Job Polarisation in India: Structural Causes and Policy Implications

Kuriakose, Francis and Kylasam Iyer, Deepa (2018): Job Polarisation in India: Structural Causes and Policy Implications. Forthcoming in: Indian Journal of Labour Economics

Abstract

Automation impacts employment and wage levels at the micro-level, and the structure of employment-shift at the macro-level. Job polarisation is defined as the automation of ‘middle-skill’ jobs that require routine cognitive and manual applications while high and low-skill occupations are preserved. This paper examines the nature of job polarisation in India during the period 1983-2012 when Indian manufacturing was being gradually automated. The research uses disaggregated data from National Sample Survey Office and examines supply-side factors such as nature of employment growth in manufacture and presence of educated labour force which have not been adequately analysed before. The study has three observations. First, only the increased demand for high-skilled workers in the formal sector is due to skill-bias of technology conforming to theoretical expectation. Second, the transition of agricultural labourers has been to low-skill manufacturing sectors such as construction and textiles signalling distress in traditional manufacturing to provide employment. Third, over-supply of secondary and tertiary educated labour force has squeezed out middle-skilled workers from middle-skill jobs to relatively low-skill manufacturing and service occupations, explaining the persistence of routine occupations. The study concludes that increased demand for high and low-skill jobs has co-existed with the persistence of middle-skill jobs in India.

• Item Type: MPRA Paper
• Language: English
• Keywords: Automation, Job Polarisation, Supply-Side Factors, Manufacturing, India
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; J - Labor and Demographic Economics > J4 - Particular Labor Markets; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J48 - Public Policy; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D

References

Acemoglu, D., and Autor, D. (2011), “Skills, tasks and technologies: Implications for employment and earnings”, in Handbook of Labor Economics, Elsevier, pp. 1043-1171.

Acemoglu, D., and Restrepo, P. (2018), “The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment”, American Economic Review, Vol. 108, No. 6, pp. 1488-1542.

Adermon, A., and Gustavsson, M. (2015), “Job Polarization and Task‐Biased Technological Change: Evidence from Sweden, 1975–2005”, The Scandinavian Journal of Economics, Vol. 117, No. 3, pp.878-917.

Aghion, P., and Howitt, P. (1990), “A model of growth through creative destruction”, Working Paper No. w3223, National Bureau of Economic Research, Cambridge, Massachusetts.

Autor, D. H. (2013), “The ‘task approach’ to labor markets: an overview”, Working Paper No. w18711, National Bureau of Economic Research, Cambridge, Massachusetts.

Autor, D. H., and Dorn, D. (2009), “Inequality and specialization: the growth of low-skill service jobs in the United States”, Working Paper No. 15150, National Bureau of Economic Research, Cambridge, Massachusetts.

Autor, D. H., and Dorn, D. (2013), “The growth of low-skill service jobs and the polarization of the US labor market”, American Economic Review, Vol. 103, No. 5, pp. 1553-97.

Azam, M. (2012), “Changes in Wage Structure in Urban India, 1983- 2004: A Quantile Regression Decomposition”, World Development, Vol. 40, No. 6, pp. 1135-1150.

Berman, E., R. Somanathan, and H. W. Tan (2003), “Is Skill-biased Technological Change Here Yet? Evidence from Indian Manufacturing in 1990s”, Annales d’Economie et de Statistique, Vol. 79-80, pp. 299-321.

Chamarbagwala, R. (2006), “Economic lliberalisation and wage inequality in India”, World Development, Vol. 34, No. 12, pp. 1997-2015.

Ernst & Young (2018), “The Future of Jobs in India: A 2022 Perspective”, https://www.ey.com/Publication/vwLUAssets/ey-future-of-jobs-in-india/%24FILE/ey-future-of-jobs-in-india.pdf, accessed on 15 Sept. 2018.

Fernandez-Macias, E. (2012), “Job polarization in Europe? Changes in the employment structure and job quality, 1995-2007”, Work and Occupations, Vol. 39, No. 2, pp. 157-182.

Ford, M. (2015), Rise of the Robots: Technology and the Threat of a Jobless Future, Basic Books, New York.

Frey, C.B. and Osbourne, M. (2013), “The Future of Employment’, Working Paper (September), Oxford Martin School of Technology and Employment, Oxford.

Gilchrist, S., and Williams, J. C. (2000), “Putty-clay and investment: a business cycle analysis”, Journal of Political Economy, Vol. 108, No. 5, pp. 928-960.

Goos, M., and Manning, A. (2007), “Lousy and lovely jobs: The rising polarization of work in Britain”, The review of economics and statistics, Vol. 89, No. 1, pp. 118-133.

Goos, M., Manning, A., and Salomons, A. (2009), “Job polarization in Europe”, American Economic Review, Vol. 99, No. 2, pp. 58-63.

ILO (2018), India Wage Report: Wage Policies for Decent Work and Inclusive Growth, ILO India Office, New Delhi.

Jaimovich, N., and Siu, H. E. (2012), “The trend is the cycle: Job polarization and jobless recoveries”, Working Paper No. w18334, National Bureau of Economic Research, Cambridge, Massachusetts.

Jones, C. I. (2005), “The shape of production functions and the direction of technical change”, The Quarterly Journal of Economics, Vol. 120, No.2, pp. 517-549.

Kijima, Y. (2006), "Why Did Wage Inequality Increase? Evidence from Urban India 1983-99”, Journal of Development Economics, Vol. 81, No. 1, pp. 97-117.

Kochhar, K., Kumar, U., Rajan, R., Subramanian, A. and Tokatlidis, I. (2006), "India's Pattern of Development: What Happened, What Follows?" Journal of Monetary Economics, Vol. 53, No. 5, pp. 981-1019.

Mankiw, N.G. (2012), Principles of Macroeconomics, Cengage Learning, New York.

Markusen, J., Rutherford, T. F., and Tarr, D. (2005), “Trade and direct investment in producer services and the domestic market for expertise”, Canadian Journal of Economics/Revue canadienne d'économique, Vol. 38, No. 3, pp. 758-777.

Mazumdar, D., and Sarkar, S. (2009), “The employment problem in India and the phenomenon of the missing middle”, Indian Journal of Labour Economics, Vol. 52, No. 1, pp. 43-55.

Mehta, A. Felipe, J., Quising, P., and Camingue, S. (2007), "Changing Patterns in Mincerian Returns to Education and Employment Structure in Three Asian Economies," Center for Global Studies Paper 06, University of California-Santa Barbara, Santa Barbara.

Mehta, A. and Mukhopadhyay, H. (2007), "India," in Asian Development Outlook 2007, Asian Development Bank, Manila, pp. 170-180.

Medina, C., and Suárez, C. M. P. (2010), “Technical Change and Polarization of the Labor Market: Evidence for Brazil, Colombia and Mexico”, Working Paper No. 007269, Banco de la República, Bogota.

Mitra, S., and Das, M. (2018), “Thorny Roses: A Peep into the Robotised Economic Future” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3185964, accessed on 20 Sept. 2018.

Nagaraj, R. (2004), “Fall in Organised Manufacturing Employment: A Brief Note”, Economic & Political Weekly, Vol. 39, No. 30, pp. 3387-3390.

Oesch, D., and Rodríguez Menés, J. (2011), “Upgrading or polarization? Occupational change in Britain, Germany, Spain and Switzerland, 1990–2008”, Socio-Economic Review, Vol. 9, No. 3, pp. 503-531.

Papola, T. S. (2013), “Role of labour regulation and reforms in India” ILO Employment Working Paper 147, International Labour Organisation, Geneva.

Sarkar, S. (2017), “Employment Change in Occupations in Urban India: Implications for Wage Inequality”, Warwick Institute for Employment Research Working Paper 2017/101, Warwick Institute of Employment Research, Warwick.

Schwab, K. (2015), The Fourth Industrial Revolution, Penguin, London.

Solow, R. M. (1957), “Technical change and the aggregate production function”, The review of Economics and Statistics, Vol. 39, No. 3, pp. 312-320.

Thomas, J. J. (2013), “Explaining the ‘jobless’ growth in Indian manufacturing”, Journal of the Asia Pacific Economy, Vol. 18, No. 4, pp. 673-692.

Vashisht, P. (2015), “Creating manufacturing jobs in India: Has openness to trade really helped?”, Working Paper, No. 303, Indian Council for Research on International Economic Relations (ICRIER), New Delhi

Vashisht, P. and Dubey, J.D. (2018), “Changing Task Contents of Jobs in India: Implications and Way Forward”, Working Paper No. 355, Indian Council for Research on International Economic Relations, New Delhi.

Verick, S. (2018), “The Puzzles and Contradictions of the Indian Labour Market: What Will the Future of Work Look Like?”, IZA Discussion Paper No. 11376, Institute of Labor Economics (IZA), Bonn

World Development Report (2016), “Digital Dividends”, World Bank, Washington.

Unni, J, and U. Rani. (2004), ‘Technical Change and Workforce in India: Skill-Biased Growth?”, Indian Journal of Labour Economics, Vol. 47, pp. 683-692.