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Livelihood Volatility in the Urban Labour Market
This paper aims at capturing the labour market volatility, which is conceptualised in terms of the lack of sustainable sources of livelihood across different quarters in a year. Though we were unable to identify the number of times workers change their jobs, the change in the job status, which cannot occur unless the job changes, unravels important findings as retrieved from the repeated survey of the same households over different quarters. The results bring out the vulnerabilities of the lower castes, illiterates, and those belonging to large households. The urban informal economy is indeed faced with income volatility, which is connected to employment instability.
The authors thank the anonymous referee for the constructive comments and suggestions made on an earlier draft of this paper.
Labour market volatility may be defined simply as the frequent movement from a state of employment to unemployment, though it can be examined in detail in terms of different labour market variables, such as unemployment, vacancies, tightness, and the job-finding rate (Faccini and Ortigueira 2010). Considering the three key features of the economy—namely firms are large (employing many workers); adjusting capital and labour is costly; and wages are the outcome of an intra-firm Nash bargaining problem between the firm and its workers—Faccini and Ortigueira (2010) noted that shocks to investment-specific technology explained 40% of the observed volatility in the United States (US) labour productivity, 55% in unemployment, and 75% in labour market tightness. Jump (2014) proposes an explanation for the observed differences in the business cycle volatility of employment and unemployment across 14 Organisation for Economic Co-operation and Development (OECD) countries. He shows that the increases in the gross replacement rate of public unemployment insurance raise employment volatility and reduce the volatility of real wages, ceteris paribus. The gross replacement rate is seen to be positively correlated with the business cycle volatility of hours worked. The role of increased social spending in reducing labour market volatility with the degree of financial development, more specifically for low-skilled workers, through compensation mechanisms has been explained by Darcillon (2013) in the context of the OECD countries.
Employment and Wage Fluctuations
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