Segmentation and Job Mobility in the Indian Labour Market

Abstract

The extent of mobility of the workers among different segments of a labour market plays a crucial role in the overall levels of poverty and inequality in the economy. Theoretical conceptualizations of the degree of mobility in the labour market have broadly been polarized into a segmented vs. integrated labour market debate. Within the segmented model frame-work the informal economy is considered an unfavorable sector and the informal workers queuing for better jobs in the formal economy. This view is countered by the legalist school who view the choice to be informal to be voluntary. Due to the importance of labour mobility equitable growth and poverty reduction and its significance in understanding the nature of the labour market, the present study analysis the patterns and consequences of labour mobility in India using the novel IHDS panel data. Our study finds significant mobility across sectors in the economy. We also find certain individual attributes being associated with movement into certain labour market segments. Finally, our study finds evidence of significant earnings differentials across paid work statuses. The study finds evidence of segmentation with regard to regular (or formal) vis-a-vis casual (or informal) wage employment. We also notice large-scale distress driven movements of works, especially from OAW and cultivation work into casual work. In contrast we also notice a large number of small businesses which have seen growth over the period. Given the results of our study suitable policy recommendations have been made.