Nature of employment and outcomes for urban labor: evidence from the latest labor force surveys in India

Abstract

Given its size and level of income, India faces unique challenges in the labor market. In the urban labor force of nearly 100 million, half of the workers engage in regular wage/salaried employment including in short-term contracts, yet a large number are either self-employed or work as casual labor. This vast pool of employees in the urban sector exists without job contract (92%), social security (90%) or paid leave (89%) barely earning subsistence wages, many close to the poverty threshold. This paper looks at the types of employment (TOE) for urban workforce and its effects on worker outcomes (earnings, hours worked, job loss). The assessment of the effects of TOE remains mostly instinctive without rigorous empirical research. Using latest three rounds of nationally representative Periodic Labor Force Surveys (PLFS), we assess the outcomes for urban workers based on TOE. We estimate the probability of being poor based on TOE and occupation where urban casual labor is associated with 7 percentage points higher likelihood of being poor and nearly 17% lower earnings. We uniquely assess the extent of job turnovers for urban workers and falling into unemployment at high frequency based on TOE. Analysis of urban panel after accounting for unobserved worker level factors captures the extent of fall in income due to job switching and loss of employment. Results indicate significant potential for poverty if worker is not socially protected, engaged in distress entrepreneurship or as casual labor.