Emerging Dynamics of Labour Market Inequality in India: Migration, Informality, Segmentation and Social Discrimination

Evidence for three decades or more indicates that wage inequality has consistently increased in most labour market segments in India. This paper focuses on how informalisation, migration, segmentation, and social discrimination, which operate most significantly at the lower end of the labour market, have contributed to well-being deficits and rising labour market inequality. There is a large and growing wage gap between formal and informal workers in the organised sector after controlling for other characteristics of the workers. On average, workers who are allocated formal or informal work in the organised sector have very similar characteristics. Across both formal and informal work, while education and experience improves wages, female and low-social-status workers have lower wages, controlling for other characteristics. This paper argues that seasonal and circular labour migrants form a growing segment of the informally employed. Poor and low-caste workers form a disproportionate proportion of such workers. Seasonal/circular migrant workers usually form the lowest rung of labour at organised sector work sites. They are segmented and fragmented by the recruitment process and along lines of caste, sex, ethnicity, language and region. This segmentation and fragmentation creates the basis for capital to acquire low-cost, highly flexible labour, who work long hours and take up the most dangerous work. This paper shows that the process of labour segmentation in Indian labour markets builds on well-entrenched processes of social discrimination but has assumed new forms as the workforce has become more mobile and informalised. Gender-based labour segmentation builds on the culturally determined social reproduction responsibilities of female workers and other socio-cultural factors. This paper concludes that while the above processes are linked to the underlying dynamics of capitalist growth in India, more equitable labour market outcomes at the bottom of the pyramid can be achieved through the provision of suitable social protection, sensible labour market regulation and a more comprehensive anti-discrimination framework.