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

33 Pages Posted: 8 May 2006

See all articles by Amit K. Bhandari

Amit K. Bhandari

RBC College; IZA Institute of Labor Economics

Almas Heshmati

Sogang University; Jönköping International Business School

Date Written: April 2006

Abstract

Since the early 1990s, the employment structure of organised manufacturing industries in India has undergone substantial changes with the 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 the concern of job insecurity in the labour market. We focus on the wage inequality between permanent and contract workers, since contract workers earn substantially lower wages than their counterpart. The study uses data at the individual level from a recent labour survey of organised manufacturing industries in India. The lower wage earned by contract worker is largely due to cost cutting, rather than differences in labour productivity. The issue of job insecurity has been modeled in form of a binary logistic model. The factors affecting job security are divided as productivity related attributes like level of education, skill etc. and institutional attributes such as labour market rules and regulations, union membership etc. Contrary to the general expectation the study finds that permanent workers are more concern of job insecurity than contract workers.

Keywords: job security, discrimination, wages, decomposition, permanent and contract

JEL Classification: J70, J31, J60

Suggested Citation

Bhandari, Amit K. and Heshmati, Almas, Wage Inequality and Job Insecurity Among Permanent and Contract Workers in India: Evidence from Organized Manufacturing Industries (April 2006). IZA Discussion Paper No. 2097, Available at SSRN: https://ssrn.com/abstract=900362

Amit K. Bhandari

RBC College ( email )

Naihati
North 24 Parganas
Naihati, 743134
India

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Almas Heshmati (Contact Author)

Sogang University ( email )

Seoul 121-742
Korea, Republic of (South Korea)
0082-2-705-8771 (Phone)

HOME PAGE: http://www.sogang.ac.kr/english/academic/03_under_0123.html

Jönköping International Business School ( email )

Jönköping, 551 11
Sweden

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