many instances—and the wage and working conditions are usually negotiated. The market wherein the bargain takes place is a flexible labour market where workers can be replaced by the employer at a minimal cost to the employer. In most of such contracts workers report that they have been cheated and face harassment. The requirements for complete contracting are severe in this market. It is difficult ex ante to specify what constitutes a satisfactory performance of the contract (as it is difficult to record and measure performance), and accordingly, it is difficult to enforce the contract via a third party. This leads to opportunism as the employer holds up the worker by requiring further responsibilities such as longer hours of work to be undertaken that were not negotiated in the first place. We postulate a bargaining approach to unearth the role of regulation and the determination of wages and work conditions in the informal casual labour market.