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Wage structure and wage differentials in formal and informal sectors in India

Author

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  • Smrutirekha Singhari

    (Institute for Social and Economic Change)

  • S. Madheswaran

    (Institute for Social and Economic Change)

Abstract

This paper attempts to decipher wage structure and wage differentials by gender, caste and religious groups in formal and informal sectors in India using recent 2004–05 and 2011–12 NSSO’s survey data. The study finds that the wage structure in formal and informal sectors differs a lot. The wage rates paid to workers in the informal sector are lower than that of the formal sector. The variations in wages among workers in informal sector and for casual workers in particular are negligible. The gender wage differentials are found to be more in the informal sector than in the formal sector, while caste-based wage differentials are found to be high both in formal and informal sectors of the regular labour market; it is more pronounced in the private sector of the regular formal labour market. Moreover, wage differentials between Hindus and Muslims are high in both formal and informal sectors of the regular labour market; the religion-based wage differential is observed at higher education levels. In addition to this, the average daily wages paid to women and STs in informal sector are found to be lower than the National Floor Level Minimum Wage rate. Thus, there is a need for proper implementation of minimum wage policy in India.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:ijlaec:v:60:y:2017:i:3:d:10.1007_s41027-018-0110-y
    DOI: 10.1007/s41027-018-0110-y
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    References listed on IDEAS

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    Cited by:

    1. Satinder Singh & J. K. Parida & I. C. Awasthi, 0. "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. 0, pages 1-24.
    2. Noe Reidt, 2021. "Climate Policies and Labor Markets in Developing Countries," CER-ETH Economics working paper series 21/351, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    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. Satinder Singh & Jajati K. Parida, 2022. "Employment and Earning Differentials Among Vocationally Trained Youth: Evidence from field studies in Punjab and Haryana in India," Millennial Asia, , vol. 13(1), pages 142-172, April.
    5. Jajati K. Parida & Merry Elizabeth John & Justin Sunny, 2020. "Construction labour migrants and wage inequality in Kerala," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 22(2), pages 414-442, December.

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    More about this item

    Keywords

    Wage structure; Wage differentials; Formal sector; Informal Sector; India;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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