1.1 Prologue
This is a book about inequality in labour market outcomes in India. Inequality is studied in terms of differences in outcomes among persons aged 21â60 years belonging to a variety of social groupsâthe groups considered in this book are Scheduled Tribes (ST), Scheduled Castes (SC ), non-Muslim Other Backward Classes (OBC-NM), Muslims, and the Forward Castes (FC )1âand between men and women. The outcomes that are studied are as follows: (i) the risk of not being able to find a job; (ii) the likelihood of finding a âgoodâ job in terms a regular, salaried wage job as opposed to a âbadâ job as a casual wage labourer; (iii) the likelihood of finding work in desirable occupations (professional and executive, clerical) as opposed to undesirable occupations (agricultural labourers or construction); (iv) the likelihood of finding permanent jobs as opposed to casual jobs; and (v) wages from employment.
For each of these outcomes the book points to inter-group disparity in the proportions of their members that meet with labour market âsuccessâ. There is no doubt that, on the face of it, high success rates are a prerogative of persons from the FC while Muslims and persons from the ST, SC, and (to a lesser extent) the OBC-NM have to content themselves with lower rates. The moot point, however, is the degree of inter-group disparity in success rates that can be explained by differences between the groups in the attributes that make for success ( attributes effect) and how much can be explained by bias which leads employers to treat persons from the different groups differentlyâacting in favour of some and against othersâeven though these persons do not differ in terms of attributes. This is the discrimination effect. Differences between the groups in their average likelihood of labour market success can then be expressed as the sum of the attributes effect (i.e. differences in attributes between the groups) and the discrimination effect (i.e. differences in the treatment of equals from the various groups). The raison dâĂȘtre of this book is to evaluate the observed inter-group disparity in the labour market outcomes listed above in terms of the respective contributions of the attributes and discrimination effects.
This evaluation, which is the product of the authorâs original research, is conducted on the basis of two sets of data. The first relates to unit record data from the latest available round (68th round: July 2011âJune 2012), and the round pertaining to a decade earlier (55th round: July 1999âJune 2000), of the National Sample Survey (NSS ) of Employment and Unemployment. The NSS employment data give the distribution of its respondentsâwho are distinguished by various characteristics, including their caste, religion, and educational standardâbetween different categories of economic status. Of these categories, the three which are the most important are self-employed, regular salaried or wage employees, and casual wage labourers . The second relates to unit record data from the Indian Human Development Survey relating to the period 2011â12. This Survey provided details about the occupations, the security of job tenure, and wages of individuals drawn from over 42,152 households in 384 districts, 1420 villages and 1042 urban neighbourhoods across India. The next four sections of this chapter outline the salient features of the labour market in India, while the concluding section sets out in some detail the plan of the book.
1.2 Introduction
In 1951, 72% of Indiaâs workforce of 140 million2 was employed in agriculture: the percentages in industry (mining, manufacturing, construction, and utilities like gas, water, electricity) and the service sectorâat, respectively, 11% and 17% of the total workforceâwere relatively small. In turn, the concentration of employment in agriculture was reflected in the fact that, in 1951, agriculture contributed 51% to Indiaâs gross domestic product (GDP ), with industry and services contributing, respectively, 19% and 30%. By 2012, however, only 47% of Indiaâs workforce of 332 million3 was employed in agriculture, with 25% in industry and 28% in services; the corresponding contributions of agriculture, industry, and services to Indiaâs GDP were, respectively, 14%, 27%, and 59%.4
The first implication of these changes over Indiaâs post-independence period is that there has been a large shift in the workforce from agriculture to industry and services between 1951 and 2012, with more recent data showing these trends continuing: between 2011 and 2015, jobs in agriculture shrank by 26 million while non-farm jobs increased by 33 million. These large shifts, emblematic of significant structural changes in the Indian economy, occurred while the overall number of jobs rose hardly at all: from 456 million in 2011 to 463 million in 2015, an increase of just 7 million jobs in four years.5
Another implication of these changes is that productivity in agriculture, relative to overall productivity, has fallen sharply while that of services has risen dramatically. In 1951, agricultural productivity was 70% of overall GDP per worker while industrial and service sector productivities were, respectively, 1.72% and 1.76% of overall GDP per worker. By 2012, agricultural productivity was 28% of overall GDP per worker, while industrial and service sector productivities were, respectively, 1.08% and 2.11% of overall GDP per worker.6 So, productivity growth in agriculture has lagged behind overall productivity growth, industrial productivity is only slightly ahead, while productivity in services is twice that of overall productivity.
Another noteworthy feature of the Indian labour market is the low participation rate, defined as the proportion of the population aged 15â65 years (the âworking-ageâ population) that is either working or seeking employment. A low participation rate may have several causes: people of working age postpone entering the labour market because they are studying, or they drop out of the labour market because they are discouraged by repeated rejections, or they cannot enter the labour market because they have unpaid caring duties, or they simply exclude themselves from the labour market for socio-cultural reasons. This occurs, for example, when married women devote themselves entirely to household duties. Most notably, the female participation rate , which was within the 34â37% range in the 15-year period up to 2005, began to decline thereafter before stabilising at a rate of 27% in 2012; the male participation rate declined from 83% in 2005 to 79% in 2013 and has since stabilised at that rate (Dasgupta and Kar 2018).
Yet another important feature of the Indian labour market is the nature of the employers and the type of jobs that are offered. Employers are of two types: those in the organised sector and those in the unorganised sector . The organised sector is defined as comprisi...