The Structure of Wages in India, 1983-1999

This paper examines the structure of wages for adult male workers within a dual labour market framework using micro survey data for three years spanning almost two decades. Augmented Mincerian wage equations are estimated for different types of workers – those with regular wage or salaried jobs and those with casual or contractual jobs - using a set of human capital measures and a variety of worker, industry and state characteristics after correcting for potential selection bias. This paper finds that the returns to education and experience are significantly different for these two types of workers consistent with the notion of segmented labour markets - while casual workers face at best flat returns the returns for regular workers are positive and rising in education level. There is some evidence of significant changes in the returns to education for regular workers over time. The widening of the gap between graduate and primary education and the rise in wage inequality could possibly be a consequence of trade liberalisation and other reforms pursued during the 1990s.