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Wage Inequality and Job Insecurity Among Permanent and Contract Workers in India: Evidence from Organized Manufacturing Industries

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  • Amit K Bhandari
  • Almas Heshmati

Abstract

Since the early 1990s, the employment structure of organized manufacturing industries in India has undergone substantial changes with steep rise in the use of contract workers in place of permanent workers. This process has led to increased wage inequality, discrimination as well as concern of job insecurity in the labor market. The paper focuses on wage inequality between permanent and contract workers, since contract workers earn substantially lower wages than their counterparts. The study uses data at the individual level from a recent labor survey of organized manufacturing industries in the India. The lower wage earned by contract workers is largely due to cost cutting, rather than differences in labor productivity. The issue of job insecurity has been modeled in the form of a binary logistic model. The factors affecting job security are divided into productivity-related attributes such as level of education and skill, and institutional attributes such as labor market rules and regulations and union membership. Contrary to the general expectation, the study finds that permanent workers are more concerned regarding job insecurity than the contract workers.

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Bibliographic Info

Article provided by IUP Publications in its journal The IUP Journal of Applied Economics.

Volume (Year): VII (2008)
Issue (Month): 1 (January)
Pages: 80-111

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Handle: RePEc:icf:icfjae:v:07:y:2008:i:1:p:80-111

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  1. Heshmati, Almas, 2000. "Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries," Working Paper Series in Economics and Finance 394, Stockholm School of Economics, revised 18 Oct 2001.
  2. Heckman, James J. & Lochner, Lance & Todd, Petra E., 2005. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," IZA Discussion Papers 1700, Institute for the Study of Labor (IZA).
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Cited by:
  1. Shyam Sundar, K.R, 2011. "Non-regular workers in India : social dialogue and organizational and bargaining strategies and practices," ILO Working Papers 466556, International Labour Organization.
  2. Rai, Soumi, 2012. "Human resource management and labour relations in the Indian industrial sector," Discussion Papers, Research Group Globalization, Work, and Production SP III 2012-301, Social Science Research Center Berlin (WZB).
  3. Su, Biwei & Heshmati, Almas, 2011. "Analysis of Gender Wage Differential in China's Urban Labor Market," IZA Discussion Papers 6252, Institute for the Study of Labor (IZA).

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