Employment, Labour and Informal Sector

A large body of research has been pursued at the Institute of Economic Growth on issues relating to labour market, employment, unemployment, underemployment and low productivity employment in the informal sector, standard of living and poverty, social capital, population and income mobility, urban slums, basic amenities and housing and many other aspects of urban development.

This is the most recent one to be added to the list of research themes of IEG. It was listed as a separate theme because special attention needs to be given to the problems of poverty, unemployment and other emerging social and economic conflicts in the context of economic reforms and growth.

Studies Completed in the Past

Some of the research issues pursued by the IEG faculty can be summarised under the following broad areas.

(i) Employment, Poverty and Quality of Life: Employment growth and patterns at the national and regional level; incidence of poverty at the national level, its variation across states and factors influencing it; employment generation in the broad sectors like industry and agriculture, and their differences in productivity and wages; impact of employment on the incidence of poverty; rural-urban and gender disparities in obtaining employment; and the provision of basic amenities such as supply of drinking water, sanitation and health services are some of the important issues that have been explored in detail. Rural-urban migration, informal sector employment and poverty are some of the issues, which have been researched extensively. Social capital and access to job market information, upward mobility and other issues relating to standard of living have been studied in detail.

(ii) Macroeconomic Studies on Employment: Employment growth, patterns and potentials at the aggregate economy level and in sectors such as agriculture, rural non-farm sector, urban manufacturing and tertiary sectors, and interconnections among them, constitute an important part of the Institute’ research. One way of understanding the inter-sectoral linkages is to address the employment issue in the macro-econometric framework, which enables one to assess the impact of several macro variables on aggregate employment and that of different sectors. For this purpose, employment data from different sources can be integrated with the required adjustments. This would not only enhance the scope for forecasting employment in the future years but also lay support to the working of optimal employment policy. Technology, factor prices and employment are intimately related and hence needs to be studied with great care for suggesting the removal of undue subsidies and forces that may work as hindrances to employment growth. Two other areas of importance at the macro level that have been done at the Institute are the impact of economic reforms on the employment and poverty, where reforms include fiscal reforms in terms of reductions in subsidies and government expenditure.

(iii) Industry Studies on Employment, Productivity and Labour: Given that organized industry was the primary instrument of development in the Mahalanobis strategy, employment in the organized industry has always been a matter of concern much more so in the post-reform period. Some of the areas that have been researched extensively at the Institute in this respect are: changes in the employment generation (quantity as well as quality) in the organized industry and across the industry groups in the post-reform period; impact of specific reforms such as liberalization of trade, foreign capital inflows in particular foreign direct investment, and technology transfers including technology imports, on the employment possibilities in the organized industry – aggregate as well as individual industries; spatial concentration of industry and hence employment opportunities and poverty. One of the most widely researched areas in this respect is employment, productivity and wage differences across the small and large-scale industries. The policy-created inflexibilities in the organized labour market that has come in the way of employment generation in the organized industry, make the relationships between labour reforms and employment opportunities an important area of research.

(iv) Studies on Agriculture, Rural Employment and Poverty: Issues of concern in this area are stagnation in agricultural employment and possibilities for improving employment potential of agriculture involving crop-based as well as allied activities; rural non-farm employment and factors responsible for it; employment and incidence of poverty in rural India across the regions; and supply and demand conditions for female labour supply.

Medium-term Research Agenda

While some of the issues mentioned above will continue to be the thrust areas for future research, the following areas and themes of work will also comprise an important part.

(i) Studies on Disparities in Employment Opportunities: Differential access to work opportunities enhances income inequalities and poverty. The earlier economic policies are said to have aggravated disparities by constricting growth and structural changes in the economy and introducing rigidities in the organized labour market. Important areas of inequality that attracted the attention of researchers are: formal-informal sector, rural-urban and gender disparities in terms of employment opportunities and wages.

(ii) Rural–Urban Growth Differentials, Migration and Urban Informal Sector: Employment in the informal sector especially in the urban areas has been the research interest of the Institute since long and continues to be so. Rural-urban disparities lead to migration of labour to large cities and exert tremendous pressure on the existing infrastructure base of the city economy. Notwithstanding the hazards of slum life, rural population migrate in search of jobs and access information pertaining to the urban job market through various informal channels. The role of informal institutions/ networks in reducing risks in the job market and in stabilising the standard of living is another important research area, which has gained prominence and needs to be explored further. In the context of liberalization and investment in large urban centres by multinationals the issue of rural-urban migration demands a fresh analysis.

(iii) Women Employment: Farm women constitute a large part of India’s women facing adverse effects of stagnating employment in agriculture. Women enterprises based on the local agro-based activities is a viable alternative. Factors that encourage women enterprises are worth studying. Another related study is the supply of female labour from below poverty line households in rural areas and its relation with the wage rate and number of earning members in the family. The gender dimension of employment and its relationship with several socio-economic and demographic variables need to be understood carefully. Inter-household inequality, education, caste, fertility behaviour, nutritional status, labour market participation and empowerment of women are all highly interrelated, and hence a detailed research on these relations can provide a meaningful base for policy formulation.

(iv) Labour Productivity, Wages and Standard of Living: With economic reforms and labour market flexibility how these variables have been behaving in relation to each other and in relation to other important macro variables need to be assessed in the context of India and other countries that have been undergoing structural reforms. Possibilities of convergence of labour productivity across states and/or activities (or industries), given the variations in infrastructure endowment, constitute another important dimension of research. Productivity gains shared by investors and labour are to be assessed critically.

(v) Role of Infrastructure in Raising Productivity and Employment Opportunities: Quality of life cannot be assessed merely in terms of per capita income or the head count measure of poverty. Other indicators such as percentage of population with access to safe drinking water, sanitation, electricity, minimum space required for dwelling per person, and skill formation are to be considered for judging the impact of development on the population. The role of infrastructure in improving productivity and opening up new opportunities as sources of livelihood determines an important course of research. Are large cities more productive compared to small and medium sized towns? What are the sources of productivity differentials? Whether the labour market functioning and real earning levels in large cities are higher than elsewhere? Are some of the unresolved questions, which have bothered development economists for several years in explaining the dynamics of urbanization. Future research is expected to focus on some of these issues in the broad context of rural diversification and urbanization following as a concomitant of industrialization and the growth of tertiary activities. Detailed analysis of labour market functioning in rural and urban areas, segmentation of the labour market along the lines of caste, skill, physical distances and the interconnections between the labour market and other markets are expected to offer an in-depth understanding of the issues.

(vi)Urban Poverty and Livelihood: The issue of urban poverty, its links with informal sector employment, the role of informal network/ institutions in providing income accessibility, the possibilities of upward mobility for the low-income households, mechanisms of improving productivity in the informal sector and provision of social security to the informal sector workers and the required policy directives constitute a major component of the future course of research. The role of social capital and networks in accessing job market information is also an important area of research. The multi-dimensional aspect of poverty is another area, which is being explored extensively.

Faculty Faculty Profile Email
Chakravarty, Sangeeta Link sangeeta@iegindia.in , sangeeta@iegindia.org
Mitra, Arup Link arup@iegindia.in , arup@iegindia.org
Jha, Brajesh Link brajesh@iegindia.in , brajesh@iegindia.org
Sahoo, Pravakar Link pravakar@iegindia.in , pravakar@iegindia.org


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