Keywords
job contracts
ASI
wage differential
How to Cite
Abstract
This study investigates wage differentials between formal and informal sectors in India's labour market, specifically focusing on the role of job contracts. Wage disparities, a critical issue in labour economics, have significant implications for socioeconomic inequality. While previous research has examined wage discrimination based on caste, gender, and productivity, limited attention has been given to the impact of employment contracts on wage inequality. Using unit-level data from the Annual Survey of Industries (ASI) and the Periodic Labour Force Survey (PLFS), this study applies a dual labour market framework to explore how contract type and duration influence wage-setting mechanisms in formal and informal employment. The study reveals that permanent workers earn a consistently larger share of total wages than contractual workers, even as the total wages and workforce in both categories have grown. The findings underscore the role of contract terms in shaping wage disparities, with shorter-duration contracts linked to lower wages. This study contributes to policy discussions by offering insights into how job contracts exacerbate wage inequality and identifying targeted interventions to address these gaps. The results emphasise the need for regulatory reforms that reduce wage disparities, enhance equity in wage-setting processes, and improve labour market outcomes in India's segmented economy.
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