Whitman School of Management at Syracuse University
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Abstract Details

Unorganised Sector in Non-Agricultural Activities: Employment Elasticity and Wage-Productivity Nexus
Vol. Volume 18, Number 4 December/2013

Arup Mitra and Aviral Pandey
Since the employment growth in the formal or the organized sector has been sluggish, the hope for the increasing workforce lies only in the unorganized sector. This paper focuses on issues related to employment, productivity and wages in unorganized manufacturing, trade and services sectors. Using the National Sample Survey (NSS, 2010-11) unit level data this study makes an attempt to estimate the employment elasticity and wage-productivity nexus in the unorganised sector. State level aggregate data gives clear indication that the rural unorganised manufacturing is more labour intensive than their urban counterpart and urban unorganised manufacturing units are positively associated with level of development. Employment function shows that employment can increase through wage reduction. However, it can affect the wellbeing of the workers as the wage rate is already very low. Wage equation confirms that asset creation for livelihood promotion is important from policy point of view. Contractualisation does not seem to be contributing to employment generation in manufacturing or trade activities. However, services reveal a positive impact, indicating that large units get their work done by the small units in the unorganised sector. In fact, several new services have emerged in the recent years and large firms usually contract out work to the small firms.

Keywords: Unorganized, labour, manufacturing, wage, employment elasticity, productivity