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Dissecting India's Unorganised Sector

Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector by National Commission for Enterprises in the Unorganised

Dissecting India’s Unorganised Sector

Dipak Mazumdar

n its Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector, the National Commission for Enterprises in the Unorganised sector (the commission, hereafter) has done a commendable job in putting together a composite profile of the unorganised sector. The database of the Indian economy, in spite of its deserved reputation, is fractured: information on the unorganised sector is scattered among a wide variety of sources. It is important to start with a clear definition of the sector. The commission makes clear that the organised-unorganised dichotomy in the Indian usage is the same as the formal-informal distinction in the international context. It defines the unorganised (informal) sector as all “unincorporated private enterprises…with less than 10 workers” and workers in this sector comprise those working in such enterprises (excluding ‘‘regulars with social security benefits’’ plus a sizeable body in the organised sector without any employment/social security benefits provided by the employers (paragraphs 1.10 and 1.13)).

1 Profile of the Sector

The commission provides an estimate of “unorganised’’ workers (Table 1.1). This effort is to be applauded given the variety of statistical sources that exist and I have not seen a careful estimate anywhere else. The table contains a few striking numbers. Of the total count of the gainfully employed (based on both the principal and secondary workers counted by the National Sample Survey, the NSS) an astounding

91.2 per cent were in the unorganised sector (US) in 1999-2000, increasing by rather more than a whole percentage point in 2004-05. A large proportion of this informal US employment is of course in agriculture, but non-agricultural activities still accounted for a substantial 40 per cent (Appendix Table 1.2).

Another interesting point about the in formal worker is that a significant

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review article

Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector by National Commission for Enterprises in the Unorganised Sector; New Delhi, 2007; pp xiv + 376.

proportion is employed in formal sector establishments. Hence US employment accounts for a larger proportion of total employment than the US itself. It is remarkable that in 1999-2000, 37.8 per cent of the workers in formal sector were in informal employment in terms of the commission’s definition of absence of job or social security coverage. Even more striking is that according to the commission’s statistics the entire increase in employment between the two thick rounds of the survey (1999-2000 and 2004-05) were of the informal type. Employment in formal sector establishments did increase by 16 per cent, but apparently all this increase was of the ‘‘informal’’ type (section 1.19). This rather spectacular increase in ‘‘informalisation’’ of employment in the formal sector was due to larger use of casual or contract wage labour.

The rich tables in the Appendix provide a wealth of information on the employment structure in India. Wage workers account for 36 per cent of total US employment, the rest being self-employed. Of the 36 per cent, 7 per cent are regular, the rest casual. Almost all of the wage workers in agriculture are casual but the regular-casual divide among them in the unorganised non-agriculture sector is almost half and half. The self-employed constitute just over two-thirds of the employment in the US, and this proportion surprisingly is almost the same in agriculture as in non-agriculture. The commission draws attention to a special category of workers who could come under the International Labour Organisation (ILO) Home Workers Convention 177 (adopted in 1996). These homeworkers, who are disproportionately females, are “dependant sub-contractors’’ who, although working for remuneration, worked in premises of his/her choice rather than in the location specified by the employer. They are to be distinguished from ‘‘independent self-employed’’. Their numbers have most likely swelled with the growing practice of “outsourcing’’. They fall in a category in between self-employed and wage worker, and could be included in either category in national survey of employment. The 1999-2000 survey of the NSS, however, had some special questions which enabled the commission to identify them. According to this count, they constituted 7.4 per cent of the US (Appendix table A1.4). The latest NSS does not provide information for this segment to be identified.

1.1 Income Levels

It is well known in the literature that the income of the self-employed is very widely distributed. They contain marginal workers who are trying to eke out some income with a minimum use of co-operant factors. But they also include small independent businesses with established markets whose income levels might exceed those of many formal sector workers. This is what we see in the NSS data on household expenditure levels where the different categories have been established by the occupation of the principal earner. The commission draws on this source to present the following statistics in Table 1 (p 28).

It is seen that the casual workers are mostly in the bottom household welfare class, but a substantial proportion of the self-employed are in better-off classes (although this percentage is a little lower than that of the regular workers who constitute just 7 per cent of the unorganised workforce).

We would have liked to know how the distribution of workers in the formal sector compares with that in the informal.


Unfortunately the commission does not provide such a table. Table 1.2 in the report is not comparable with that of Table 1.3, because the former for the whole population gives the distribution of population, and the latter for the informal sector is for workers. It is likely that the distribu-

Table 1: Distribution of Workers by Household Welfare Levels in the Informal Sector

Status Total Self- Regular Casual
Unorganised Employed Wage Wage
Workers Workers
Poor and vulnerable 78.7 74.7 66.7 90.0
Higher income 21.3 25.3 33.3 10.0

Source: Report, Table 4.1. The poor, in this classification, are those who are at or below the level of 1.25 times the official poverty line in 2004-05, and the “vulnerable” between 1.25 and 2 times the poverty line.

tion for the self-employed, in particular, in the informal sector overlaps with the distribution of the formal sector workers. The commission does provide estimates of the percentage of the workers below the poverty line (based on the mixed recall period and the Employment and Unemployment Survey). The data in Table 2.6 of the report suggest that 15.9 per cent of the selfemployed in the rural US, and 21.4 per cent in the urban, were below the poverty line.

This compares with the poverty ratios of The low level of wages in the casual wage

5.2 and 6.8 among regular organised sector is amply documented by comparing workers in the rural and the urban areas the average daily earnings in this sector respectively. However, the or-

Table 2: Average Daily Earnings in 2004-05 and Comparison with ganised sector, as already Minimum Wage1

Industry Male Female All % Below Minimum Wage

mentioned, contains a sizea-

National Rs 66 NCRL Rs 49

ble body of workers without

M F All All

contracts and social security

Agriculture 56.80 34.29 46.72 76.6 96.6 90.5 63.6 benefits. The poverty ratio Non-agriculture 76.12 47.62 71.29 45.5 83.0 64.7 26.8

All casual 74.30 43.58 68.10 48.7 87.5 83.7 54.0

among these was much clos-

Source: Report Appendix Table A3.1

er to that of the self-employed in the US, although significantly less than that of casual workers.

1.2 Wages

As we have seen, the casual wage labourers in both the rural and the urban sector occupy the bottom of the earnings distribution. Most of them are dependant on wage earnings. While 16 per cent are landless, another 64 per cent have ‘’sub-marginal’’ land holdings (less than 0.40 hectares). Of the casual wage workers, 78 per cent are in agriculture, the rest in non-agriculture, with construction being the most important, followed by services and manufacturing.


with the official minimum wage as defined under two alternative adjudications.

The massive extent to which the actual daily earnings in the Indian economy fell behind the official minimum wage line in 2004-05 is of significance in my evaluation of the commission’s recommendation in the next section.

The low wage level in the unorganised sector is not the only problem with the conditions of work in this sector. The commission documents in some detail the poor working conditions in the unorganised sector (Chapter 3). While the commission notes that “some of the attributes of the

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working conditions may not be easily measurable, and data on them may be speculative and subjective (such as ‘good, very good, bad and poor’)” there are others, e g, space, ventilation, temperature, humidity, etc, which can be measured and norms set. In India, the Factories Act (1948) has provided standards for some of these variables for the formal sector. There is ample evidence from case studies in the unorganised sector showing that not only are these standards not met, but generally conditions are deplorable in the place of work in terms of the variables that are not immediately measurable.

1.3 The ‘Wage-ladder’

Apart from the question as to how much is the unorganised sector wage below minimum wage norms, the extent of the gap in wage levels between the formal and informal sectors is of considerable interest. It shows the extent of “dualism’’ in the Indian labour market, particularly in comparison with other comparator countries in Asia and elsewhere (see Section 3). The commission does not address this set of issues, but we can point to some results from the literature. Although, as pointed out by the commission, regular workers contain some ‘‘informal workers’’, the wage difference between the regular and the casual categories give some idea of the formalinformal wage gap. Detailed analysis of NSS data on the earnings of the two categories have been undertaken by Vasudeva-Datta (2004) and Mazumdar and Sarkar (2008, Chapter 3). In 1999-2000, confining the sample to prime-age males, regular wage workers earned 3.3 times more than the casuals, measured at the mean, and

2.87 times more measured at the median. The dispersion of wages among regular workers is much more than among casuals. This is because age and education variables play a much larger role in the determination of regular wages, as do industry and occupation. The single most important explanatory variable in the casual wage function (for males) was region, with age playing a minor role, and education none. For manual workers alone, and controlling for age and education, regulars earned nearly double that of non-regulars. For rural females the differential was less – of the order of 50 per cent.

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However, detailed study of wages has shown that there is a hierarchy of wage levels even within the organised sector establishments. The most careful study of wage differences was carried out in a project initiated by the World Bank in collaboration with Bombay University in 1978-79. Unfortunately, this survey, which had the advantage of being in a regionally compact area, has not been repeated but it is unlikely that the major results are qualitatively different. The results revealed that, confining ourselves to male manual workers in the geographically limited area, “net” monthly earnings (i e, controlling for age, education, occupation, training and knowledge of English) increased monotonically from casual through small establishments through size classes of factories in the organised sector [Little, Mazumdar and Page 1987]. The critical point in the hierarchy seems to come at the 10-99 employment size class: the wage differentials as between three size groups above the level of 100 workers is not large. It should be remembered that at this date wage regulations covered all of the factory sector (the so-called Annual Survey of Industries sector). But this did not prevent substantial “net” wage differences to emerge within the “covered” sector, even though wages in the 10-100 size groups were more than third higher than in the small-scale establishments, and as much as 50 per cent higher than casual workers. Evidently, significantly lower wage differences are found not only for “uncovered” workers but also for workers employed in smaller factories within the covered sector. These wage differences most likely reflect differences in labour productivity, and are of critical importance to the analysis of Indian labour markets (see the discussion in Section 3).

2 Minimum Wage and Alternatives

The policy recommendations of the commission aimed at lifting the living standards of the unorganised sector worker fall broadly into two categories: on the one hand, strengthening and enforcing the minimum wage is viewed as the most important in the wage sector; and increasing the productivity of labour through measures that would ease the various types of constraints faced by small farms in agriculture and micro-enterprises in nonagriculture. These include “inadequacy of credit; low level of technology; difficulty in arranging critical raw materials; marketing of products; lack of skills, etc” (p 185). The two prongs of policy are clearly interrelated. Any success on either front should increase the income of workers. There is, however, a basic difference between the minimum wage and the productivityenhancing policies. While the latter unambiguously increases household income and thus in the second round increases the demand for labour, the problem with the policy of increasing the minimum wage, however, is that it might bring about a reduction in the demand for labour. This would have the effect of decreasing employment, and would, in a casual labour market, reduce the number of days of work secured by an average worker during a year (or season). If the dampening effect on employment is sufficiently strong the minimum wage has the adverse effect of actually decreasing the incomes of poor households in the economy as a whole. The present writer’s disagreement with the commission is strongest in the area of its recommendations on the minimum wage.

2.1 Empirical Evidence

In my view the commission’s optimistic view “that there is no clear-cut evidence that minimum wages deter employment” (section 1.46, p 10) is overdrawn. The commission might have been misled by the literature on the impact of minimum wage legislation implemented in developed countries including the United States of America (USA) and the United Kingdom (UK). The difference between the minimum wage in these countries and in India (both in terms of the past experience and what is being proposed by the commission) is the level. In developed country legislation, minimum wages are set at levels in which the impact on the earnings structure is marginal. In the UK, for instance, the National Minimum Wage was first introduced in 1999 (the extensive previous experience was with wage boards in individual industries). The rate was increased from year to year in line with the growth of the general level of wages. The year in which the minimum wage was introduced


it was (for adults) 0.87 of the lowest decile, and 0.47 of the median. The ratios increased to 0.91 and 0.51 respectively in 2006.2 A careful study of the impact on employment in a specific low wage sector (the home care industry) before and after the introduction of the minimum wage found that the elasticity of employment with respect to the wage increase was significantly negative but of moderate value (of the order of –0.5).3

We have given in Table 2, above, figures on the level of minimum wages already on the books in India which provide a dramatic contrast with the UK (and other developed countries) experience. The mean average daily earnings in all casual employment was half of that of the NCRL minimum wage, and even farther below that of the minimum wage recommended by the Central Advisory Board. A further relevant point is that in any comparison of developed country experience with the Indian scenario, the labour markets in the former would be much more of the type in which the employer deals with a firm specific labour force rather than a large mass of casual labour. As pointed out in Box 1 the monopsony and efficiency models would be more applicable to the former, and accordingly the impact of any administered wage on employment could be expected to be less severe.

The commission proposes an even higher minimum wage which has been in the Indian labour legislation so far. The recommendation in section 13.74 is that the National Minimum Wage should be fixed at a level which would assure the household of the worker “a monthly per capita income level corresponding to the poverty line as determined by the Planning Commission”, taking into account average dependantearner ratio in labour households, and the average days of employment secured by the worker in a month. In other words, the minimum wage should be used to bring the poverty ratio among labour households to zero. It is unlikely that such a drastic use of the minimum wage instrument could ever be operationally implemented. It might remain in the books much as the current standards have been doing for some time, and only be implemented in certain socalled ‘‘scheduled industries” or groups of establishments where monopsonistic conditions are strong, and employers enjoy a significant level of surplus.

2.2 Heterogeneity of Labour

An important point about the impact of a minimum wage in developing countries is that labour is more heterogeneous than in developed country both in terms of its innate quality (or efficiency) and in terms of the employers which use them. This is bound to be so in economies in which modern technology is impinging on traditional modes of production. If a uniform wage is imposed in the labour market with widely varying qualities of labour and enterprises (i) employers would tend to employ the more productive labour at the cost of labour of less quality, and (ii) enterprises with higher productivity – often those with more modern technology and market power – would absorb the cost of the high minimum while smaller, less productive enterprises would go under from the burden of high labour costs, if the minimum wage is effectively enforced. Both these effects will be regressive in terms of income distribution. Thus we have the paradoxical situation that minimum wage is often

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advocated by political interests which are advocates of high earning groups. The classic case is of course South Africa during the apartheid era. The unions of white mine workers were in the forefront of demanding a high minimum wage for black workers because it was pretty obvious that at the wage suggested the lower productivity black workers would not be competitive with white workers.

3 The Self-employed

A majority of workers in the unorganised sector are self-employed. The commission does a great job in providing a comprehensive account of this body of the labour force and of key components of it. Agriculture is, of course, the largest sector providing gainful employment to the self-employed, but non-agriculture is also of great importance. The commission notes an interesting gender difference in that females are to be found more in manufacturing and males in services. Not all of the self-employed are of course in the unorganised sector – Table 4.2 of the report provides a list of the principal types of the self-employed, separating the low income from the high income (professionals, owners of small enterprises, etc) persons. The brief descriptions in Chapter 4 of the variety of unorganised self-employed in non-agriculture are extremely useful and interesting.

The wide variety of workers and enterprises found in this sector suggest that different types of policies will have to be to be pursued for dealing with the specific needs of low earners. Agriculture of course dominates the sector. The policies for lifting the incomes of small farmers are reviewed in Chapter 9. In non-agriculture, the problems of individual self-employed are distinguished from those of enterprises and of homeworkers. While some issues, like the provision of credit on reasonable terms affect all these categories, others are more specific. The commission recommends that a special body to be called the National Fund for the Unorganised Sector (NAFUS) be set up to provide urgent services needed by small enterprises apart from credit – in the rates of techno logy, the supply of critical raw material, marketing skill development, etc. Existing bodies like National Bank for Agriculture and Rural Development (NABARD) and Small Industries

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Development Bank of India (SIDBI) “are not rendering these promotional services effectively”. Further details about this recommendation are to be found in the special report on credit submitted by the commission to the government.

The commission highlights the problem of the homeworkers as a specific category within the unorganised sector. These include a disproportionate number of females as well as child workers. “Many of the activities undertaken by homeworkers are conducted within a value chain, which is sometimes connected globally” (Para 4.89, p 71). Garments are the most important in this sub-sector. Together with other more domestically oriented industries like beedi-making, workers in these activities get a very small portion of the final sale price of their products (fieldwork evidence cited in the report puts the percentage at 17 per cent in beedi-making). It seems to me that this sub-sector is a classic case of monopsonistic labour markets, in which the workers are in a subservient relationship to a trader-assembler. As such minimum wage provisions should work pretty well in improving labour shares in this sub-sector (provided of course the levels of the minimum wages are not set in an over-ambitious way as discussed in Section 3 above).4 Another important point to note is that NGOs would be the ideal institutions to help in the formulation and implementation of such interventions. NGOs in fact are the most important institutions to help in the betterment of conditions in the unorganised sector. Given their proliferation in the Indian economy the commission might think of commissioning a special report on these bodies.

I do not have the space to examine or comment on the very large number of policy recommendations pertaining to the self-employed sector. I would therefore like to confine myself to one particular area on which the commission has not commented but which seems to me to be rather important. A substantial proportion of the self-employed in the unorganised sector work is in family enterprises with or without the use of some hired wage labour. Of those working with hired labour, the NSS distinguishes the establishments with two to five workers and those employing six to nine workers, the rest being own-account enterprises mostly working with family labour. The report gives the percentage of total workers in these categories being 19.4, 7.2 and 73.4 of all unorganised sector workers (Table 4.3). However, if we leave out agriculture, which consists disproportionately of the own-account type of enterprises, the importance of the other two categories of establishments would be much larger.

The larger establishments of six to nine workers include the small enterprises in modern manufacturing. In international statistical practice they are generally included in surveys or censuses covering the factory manufacturing sector (the cut-off point being generally five workers). To put the Indian size distribution in modern manufacturing in perspective we can include these enterprises along with the ones in the formal sector covered by the Annual Survey of Industries. When we do this, a striking result emerges in the international comparison. Among the Asian countries, India has ‘‘dualistic’’ structure with a bipolar distribution. There are two


strong modes in the distribution of employment in modern manufacturing: in the 500 and more category and the five to nine category with the proportion of employment in the intermediate middle size groups being conspicuously small. This phenomenon sometimes characterised as that of the “missing middle” is contrasted with other Asian countries – e g, Korea, Hong Kong, Taiwan, Malaysia and Thailand. A few of these other Asian countries like Taiwan, Hong Kong, Japan and post1990 Korea have strong presence of small enterprises in the five to nine class but the proportion of employment in this group is never as much as in the large enterprises, and of course the intermediate size groups are well represented. A further striking difference between India and the other Asian countries with a strong small-scale sector in manufacturing is that the productivity gap between the small and the large units in modern manufacturing is much larger in India. The gap in labour productivity between the large and the small size groups in India is of the order of 8:1, as against 3:1 in Japan, Korea and Taiwan (and even smaller in Hong Kong).5

Why should we regard the phenomenon of “dualism” in manufacturing, with its “missing middle”, as a drag on the growth and performance of the manufacturing sector? Of the many points relevant here the more important are the following:

  • (1) Difference in productivity between the extremes of firm size groups is reflected in differences in wage levels. Thus the wider the gap between productivity levels, the larger is the loss in terms of allocative efficiency and larger the inequality in the distribution of labour earnings.
  • (2) In a more dynamic sense the missing middle implies a weak process of graduation of small firms and the development of entrepreneurship. It is arguable that the dispersion of entrepreneurship as well as industrial technology over a wide spectrum of spatially and economically distributed regions is dependant on the mushrooming of medium scale enterprises, into which the small units are able to graduate.
  • (3) Similarly dualism slows down the growth of the labour force with industrial skills. This is particularly true in developing economies in which many of the skill requirements of modern industry (including
  • discipline in the work place) are acquired by on-the-job-training rather than education in schools. The slow growth of the skilled workforce in its turn has an impact on the choice of technology. It has been established that capital-intensive techniques have been adopted in economies or sectors more in response to a shortage of skilled rather than unskilled labour. Thus a potential shortage of skilled labour of the type needed by modern manufacturing could dampen the value of employment elasticity and slow the rate of growth of employment in the industrial sector.

    (4) While the last two points emphasise problems created on the supply-side “dualism” might also affect the growth of industry through its impact on the demand side – the expansion of markets for industrial goods. But their importance in the expansion of domestic markets also needs to be emphasised. Dualism strengthens and perpetuates product market segmentation. The market for industrial products is split into low quality products catering to the need of low-income consumers, and supplied by small-scale local producers on the one hand, and the higher quality segments which the large establishments supply to a limited number of high-income consumers. The lack of integration of markets could be a bottleneck in the development of mass markets for manufactured consumer goods.

    It has been noted that the development in the non-manufacturing sector in India in recent decades has been peculiar in that the largest increase in employment has been in the tertiary rather than the manufacturing sector, thus contradicting the established pattern of development in which the reallocation of labour from agriculture to manufacturing has been the hallmark of growth in less developed economies. One explanation for this peculiarity is that recent developments in technology has been much faster in manufacturing thus reducing the need for manufacturing to use so much labour. But the Indian case has been rather extreme. Not only the relative importance of manufacturing in absorbing labour released from agriculture been at a much lower level than the historical experience of Asian economies like Korea and Taiwan, but it has been at significantly

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    lower level than that of China, or also a late industrialising country like Thailand.

    Papola (2005) compared the experience of changing shares of Gross Domestic Product (GDP) and employment over the period 1960-2002 in five Asian countries

    – China, Indonesia, Thailand, Malaysia

    Figure: Relative Productivity in Services vis-à-vis Industry, Various Asian Countries, 1960-2000

    180 –167

    – 140 – – 100 – – 60 – – 20 – 0 – 59 45 47 37 72 71 60 60 133
    China Indonesia Thailand Malaysia India
    1960 2002

    Source: Papola 2005. The original source of the data is the World

    Development Report, various years.

    and India [reproduced in Mazumdar and Sarkar 2008, Chapter 3]. The significant point to emerge was that the share of workforce in industry increased along with its share of GDP in all countries including India, but it produced a much larger share of GDP in all Asian developing countries other than India. It implied that the relative sectoral productivity of labour in Indian manufacturing has been strikingly low by international comparison. In 2002 the tertiary sector in India contributed more than half the GDP in India but its contribution to employment was only 22 per cent.

    The picture presented in the Figure of relative productivity in services vis-à-vis industry in the comparator Asian countries brings out the striking point that it is only in India – among all the countries represented

    – that the relative productivity in services has increased over the 40-year period. A second important point to note is that the productivity in services exceeds that in industry only in India in both the years, and that too by a substantial percentage.

    It shows that service sector growth in India has been productivity-led and not employment-led contradicting views of some economists that employment grew in services because this sector has been a repository of low income labour “pushed out” of agriculture. The heart of the employment problem in India would thus seem to be not an excess absorption of labour in the tertiary sector, but the low productivity of the manufacturing sector,

    Economic & Political Weekly EPW february 9, 2008

    and its persistence over time. It is this low performance of manufacturing which has prevented it from being the dynamic sector – playing a central role in productivity growth as well as the reallocation of labour as in other countries in the history of successful economic development. It will now be argued that this disappointing role of the manufacturing sector can be traced, at least to a significant part, to the persistence of dualism in the sector. It is this which perpetuates the tremendous difference in relative labour productivity between the small (informal) and large (formal) size groups. The very low level of labour productivity in the manufacturing sector can be traced to this dualism.

    It seems fairly clear that one of the causes of low productivity in Indian manufacturing is the concentration of employment in this sector in the lower modal group of six to nine workers. Employers in this group concentrate in this group at the lower end of the product spectrum and compensate for the low level of productivity (and technology) with low wages. The issue of low over-all productivity in manufacturing as a whole in India then boils down to the question: what prevents the large group of units in the six to nine group from graduating to larger size groups? What are the major factors causing the emergence of dualism in its two aspects – the phenomenon of the “missing middle” and the unusual productivity gap between the small and the large units?

    The policy has been reversed during the economic reform process with a drastic shortening of the list of “reserved items” for the small-scale. Further the liberalisation of the imports of consumer goods have surely undermined the viability of many producers of low productivity producing these items or close substitutes. But it is a matter of some surprise that the liberalisation process has had little effect on the problem of the “missing middle” [for a detailed discussion of this and related issues see Mazumdar and Sarkar 2008, Chapter 9]. What explains the persistence of the phenomenon?

    This important aspect of the Indian economy – which I believe has crucial implications for economic policy – has been under-researched. I am collaborating on a new research project with the Institute of Human Development in Delhi on this group of issues with funding from the International Development Research Centre (IDRC). I would invite scholars and researchers in India to contact us if they are interested in contributing to this project.

    4 Conclusion

    I have, for reasons of space, picked on only a couple of issues in this review in which I feel the commission’s work needs further debate and research. This is not to detract from the merits of this valuable report. The high quality and comprehensiveness of the report will make it a standard source of reference for all interested in the subject and would be the basis for much work to come.


    1 The NRL minimum wage is the updated level for 1999 (keeping in mind the rising cost of living) of the floor wage first proposed by the National Commission on Rural Labour 1991. The higher minimum wage is due to the Central Advisory Board constituted under the Minimum Wage Act 1948. This revised figure was effective in 2004 (for details see the report, pp 44-45).

    2 The source is the Low Wage Commission Report of the UK 2007.

    3 Stephen Machin, Alan Manning ad Lupina Rahman: ‘Where the Minimum Wage Bites Hard’, Working Paper, Centre for Economic Performance, London School of Economics, September 2002. See Table 6 in particular.

    4 This sub-sector indeed resembles the “sweated trades” in 19th century England where minimum wages were first mooted as a desirable and viable policy intervention in the 19th century.

    5 See Mazumdar (2003) for the detailed statistical evidence and a discussion of the comparative Asian scenario.


    Little, Ian, Dipak Mazumdar and John Page (1987): Small Manufacturing Enterprises, Oxford, New York.

    Mazumdar, Dipak (1989): Microeconomic Issues of Labour Markets in Developing Countries: Analysis and Policy Implications, Seminar Paper no 40, Economic Development Institute, World Bank, Washington DC.

    – (2003): ‘Small and Medium Enterprise Development in Equitable Growth and Poverty Alleviation’ in Christopher M Edmonds (ed), Reducing Poverty in Asia: Emerging Issues in Growth, Targeting and Measurement, Asian Development Bank, Edward Elgar, Cheltenham, UK.

    Mazumdar, Dipak and Sandip Sarkar (2008): Globalisation, Labour Markets and Inequality in India, Routledge, London (In Press).

    Murgai, Rinku and Martin Ravallion (2005): ‘Is a Guaranteed Living Wage a Good Anti-Poverty Policy?’ World Bank Policy Research Working Paper 3604, Washington DC.

    Papola, T S (2005): ‘Emerging Structure of Indian Economy – Implications of Growing Inter-Sectoral Imbalances’, presidential address of 88th Annual Conference of Indian Economic Association, December 27-29, 2005, Visakhapatnam.

    Vasudeva-Dutta, P (2004): ‘Trade Liberalisation and the Industry Wage Structure in India’, Department of Economics, Discussion Paper, University of Sussex.

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