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Post-reform Trends in Wage-Differentials: A Decomposition Analysis for India

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  • Mukherjee, Dipa

Abstract

Wage inequality often creates much broader socio-economic inequality and may even accentuate them. For attaining equitable development convergence in wages and earnings is therefore desirable. This paper explores trends and patterns in wage differentials in India in the post reform period. Using decomposition technique it compares trends in within group and between group disparities – across occupational group, gender, job type, and region. It is observed that while inter-group disparity or vertical differentials are coming down in terms of wage rates, they are increasing in terms of total earnings because of more than proportionate rise in disparity in labour demand and job availability. Intra-group wage differentials have increased among most of the occupations as also among several sub-groups, leading to polarization within groups. Decomposition analysis shows that wage differential across some groups are mainly due to the skill factor while for some other groups it is pure discrimination or unfavourable labour market conditions which is creating the wage differential. Only an inclusive growth strategy will lead to lowering of wage differentials and removal of disparities in living standards across space and people.

Suggested Citation

  • Mukherjee, Dipa, 2007. "Post-reform Trends in Wage-Differentials: A Decomposition Analysis for India," MPRA Paper 12754, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12754
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    References listed on IDEAS

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    3. Geeta Gandhi Kingdon, 1998. "Does the labour market explain lower female schooling in India?," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 39-65.
    4. Duraisamy, P., 2002. "Changes in returns to education in India, 1983-94: by gender, age-cohort and location," Economics of Education Review, Elsevier, vol. 21(6), pages 609-622, December.
    5. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    6. repec:pru:wpaper:29 is not listed on IDEAS
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    2. Sonu Madan, 2019. "Wage Differentials Among Workers: An Empirical Analysis of the Manufacturing and Service Sectors," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(4), pages 731-747, December.
    3. Satinder Singh & J. K. Parida & I. C. Awasthi, 2020. "Employability and Earning Differentials Among Technically and Vocationally Trained Youth in India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 63(2), pages 363-386, June.
    4. Smrutirekha Singhari & S. Madheswaran, 2017. "Wage structure and wage differentials in formal and informal sectors in India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 60(3), pages 389-414, September.
    5. Shiba Shankar Pattayat & Jajati Keshari Parida & Kirtti Ranjan Paltasingh, 2023. "Gender Wage Gap among Rural Non-farm Sector Employees in India: Evidence from Nationally Representative Survey," Review of Development and Change, , vol. 28(1), pages 22-44, June.
    6. Nidhi Sharma, 2021. "Interstate Wage Differentials in Organized Manufacturing Industries," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(4), pages 961-979, December.
    7. Balakarushna Padhi & Udaya S. Mishra & Urmi Pattanayak, 2019. "Gender-Based Wage Discrimination in Indian Urban Labour Market: An Assessment," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(3), pages 361-388, September.

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    More about this item

    Keywords

    Wages; Employment; Disparity; Occupational Choice; Decomposition;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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