Trajectories of labour market transitions in the Indian economy☆

Abraham, Rosa (2025) Trajectories of labour market transitions in the Indian economy☆. World Development, 195.

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Abstract

The Indian economy, despite registering high growth, is characterised by a persistent and vast informal economy. Using India as an illustration, we draw lessons for characterising labour markets in contexts of high informality. We employ a group-based statistical modelling method to identify whether systematic patterns exist in the high volume of worker transitions across different employment arrangements. Using panel data for eight points between 2017 and 2019, we identify seven dominant labour market trajectories. The trajectory capturing stable formal salaried employment, with the highest average earnings, accounts for only 6.7% of the sample. None of the dominant trajectories denote a job ladder from informal to formal work, and the sorting of individuals into informal trajectories is far from voluntary, indicating the existence of formal–informal segmentation. The most populous trajectory, comprising 38.4% of the sample and associated with the second-highest average income (although less than half that of the formal salaried trajectory), is stable self-employment, followed by a trajectory representing transitions within different forms of informal wage work (27.2%). Most trajectory groups associated with informal wage arrangements exhibit high flux, indicating a lack of stability. Furthermore, trajectories associated with informal wage employment have even lower earnings than those linked to informal self-employment. Far from suggesting the desirability of informal self-employment, this pattern indicates a breakdown of the expected voluntary transition from self- to wage employment in the process of structural transformation. Access to trajectories is stratified along several correlates, especially caste. Caste hierarchy operates most starkly at the point of access to trajectories, while its influence on earnings penalties or gains does not always operate uniformly. Overall, our findings disrupt standard expectations in structural transformation models and labour market theories, highlighting the need to foreground the evolving nature of informality in labour market models for developing economies.

Item Type:	Article
Authors:	Abraham, Rosa
Document Language:	Language English
Uncontrolled Keywords:	Informality; Labour market; Transitions; Economic development Job ladder; Caste
Subjects:	Social sciences Social sciences > Economics
Divisions:	Azim Premji University - Bengaluru > School of Arts and Sciences
Full Text Status:	Restricted
Related URLs:	Publisher
URI:	http://publications.azimpremjiuniversity.edu.in/id/eprint/6551
Publisher URL:

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