Wage Gap and Employment Status in Indian Labour Market: Quantile Based Counterfactual Analysis

Abstract

This study examines the extent of wage gap between workers in permanent and temporary jobs but in roughly similar occupation types by evaluating the impact of workers’ characteristics and education. The differential effects of the covariates on wage gap at different locations of the wage distribution are estimated by applying quantile regression model. After estimating the differential effects the relevance of glass ceiling or sticky floor hypothesis has been tested with Indian data. The wage gap between temporary and permanent employment is decomposed into endowment effect based on the difference in labour market characteristics and coefficient effect based on the difference in returns for the same characteristics. The study observes that the wage gap between temporary and permanent workers is wider at the upper tail of the distribution not rejecting the glass ceiling hypothesis. The decomposition analysis suggests that the wage gap presents in the Indian labour market primarily because of discrimination measured by the coefficients effects.