February 2018

IZA DP No. 11376: The Puzzles and Contradictions of the Indian Labour Market: What Will the Future of Work Look Like?

Analysing the Indian labour market poses inherent challenges given the country's size and diversity. Rather than a case of "jobless growth", India has experienced concentrated employment growth, mainly in urban areas and for men. This has been accompanied by a decline in the female labour force participation rate, which emerged as a major puzzle. Informality remains a defining feature with rising informalization in the formal sector. Some outcomes partly reflect India's overall level of economic development. At the same time, structural transformation in other countries, including those in the region, has led to greater absorption of workers, particularly women, in manufacturing. Looking at the future of work, the current situation is likely to prevail in the near future. This means that workers will continue to leave agriculture and seek employment in urban areas. But the ability of the manufacturing sector to engage workers will be constrained by the capital and skill intensity of production. More wage employment will be created but the challenge is to ensure these workers have access to social security and other benefits. As women become better educated, their participation in the labour force is likely to increase but many constraints keep them out of paid employment. Rather than focusing singularly on the threat of automation to job creation, policymakers need to address the distributional effects of technological change, particularly in terms of its skill-bias. An important goal is to improve access to technology, which would enhance productivity and working conditions.