Labour market discrimination in India

Liberalization, Privatization, and Globalization (LPG) policies of 1991 have brought a significant change in the pattern of employment with a new form of contractual relationship between employer and employee with a detrimental impact. Contractual employment is perceived to be positively correlated with labor flexibility and productivity. Resultantly, contract workers are found in both formal and informal sectors. Contractual arrangement tends to bring insecurity among workers; it denies the right to associate or unionize, affecting workers negatively.

Literature emphasizes considerable discrimination in labor market across the region and sector. In this regard, evidence sheds light on rising wage-based discrimination over the year along with the impact of sticky floor effect on wage (Duraisamy and Duraisamy, 2016). Discriminatory behavior caused by social and institutional bias is subject to several decompositions and experimental research (Karki and Bohara, 2014; Mainali et al., 2017). Decomposition studies mainly provide insight into caste- and gender-based discrimination. Studies on employment- based discrimination in south Asia provide a complex picture with variation in religion, gender, caste, and employer inherent bias (Sengupta and Das, 2015).

The evidence further indicates aggravation in discriminatory behavior in contractualization of work (Agrawal, 2013; Sengupta and Das, 2015), and there are other scholarships indicating contrary understanding (Pignatti, 2010). A few studies explored the issue of discrimination in India’s labor market with comparative analysis of regular and contractual dichotomy of employment. Dutta (2005) identified wage inequality between regular and casual workers factoring education as a major determinant.

Moreover, most striking gender-based discrimination to contract women workers implies that lower wage compared to men counterparts is prevalent and widespread. Deininger et al. (2013) found that gender-based discrimination is higher in the informal labor market causing more losses than gains, but employers tend to underestimate the impact, being motivated by inherent biases. However, formal or regular employment tends to decrease gender-based differential with time, but the wage gap between formal and informal setup remains to be stark (Sengupta and Das, 2015).

In rural India, non-farm wages are found to be higher than farm wages due to obvious reasons. Furthermore, farm distress and ever-growing globalization favor private companies and big farmers adding to the problem (Abraham, 2017). For the urban contractual labor market, the variation in wages in different sectors and industries is massive across the region (Panigrahi, 2016).

It has been argued that economic growth will not eradicate inequality as discrimination emerges from factors entrenched in the thought process guided by the social norms. The supply–demand framework suggests that the real wages for unskilled labor have increased post LPG, but the rise in rural areas is higher. Unni (2005) analyzes the wages of workers in the formal and informal sectors and found workers are forced to join the informal sector as they get rationed out of the formal sector. Education plays a significant role in determining the nature of employment a worker gets engaged with, allowing control over income with the level of education (Mainali et al 2017; Papola and Kannan 2017; Sharma, 2006; Srivastava and Sutradhar, 2016).

On the other hand, the majority of academia deals with a comparative analysis, advocating globalization for a liberal and competitive environment, as this would disrupt monopolies reducing the dominance of power, allowing lesser differentiation with probable equal outcomes (Sahoo and Neog, 2017). Understanding of discrimination in the formal sector is largely flawed as most of the Indian economy is informal in nature (Mehrotra et al., 2014; Sahoo and Neog, 2017). Henceforth, wages in lower rungs of the hierarchy are likely to be affected by social norms rather than based on legislation and rules.

Wage gaps at the workplace are the result of variation in the endowment of workers in the context of class, education, gender, and occupation. ‘iscrimination’ as the determining factors for the devaluation of labor and increasing inequality. Nevertheless, it has been emphasized that the informal nature of employment and rising inequality are the outcomes of discrimination (Gupta et al., 2006; Rodgers and Subramanian, 2016).

There is a deliberation on forms of discrimination in the context of institutions and regulations for detailing discriminatory actions (Blau and Kahn, 2003). As Peetz (2015) underlines the position of ‘regulation proximity’ or the conditions of employment of certain labor groups are to be regulated, involving collective bargaining, legislature, or other methods, in affecting working conditions. Furthermore, sectors and groups operating in low regulatory scenarios are most likely to suffer from the discriminatory nature of employment as there is a high likelihood of institutions, norms, and culture favoring the people in power. It causes adverse outcomes for vulnerable groups. A society with inequitable behavior tends to display a positive relationship with the market, India being picture-perfect for such a scenario.

As evident, academic literature has met mixed results in the context of providing an understanding of contractual labor and discriminatory behavior at the workplace. And lack of sectoral and grounded evidence from the field is a major issue. This study tries to contribute to the existing literature to decipher inequality about contractual work.