Wage gap and mobility between vulnerable and secure workforce in india

Abstract

Over the last two decades, concerns around instability and precarity of work in India have been growing. However, the literature lacks a comprehensive classification of the workforce based on vulnerability. In this thesis, I develop a classification to identify the vulnerable workforce in India. Further, I propose a conceptual framework which yields endogenous sorting of workers into vulnerable and secure labour markets, the consequent wage gap, and the mobility that may arise due to exogenous shocks. Using data from the Periodic Labour Force Survey (PLFS), I estimate the wage gap between vulnerable and secure workers. I further employ the Oaxaca-Blinder decom position to determine the explained and unexplained components of the gap. I find the average wage gap between the two work arrangements to be around 40%, with the peak during the pandemic year of 2019-20. After the pandemic, the endowment effect reduced by over 5% points, implying that a larger portion of the wage difference is now unexplained. Additionally, evidence suggests an influx of workers into the secure and self-employed sectors post-pandemic, which aligns with the conceptual framework’s predictions. Through such analyses, I attempt to study the labour market segmenta tion through a new lens that accounts for multiple horizontal vulnerabilities, including economic uncertainty and contractual vulnerability.