LABOUR MARKET ANALYSIS AND RESEARCH ----~--- ........ '--.----~..--~- .... -.. ~-

I. Concept o~~QQ~r Market

Labour Market is an important aspect of modern economy.

It represents the interaction of ~emands and supplies of

various categories of labour through which prices of these

categories of labour, i.e., wage rates are determined.

Theoretically, the concept of labour market, like that of the

markets for capital and commodities, does not necessarily

refer to any physical·placc, but represents an abstraction

of a system allocating and rewarding labour. Since labour

differs from capital and commodities due to human element

involved therein, the concept of labour market incorporates

considerations of the complex of economic and social forces

influencing the process through which employers recruit

vlorkers and workers seek employment .

. . Although labour market, like markets for commodities,

existed since almost the beginning of exchange economy, its

distinct identity came to be recognised only in recent stages

of the evolution of economic thinking. In early stages of

exchange economy, with self-sufficient household units, how­

ever, the distinction between the consumer and producer roles

of an individual was very narrow and therefore labour market

1

2

did not attain a separate identity in the same sense in which

it operates in modern industrial economy. The tre~tment of

'labour market' in early classical writings reflects this

tendency, where labour market is treated analogous to the

markets for capital and commodities. In Post-Keynesian macro­

economics, labour market is treated as a distinct market for

analytical purposes. Indeed, Keynesian revolution,has assigned

'labour market' a meaningful significance in economic litera­

ture. The emergence of the concept of labour market reflects

growing need of human ,resource alJ oca tion for the maximisation'

of economic welfare which is consistent with optimum production

structure.

The main components o'f labour market are, the demand for

labour, the supply of labour and the wage determination. Prima

facie, they seem analogous to that of the markets for capital

and commodities, but in fact, there are marked differences in

their nature and responsiveness. For instance, the law of

supply that if price increases supply also increases holds

good only upto certain extent in the case of labour. The

phenomenon of bacln:ard bending supply curve is observed to be

valid to larger extent in case of labour than in cas es of

commodities and other inputs. In the same way, demand for

commodities is generally for direct consumption purposes,

while that for labour, except in case of some personal services,

is not for the direct consumption purpose. Demand for commo­

dities influences the investment decisions and the technology

3

in production process which in turn determines demand for

labour, reflecting the derived nature of demand for.labour.

Since the main function of labour market is to match

workers and jobs and to fix remuneration in a manner that 1 ensures required quantity as well as quality of labour supply ,

its performance is judged by the efficiency v.lith vlhich labour

market processes perform this function. The functioning of

labour market thus depends upon the efficiency with which

allocation of labour among industries, regions and occupations

takes place. This is analysed through the nature of occupa­

tional, industrial and regional wage differentials existing

in the market and the nature and patterns of mobility and

migrations. The information channels about the job vacancies

and availability of workers play vital role in bringing the

supply and demand for labour in equilibrium. In economic

theory, market processes have been vievled differently in

different theoretical framevJOrks. Therefore, a brief analysis

of the alternative theoretical models is attempted in the

following section.

The history of economic theory signified three theore­

tical strands in the analysis of labour market behaviour.

1. T.S. Papola, "Economics of Labour Market", in V.B. Singh Edt., La~:r __ fui~~rch i.n ~IllQ.ia , Popular, Bombay, 1970, p. 1'70.

These involve more or less simplified outlines of the prin­

cipal variables and relationships that characterize the

marketing proces.s and· correspond with three important theo­

retical approaches which have evolved through time viz.,

classical, Neoclassical and Institutional.

The classical model give no special treatment to labour

market, because it was considered analogous to the markets

for capital and commodities. The classical thesis with res­

pect to the distribution of workers among employments was only

a specific application of the general principle "Ihich the

classical economists understood to govern the distribution of 1 all resources among uses. Thus, the model merely applied

price determination analysis of demand and supply as a special

case to the wage determination.

In the short-run, supply of labour "laS assumed to be

constant. Therefore, demand for labour became decisive factor

in the analysis. It Was also assumed that the entrepreneurs

had certain amount of investible funds in a given ueriod as a

result of the past savings i.e., profits and these funds would

be invested in purchasin8 the factors of production. These

wage-funds constitute demand for labour. If the entepreneurs

had relatively lo'v wage-fund, demand for labour "[ould be less

and wage would be determined at low level.

--------------------1. Rottenberg, 8., .IOn Choice in Labour Market··, in.r. B.

McCormick and E. Owen 8mi th. Ed t . . The J;:Clbo~r __ t1a rket· , Penguin Modern Economics, 1968, p.52.

5 In the long-run however, there wOllld be factor substi­

tution possibilities in response to the changes in factor

prices. Thus, if labour continued to be available in excess

to its demand even at lower v1age rate, there would be tendency

to shift to more labour intensive techniques of production.

Qut in money wagBs was therefore, considered by this model as

a solution to unemployment problem. However, the 10\'1est extent

of wages was assumed to be consistent with sUbsistent level of

workers. Thus in the long-run analysis, supply of labour was

assumed to be determined by the subsistence theory.

Since conditions of perfect competition \·rere assumed no

problems of wage differentials existed because of assumed

homogeneity of labour. Therefore occupational and industrial

wage differentials of the short-run analysis vlere removed in

the long-run analysis under the assumptions of perfect infor­

mation, perfect mobility and zero cost of transfer. Therefore,

there was no unemployment and no· uncertainty in labour market

in the long-run.

However, Adam Smith made allowance for the continuation

of occupational wage differentials due to non-economic factors

like easiness or hardship, cleanliness or dirtiness, honour­

ableness or dishonourableness, probability of sucqess etc.,

involved in the occupation; vlhich is called 'compensating'

wage differences as a function of differences in the nonwage

qualities of different jobs; and 'real' wage differences as .a

function of restrictions on freedom of occupational choice. 1

But, in the analysis, these Here treated as exceptions tending

to change with the changes in social outlook. In other words,

human element and other non-economic factors effecting workers'

behaviour in labour market were considered in economic thinking

of classical economists bht they were not incorporated in the

general analysis of wage determination.

Thus, the classical model has three main limitations.

First, it is based mainly on aggregative analysis 'without

incorporating unit level analysis. Secondly, it analyses the

process of labour market on the basis of unrealistic assump­

tions i.e., perfect competition, perfect information and homo­

geneity of labour. And, thirdly, it doe~ not consider charac­

teristics of labour as a human factor of production while

analysing the labour market processes. For example, mobility

is restricted by social factors like age, sex, family size etc.,

and many times workers do not move even if there exist occupa-

tional, industrial and regional "'lage differentials. These

limitations make this approach unable to bring out meaningf~l

results from the analysis of labour market processes. 2 Perhaps

1. Adam Smith, 'An~Inglliry_5nto j~Jle_~Na..tu:r~_a)lQ_Q.au!ie~_Q.[ the Weal th of Nations', Modern Library Edition, Random House, New York, 1937, Please see, Chapter 10 of book 1, 'Of Wages and Profit in the Different Employment of Labour and Stock.'

2. There is some element of realism in Rottenberg's contention in defence of class ica'l Theory of Labour Narket that, "Some however, have charged the theory with errors it does not contain", 'Op.cit', p. 49. However, the attempt here is only to highlight some basic limitations of classical analysis of labour market processes.

because of these limitations Marshall had admitted the

~nfluence of unemployment; a permanent excess of supply to

the demand for labour in wage determination. 1 Similarly,

7

Hicks categorically stated that in reality, labour market is

scarcely ever in equilibrium. 2

B. The Basic Neo-classica~_'~.Il.I2.r.oach

Severe criticism of the unrealistic assumptions of the

competitive approach gave rise to neo-classical approach,

"wherein the focus of attention is on the labour market process,

including the action of individual employers and firms and

individual workers and their unions."3

The basic Neo-classical approach has its roots in the

economic thinking of 1870s which is known as 'marginal revolu­

tion' in the history of economic thought. It V.'as a new kind

of static micro-economic analysis forwarded by Jevons, Mengers 4 and Walras., However, Marshall and Hicks are more prominant

1. Quoted by A.V. Raman Rao, in his collection of Es~avs on Indian Labour, Popular, Bombay 1965, p. 299.

2. J.R. Hicks, Theory ot_W..aR.e'§_, Macmillan, London, 1932, p.76.

3. Dale Yoder and H.G. Heneman Jr., Labour Economics and Industrial Relations, South-West Publication Co. Chicago, 1959, p. 488.

4. Please see, "The turning point in the early developr.1ent of economics, ~ .. lhi.ch marked the transition from classical to neo-classical economics, appears to be the independent discovery by, Menger, .Jevons and Ualras, that the most important concepts of classical economics could be exoressdd in terms of the theory of incremental values!!, C.A. ~ Pissarides, Labour lvT.arket Adjustment : Nicro-economic Foundations of Short-run Neo-Classical and Keynesian Dynamics, Cambridge University Press, London, 1976, p. 1.

s names in regard to wage discussions. In classical approach,

the aceent was on the capital accumulation and economic grm'lth

in the context of private enterprise economy and free compe­

tition was thought to be desirabJe because it tended to expand

the area of market by bringing about an improved division of

labour. In the new approach, i.e., the marginal analysis, the

essence of the economic problem was the search for the condi­

tions under which given productive services v:ere allocated

with optimal results. among competing uses. Thus, the classi­

cal approach to economic development Has replaced by the

concept of general equilibrium within an essentially static

framework. 1

Retaining the principle of maximizing behaviour and

applying it to the firm level analysis, two more aspects were

incorporated in this approach, namely, factor substitutability

and marginal productivity theory of input pricing. The possi­

bility of substituting one factor of production by another put

forward various combinations 'of production functions for a

firm to choose from. Firm \vould choose the combinations

keeping in view the cost constraints. The relative cost of

factors ".;ould be determined by their respeetive marginal

productivities.

1. Hark Blaug, Economic Theory in Retrospect, II Indian Edit., Vikas· .... Publ., Ne\·! Delhi, 1983, p. 312.

9

Thus the Theory of Marginal Productivity Has propounded

by the neo-classists to explain the price determination of

production inputs. The demand for labour in a firm \-Jould be

upto the point where the value of marginal product of 1abour

equals its price i.e., wage. In other v;ords, a firm would

employ an additional unit of labour if the value of its

marginal product is greater than the wage rate. Thus, the

probability that with the technological changes and shifts

in production functions productivity also may increase and •

result in a pattern of hieher wage-rates viaS explored and

incorporated in the analysis.

Retaining the principle of maximization, the theory

explains short-run fluctuations in labour market prices

resulting from the combir~tion of employers' estimates of

workers productivity and employees I offer to sell their

services. The former determine the demand for labour and the

latter' constitute the supply of labour. Under the assumption

of diminishing returns, the marginal productivity would

diminish and there would be dOvlTIvlard sloping demand curve

for labour. The supply curve of labour \-[ould be generally

upward sloping unless there is a union adopting restricted

supply policy. Thus, in the short-run, if the prevailing

wage rate is higher than the expected rate/value of margir~l

productivity of labour by the employer, demand would reduce

resulting in unemployment. However, in the long-run the

interaction betv,Teen the supply of 'labour and the supply of

capital would exert more influence on the decision of employer,

because, though ce.pital and labour are substitute, they are

complementary also and the employer must have both for the

maximisation of profits.

The theory made an easy headway in explaining the rising

vlage trend' as the new natural resources and supply of capital

had increased productivity. But this phenomenon, alon~.'rith

interfirm and, inter-industry waee differentials, revealed that

there was a case for bargaining for higher wages by the unions.

And that gave rise to the bargaining theories and so-called

'Institutionalist' theories.

The main attack of the critiques of neo-classical

approach was on the marginal productivity theory. It was

argued that in practice, it is almost impossible to determine

marginal productivity of any single factor of production

becaus e it is a ,complex process involving interactions of all

the factors of production. 1 Even in the case of agricultural

production, which is a vourite example of neo-classicists to

explain marginal productivity theory, the theory did not hold

good in reality.2 Moreover, in industrial sector, it was

1. The Hobson objection stated by Mark Blaug, Ope cit.,p. 459.

2. Loyed Fisher, "The Harvest-labour Market 01 Ca.lifornia," Quarterly Journal of Economics, Vol. LXV, November 1951, pp. 463 -491 •

11

argued that "there is a labour recruitment process and a wage

determination process; each influenced by its own set of factors 1 and usually without strong connections between the two."

Most of the criticisms seemed to be based on the fact that

early neo-classical economists used it as the condition deter-

mining the level of employment i.e., equilibrium in the labour

market. However, it Was realised much later that as a condi­

tion of equilibrium, the theory followed logically from a set

of more primitive assumptions. 2 The fact that factor combi-

nation is fixed in the short-run and there exists imperfect

information about w6rkers' reservation wages and in some cases

about their efficiency imply that firms are not price takers

in the labour market implying a serious limitation of the

theory.3

It can be said therefore that, the basic neo-classical

approach had the same limitations from which the classical

approach suffered i.e., the approach based on unrealistic

assumptions of perfect competition and perfect inforrr.ation,

maximizing behaviour and lack of consideration of human element

in labour market process. The neglect of human element in

labour "market behsviour has led Gunnar Myrdal to characteristic

1. R.A. Lester, Economic of Labour! , II Edt., MacrIlillan 1964, p. 267, For his comments on Marginal Productivity Theory of Wages, Please see pp~ 278 to 280.

2. C.A. Pissarides, Labour Harket Adjustment: Micro economic Foundations of Short-run Neo-c1assical and Keynesian Dyhamics, Cambridge University Press, London, 1976, p. 26.

3. Ibid, p. 27

liberal economic theory, encompassing both classical and

neo-classical versions, by mercantalist mode of thinking

12

1 in all aspects of economic analysis inchiding labour market.

One limitation of this approach has been that the sllpply "')

function has been pushed out of the analytical system.~

Though labour mobility from low to high wage occupations,

industries and regions was assumed for long-run equilibrium;

the approach is silent as to Which factors affect supply of

labour and '.vhat is the responsiveness of labour supply to •

wage rate changes. Any scientific approach vlOuld take into

account both the sets of factors that affect demand for as

well as supply of labour. It is in this context that .J. T.

Dunlop contended that, the pivotal task of wage theory is to

formulate an acceptable theory on. the supply side. 3 It is

argued that if wage differentials are explained in terms of

productivity differences then even demand considerations.are

1. For example, While discussing the employment problem Gunnar Myrdal observed' "This liberal economic theory, which in its classica.l and neo-classical versioned remined the type of thinking that mainly rationalized and greatly influenced public policy until recent dece.des, was less purged of merce.ntalist ideas in its approach to for~ign trade and the regulation of internal production and commerce", Asian Drama, Vol. II, Part V, in 21, Pantheon, New York, 1968, p. 987.

2 • .John T. Dunlop, "The Task of Contemporary Wage Theory", in Ray Marshall and Richard Perlman Edt., An Anthologv of Labour Economics, New York, 1972, p. 219. Please see, "The fact that production is a social process, organised \-:ithin a specific institutional and social framev:ork is ignored," Peter Nolan, "The Firm and Labour Harket Behaviol.lr" in George Sayers Bain and Be.sis Blackvrell E.dt., "Ind'lstr';a1

ReJations in Britain," Oxford, England, 1983, p. 291.

3. Ibid, p. 291 .

>-'

1.3

redundant; because, changes in demand for different levels

of skills will determine the level of employment in each

skill category, b~t the wage differentials between different

skills and occupational categories should be explicable

purely in terms of the relative costs of skill acquisition. 1

In other words, the factors' governing the supply decision is

more important even in productivity differentials explanation.

Mor'eover, the classical and Neo-classical approaches experien-

ced serious difficulty in explaining the persistence of

discrimination by sex and race in the labour market. 2

These limitations gave rise to the belief that the

analysis of economic factors alone is not sufficient to exnlain

the labour market processes.

c. The Institutionalist Apnroach

The quest for factors, other than purely economic,

affecting labour market processes, gave rise to the institu­

tional approach. 3 It was observed that some social, political

1. Deepak La.l, "Theories of Industrial Wage Structures: A Review," Indian ,Tournal of Industrial Relations, Vol. 15, No.2, Oct., 1979, pp. 176-177.

2. R.I1. Blackburn and Michael Mann, The \'Jorkin£; Class in the .Labour Market_; Macmillan, London, 1979, p. 21.

3. Please see, "vlillia:m Tho:npson (1'1'15-1833) "vlas the first economists to warn of dangers of trying to interpret economic phenomena, in terms of economics alone," Guv Routh.

The __ Qr i &:hn._Qf.J!;coJlQI11:hc.._IdEla)I·', Hacmillan, London, 1975, p:5.

14 and psychological factors are effectively influencing

decisions of workers regarding labour supply. Lester

observed that firms do not lay more stress on vrages as a

factor in determining the volume of employment; instead,

they consider market (demand) for their product as a more

14

1 important. factor in determining the volume of employment.

Reynold's study of U.S. labour market in the late 1940s is

considered to be the model attempt by an economist to

incorporate a sociological approach into his research. 2 He

observed that 'demand' concerns not the quality (prod~cti­

vity) of workers but their (employers') preferences. 3 The

tendency for 'better' job to be filled by 'better' workers

has also been revealed in economists' researches. It is

found that employers have their OVln 'indexes 1 to decide 1+

workers' quality. Firm's practice to retain experienced

---.--.---1. R.A. Lester, "Shottcomings- of Harginal Analysis for

vJage-employment Problems" (191+6), Reprinted in B.,J .Hc­Cormick and E. Owen Smith, Edt. The_J~.ClQ.Q.1.r::. )1~r:~et, Penguin Modern Economics, U.S.A.,1968, pp. 16-17.

2. R.M. Blackburn and Michel Mann, Th<?_Jl.Qr:ls.tDE._Q1..CLs_L:),,:n. .. j;Jl~ LabourJ1Lrk~_t., Macmillan, London, 1979, p. 4.

4. Please see, "There j.s a clear evidence of \.;a.?:e di:feren­tials in favour of males over femal es, .... :hites over non­'''hites and other whites over those '.dth Spanish surnames", A.,J. Rees and G.P. Shultz, Vlor)5.e_G'i_q._!ld_Jg&~s_ ilJ._a)1._LLr:.Q.c:tJl LabQ1J..LHa~r:.ket, Chicago University Press, Chicago, 1970, p. 220.

6

1.6

labour market, wage rate ...,lould have positive effect on

labour supply; while for those who are already in the

labour market, wage rate mayor may not have positive

effect. 1 This theoretical discussion is important as it

makes it clear that behaviour of workers in the labour

market is not the same for both the types of workers. Tne

workers who are already in the labour market are less likely

to respond to changes in wage rates. It has been observed

in various studies that only a small minority of employed

workers between 10 to 20% were respond~ng to changes in wage

rates in the labour markets. 2

It has also been observed that workers usually possess

very incomplete knowledge about wage offers of different

firms in the labour market and hardly they are able to compare

between different wage offers and other rewards.3' Workers

----~-

1. Guy Standing, Labour Force Participation and Development, ILO, 1978, p. 56, For more theoretical discussion, Please see, Albert Hees, The Economics of Work and ~, II Edn., Harper, New York, 1979, pp. 19-22 and also ~ohn Creedy and Barry Thomas, The Economics of Labour, ~ut~erworths, London, 1982, pp. 42-56.

2. See for example, C.A. Myers and W.R. MacLaurin, The Move­ments of Factory Worker~, Wiley, New York, 1943, C.A. !layers and G.P. Schultz, The Dyn::ynics of a Labour l1arket, Prentice­Hall, Nevi York, 1951 , G. Palmer, Labour l10bili t.x in ~ix Cities, Social Science Research Council, NevI York, 1954, and H.S. Parner, ReserJrch on Labour 11obility, Social Science Research Council, Nevi York, 1954.

3· L.G. Reynolds, The Supply of Labour to the Firm, QUC1Yte:t.h.~ournal of Economics, May, 1946, Vol.LX, pp. 390-411.

17

do not 'shop around' betvleen many companies, making compa-

risons between them. Rather, they accept the first job

offered to them provided it is minimally acceptable to them. 1

vlorkers have their own conceptions of 'satisfactory jobs' in

relation to their socio-economic status and education and

training. Therefore, not much percentaee of voluntary movers

are found who had 'satisfactory jobs'. 2 VOluntary job

changes have been found to decline 'With advancing a[,e of the

workers. 3

Thus, the conclusions regarding the firm', s behaviour

for demand for labour and viorker' s be~1.aviour for supply of

labour are quite different in reality than those propounded

by the neo-classical,theory. The f:indings that vlages are

neither determined by the forces of labour supply and demand

alone nor there is a tendency of equalizing occupational and

region'al wages have set the backeround for researchers to

app~y the institutional approach to expla:in labour market

processe s.

1. IVIartin and :l!'ryer, quoted by H..Iv1. Blackburn and IvIic..'l-),aeol Mann, 1'11e_ Working C lass in the .Labour Ivlarke t, Nacmillan, Lond on, 1 979, p. 1 38.

2. L.G. Re'ynolds and J,. Shister, Job Horizons: A Study of Satisfaction and Labour Nobili tv, Harper ~ .Hevl York, 1949, pp. 108-109.

3. Charles A. ri;yers: "Labour Narket Theory and Empirica..L Research ll in John T. Dunlop ~edited) 'l'he T..'1eorY of ·,larr.e Determination, Hacmillan, NevI York, 1966, pp. 320-321.

8

-~-

18 The institutionalists highlighted the fact of the exis­

tence of multiple labour markets as against the single labour

market of Classical and Neo-classical setting under the -

influence of competitive forces. Cairnes maintained the exis­

tence of 'non-competing groups', stating that the average work-

man, from whatever rank he was taken, finds his power of compe-

tition limited, for practical purposes, to a certain range of

occupations; so that however high the rate of remuneration may

ris e in those 'occupations which lie beyond his power of compe­

tition, he is excluded from joining shorting them. 1 The exis-

tence of different types of labour markets separated by occu-

pational, regional and industrial characteristics, was thus

recognised. Kerr, emphasised local labour market stating that

the natural market for labour is quite different from that

recognised so far. The average v!orker has a narrO\·;ly confined

view of-the market and is not an alert participant in it. 2

Reynolds argued that labour is not homogeneous even within

broad occupational groups.3

1 . .J.E. Cairnes, "Political ~conomy", Harper, New York, 1974, pp. 67-68.

2. Clark Kerr , "Balkanization of Labour Markets II in E. 'w'':. Bakke, Edt., - Labour Mobility and Economic. Opnortunity , Technology Press, 1954, p. 92.

3· L.G. Reynolds, "The Supply of Labour to the Firm", Quarterly.Tournal of Economics, Vol. LX, May 1946, pp. 390-411 .

19

The employers and vlorkers do not interact in accordance

vii th assumptions of a tomis tic competition, but through ins ti­

tutional arrangements. The employers typically exercise a

certain degree of control over the labour market through the

tacit collusion. 1 The effects of trade unions is introduced

bargaining into the wage determination process; in which,

unions use the threat of strike to raise the earnings of their

members. "Consequently, the job market alone does not set the

upper and the lower limit~ for wage det~rmination. The single

price does usually exist but as a consequence of policy and

not the operation of market·forces.,,2

Growing evidence on the existence of segmentation in labour

market gave rise to the literature on 'dual labour markets'

which emphasizes the distinction between a primary labour market

or formal labour market, cons is ting of firms \.;i th structured

employment relationships of a promotional ladder type internal

labour markets; and a secondary or informal labour market, where

labour productivity and earning are low and employment relation­

ships is close to that of a casual labour markets. 3 It is

claimed that the wage structure even in primary labour market

is not determined by efficiency (productivity) criterion but

rather by customs and habits. Therefore, the distribution of

jobs and income in the primary sector is not dictated by abi­

lity and human capital but by customs and institutional practices.

1. L.G. Reynolds, liThe Supply of Labour to the Firm", ~u2rterly Journal of Economics, Vol. LX, May,1946, pp.390-411.

2. Clark Kerr, "~'iage -ReJ a tionships : The Campara ti ve Impact of Market and Power Forces", in J.T. Dunlop Edt., The Theory of Wage Determination, Macmillan, London, 1966.

3: Dee~a.k Lal, "Theories of Industrial Wage Structures: A Reviev:" Indlan Journal of Indu~tri8l Relations Vol 15 ~o 2 0 t b ' 1979, p. 179. ' -. '.'., 'c 0 er

.+

Institutionalists .thus reject abstract general theories

and advocate an inductive and inter-disciplinary approach to

labour market research, However, in absence of any general

theory, it is almost difficult to put the findings o~ this

approach in a coherent manner. In fact, findings are so

varied and contradictory that it is almost impossible to bring

out any general statement out of it. The institutionalists"

claim on the existence of dual labour market and emphasize on

structured relationships in primary labour market due to

internal promotional ladder. But it becomes weak as the

contrary evidences are found. For example IIports of entryll 1 exis ted at every sldll. level and that, internal labour rnarket

normally co-exists with the external labour market. Therefore,

the firms' behaviour is not So effectively altered as to render

neo-classical theory ineffective in providing explanation. 2

It is also found that evidence for workers' ignorance is mostly

impressionistic and worker's knowledge is not 'tested' by

researchers. 3

1. D.I. l1ackay, et.al., Labour Markets under Different Employment Conditions, Allen 1: Unwin, London, 1971 , Ch. 11.

2. M.S. Gordon and H. Thal-Larsen, Employers' Policy in a Changing Labour Market, Institute of Industrial Relations, Berkeley, 1969, pp. 347-348.

3· Wilcock .& Franke (1963) quoted by R.M. Blackburn and Hichael Mann, in,' The Working Cl ass in the Labour Market, thcmillan, London, p. 95. Please see, 1I~~e conclude that even the most thorough of the previous studies has failed to establish the degree and accuracy of vlorl{ers' knowledge of labour rr.arket" , Ibid. p. 115.

>

21 It thus became eventually clear that independently this

approach is not capable of generating testable prepositions;

and need was increasingly felt by the researchers to construct

a .theoretical frame\Olork \olhich combines the neo-classical theory

.... ;ith the findings of institutionalists. ..

III. Synthetic Anproaches

The onslaught of ins titutiona. lists on basic classical and

Neo-classical theoretical edifice led to several forms of

reactions. Some economists attempted solutions to institution-

alists' problems within the neo-classical framework, and to

some extent succeeded in demolishing their base. For example,

the argument that the supply curve is backward bending indica-

ting socio-cultural effects and therefore rendering it useless

to analyse supply function in economic frame has been success-

fully turned-down by G.S. Becker. He forv.'arded a "Theory of

Allocation of Time", explaining that, labour supply is the out­

come of house-hold decision making and must be treated inte-

grally with consumption behaviour. 1 It has become possible

thereby to bring several aspects of non-economic phenomena

iricluding job preferences by 'yorkers and discrimination by

unions within the ambit of neo-classical theory. One off-shoot

has been the, "Theory of Investment in Human Capital", '\-.'hich

shows how net or observed pay levels may include elements of

current and past outlays on human capital formation during some 'I

phases of the worker's life cycle.~ The standard neo-classical

1. G.S. Becker,"Theory of Allocation of Time',' Economic Journal, 1965, pp. 493-517.

2. G.S. Backer, 'Human Capital, II Edt., Columbia University Press, New York, 1975, pp. 29-30.

-+

22

theory does not permit consideration of such investment.

The developments in Neo-classical Theory led E.S. Phe;t.ps

and his a.ssociates to develop "Hicro-Economic Foundations of

Employment and Inflation Theory", whicrl when apnlied to labour

market considers the role of the accumulation of kno\'Jledge

about the job opportunities and job offers and the, prices

attached to them in the market. Consequently, the Marshallian

equilibrium analysis is replaced by a disequilibrium ap~lysis

involving the role of. expecta tions and adj us tment proces ses in

search behaviour under conditions of incomplete knowledge and

interdependent decision making by the employees and employers

in the market. 1 These theoretical developments attempt to

incorporate the effect of the so-called non-economic influences,

highlighted by the institutionalists' contribution, on the labour

market in the modified neo-classical fra.me work. A detailed

analysis of labour market behaviour under this approach is under­

taken by Pissarides, 'It/ho attempted to provide analytical solu­

tion to the problem of coordination in the labour market over­

time when households and firms engage in trading on the basis

of expectation formed under the conditions of incomplete

knowledge. 2

1. E.S. Phelps, 'Micro-Economic Foundations of Employment and Inflation Theory', NevI York, 1970.

2. Christopher A. Pissarides, "Labour Market Adjustment: Micro­economic Foundations of Short-run Neo-classical and Keynesian Dynamics' Ca.mbridge University Press, London,1976.

--t

23

A wide range of empirical studies followed broadly

this framework of analysis. Some studies focussed on supply

side, while others considered demand side of labour market

in this context. Reynolds and Shister, for instance, attem-

pted a study on the attitudes of workers towards different

jobs and relative importance of \'18ge and other 'economic'

attractions over the 'non-economic' attractions on the selec-

tion of jobs. They concluded that the displaced workers give

more weight to economic factors than human relation factors.

Thus, the quality of human relations in industry apparently

seems to be less i~portant than 1 "a steady job at good wages."

Lewis also studied the same aspect in the form of "Hours of

work and hours of Leisure". He found that, although, evi-

dence reveals that as a result of operation of non-economic

forces the long run supply curve seems to-be negatively

stoped, the same is not the case for the short-run. It is

the short-run curve that directly relates the response of

labour supplied to a specific wage increase, thereby reducing

the importance of non-economic factors. 2 Myers and J'.1claurin

attempted some questions on ~labour mobility,3 but Hunter

and Reid say that, actual movement between employers is only

1. Lloyd G. Reynolds and Joseph Shister, "Job Horizons", Harper, New York, 1949, pp. 6-A8.

2. H. G. Lewis, "H.Q~rs of_",,1 or~s ,and Hours of· Leusure ll , in Ray Marshall and Richard Perlman Edt., An Anthologv of Labour Economics ':, John Wiley, NE.:w York, 1972, pp. 187-201.

3. Charles A. Myers and VI. R. Mclaurin, The Movement of Fa ctory Workers, The Technology Press, London, 1943, see particularly, Chapter 5.

24

one aspect~ The ability to move, i.e., the possession of

relevant skills which are not specific to anyone form and

the willingness to move are perhaps more important. 1

Killingsworth studied the affects of automation on

the labour market. 2 He argued that, the fundamental effect

of automation on labour market is to 'twist' the pattern

of demand. It phases down the demand for workers with

little education and~training while pushing up the demand

for workers with large amount of education and training.

In general, he found inverse relation between educational

attainment and the rate of unemployment. As against this,

Mackay finds in his study that most technical Changes place

premium on speed, dexterity and adaptibility rather than on

experience and skill. 3 Walter'Oi has pointed out one

important aspect in the context of firm's demand for labour

and labour mobility. He observed that, workers are trained

by individual firms for their specific operations in various

fields and this cost can no longer be treated as firm's

variable costs; and such trained labour is a quasifixed L~

factor of production.

1. L.C. Hunter and G. Reid. !'Urban Workers' Mobility, OECD, Paris, 1968. '

2. Charles Killings \'J orth, "Automation, Jobs and Manpower", in Ray Marshall and Richard Perlman Edt., Ope cit., pp. 306-311.

3. D.I. Mackay et.al., Labour Market Under Different Employ­ment Conditions', Allen & Unwin, London, 1971, pp. 124-125.

4. Walter Oi, 'Labour as a quasi-fixed factor", Journal of Political Economy, December, 1963.

.. ~

25 This proposition gave rise to number of studies on firm's

specific training and general training aspects and their influ­

ences on labour market processes. 1

Thus the various theore.tical and empirical studies have

sho'wn' that the modified ne o-clas sical framework is capable of

analysing so called institutional factors and that , it can be

considered as the only testable version of trade union bargai-

2 ning power.

IV. Labour ~hrket and Development Process

The theoretical approaches explaining labour market beha-

viour are the abstractions of the labour market process opera-

ting in reality. It is not surprising therefore, that the

form in wh:i.ch labour market processes actually take place

differs considerably from its theoretical abstractions.

Most of the discussion of theoretical approaches attempted

in the previous section is based on the studies of labour markets

in developed countries. It has also been mentioned how the

existing labour markets in developed countries do not conform

to the theoretical paradigm.' For example, the eXistence of

non-competing groups and inteL~al labour markets does not

conform with the basic assumption of competition in the

labour I-larkets. The existence of discriminative hiring

1. See, J.T. Additionaland W.S. Siebert, The Market for Labour: An Analytical Treatment, Good Year, California, 1979, Chapter 4, 'Investment in Man', pp. 110-117.

2. Deepak Lal, "Theories of Industrial vlage Structure: A Review", Indian Journal of Industrial Relations, Vol. 15, No.2, October 1979, pp. 167-195.

26

practices by the employers on the basis of sex, race,

religion, nationality etc., do not conform with assumption

of hiring practices based on labour productivity. And, the

fact that employers rate such workers at discount restricts

the mobility of workers and shaking thereby the very base of

theoret9..cal~ ed'ifi'ce'"d..!e~:~" -equiiiiationof l'lag'e-rate Iiri-nciple.

More recently, even in developed countries therefore, the

stress is not much on highlighting such differences as that

on finding out the pecularities of labour market process in

the regional and national context with a view to find out

alternative solutions for channelizing the processes in the

desired direction. For example, in USA, ~t is found that

the composition of labour force is rapidly changing as more

women and students come forward to join labour market and

that the antomation in industries is changing the pattern

of demand for labour and the benefits of a decline in the

overall rate of unemployment appear to be quite unevenly

distributed among different educational attainment groups.

A 'Hide range of such studies have been revievled by Harshall

and Perlman1

on the basis of which some broad characteristics

of labour markets of developed countries can be described as

following:

(1) The extent of unorganised sectbr labour market is

limited, but the quantum of casual type of labour is

increasing as students are a"lways ready to be in the

1. See, Marshall and Perlman Edt., An Anthnlo~v of Labour Economies , John Wiley, New York, 1979.

27

labour market to meet with their learning expenditure.

(2) Sex composition of labour market is rapidly changing

as women come forward to join the labour market.

(3) There is increasing use of formal information sources

for employment search.

(4) The widening productivity spread and the constant

(relative) wage spread(the social-minimum wage) have

caused the creeping unemployment and labour force

replacement.

Though these characteristics are quite commonly

observed in labour markets of developed countries, there

are wide variations among countries and among geographical

regions within countries. It is because, although logic of

industrialism is same, the process of industrilization

differs from one situation to another leading to differences 1 in nature of labour marl<:et proc ess.

The labour markets in developing countries differ

from the corresponding markets in developed countries

because of the different socia-cultural setting and different

level of economic development and industrialization. 2 As a

result labour markets in these countries are likely to have I

gr.eatex:- extent of unorganised (informal) sector and limited

1. See, Clark Kerr, et.al.,Industrialism and Industrial Man, Harvard University Press, Cambridge, 1960, Ch.2 and ch.4. Also Walter Galenson, Edt., ·Labour in Developing Econ0mics , Institute of Industrial Relations, University of California Press, 1963, Vol.III.

2. r·!arket

.~

2·R

extent of the use of formal channels for the flow of

information about job availability and recruitment. The

search behaviour of employers and employees regarding

personnel and jobsift turnns governed by traditional and

informal methods. Except in service sector of some urban

centres, no significant change in sex-compositio~ in

industrial labour force is seem. The pattern of industrial

development is so uneven that the relation bet\'/een the level

of education and the rate of unemployement has not yet

clearly established as in the case of developed countries. 1

T~e problem of sectoral transfer of labour from agriculture

to industry on a permanent basis is still unresolved in

developing countries as the industrial workers are not

completely detached of their agricultural and rural links.

The importance of formal education and training in demand

for labour 'is also not clearly established and the functional

requirements from the different occupational categories are

almost unspecified.

From-the above discussion it may be stated that

labour markets in developing countries are in transit and

they are likely to imbibe developed countries labour market

characteri stics as they gradually industrial ize •. However,

hypotheses emerging from such characteristics differences

1. See, Vijay Joshi and Heather Joshi, 'Surplus Labour and the City - A Study of Bombay'~' OXford University Press, 1976, Also see, T.S.Papola, 'Urban Informal Sector in a Developing Economy, Vikash, Delhi, 1981.

.~.

29

and also from those emerging from the set of factors that

effects labour market process in developing countries have

been tested by various researchers. 1 These studies reveal

that the institutions and pra.ctices of the labour market

adopted in various countries sho\v grea t divers i ty. Wha t-

ever uniformities have been discerned, are more in the

nature of tendencies rather than exact theoretical results.

These tendencies provide a frame work which can be used to

study institutional and functional similarities and diver­

sities of labour markets of different countries as well as

of the (areas with different countries as well as of the]

areas with different development stages in a country like

India.

v. Labour Market Analysis in India

Studies on Labour Barket in India V.Jere initiated in

sociological and industrial relations background. These

came to incorporate problems of manpovler planning in the

later stage and gradually tUrned to analytical issues

relating to such aspects of labour market behaviour as wage

structure, mobility, job search behaviour and investment

in human capitaJ. A brief review of Indian labour market

research is attempted here~

1. Also see, Dipak 11ajumdar, 'Para.digms in the study of urban Labour Markets in Developing Countries : A Ree.ssessment in the Light of Empirical Survey in Bombay City', World Bank Working Paper, NO.366 ,1979 and Dipak V~jumdar and ~~sood Ahmed, 'Labour t1arket Segmentation and the Determination of Earnings: A Case Study', vlorld Bank vIorking Paper, 1978, For a comparative analysis of labour market features, see, Halter Galenson Edt., Labour in Developing Economics', Vol.III, .University of California Prc·ss, 1963, I Vol.I ,~ I~ are tltled, 'Labour and Economic Development' John Wlley, 1959.

·~ ..

The study like 'Social Implications of Industria-. 1

lization attempted the problem of labour co~mitment in

the light of urbanization and social changes, 'viorkers,

Factories and social changes in India' 2, vim-red the process

of industrialization in India through a movement of the

Indian society from pre-industrialist traditional to indus­

trial-modern stage. 'Jobs and workers in India',3 provided

a reviev! of Indian labour situation but its \~'ide coverage

made it too general. 'Industrial relations in India',4 is

another of this kind emphasizing the rural orir;in of the

workers and their absenteeism. Both these studies maintained

that the rural link of the workers has kept their level of

commitment 10\'!. Moreover, this I viI] age-nexus' thes is has

not been supported by other studies. 5 Some pioneering work

has also been done in this connection. James Ralp, for

example, presented for the first time the problem of casual

labour in Indian industry in his paper, 'The Casual Labour

Problem in Indian Manufacturing,.6 He also attempted a

1. Prabhu P.N., ·Soci~l Implications of Industrialization, Five Sbldies in ASia, Unesco, Calcutta, 1956.

2. Lambart Richard D., '\-Ior1-<"ers, Factories and Social Changes in India', Asia Publication, Bombay, 1963.

3· Ornati Osca.r, Jobs and \'Jorkers in India, It2cha, New York, 1 955 .

4. C.A. Myres, 'Ind11strial Relations in India, Asia Publish,ing, Bombay, 1958.

5. See, Prabhu P.N., Op. cit., and Lambert Richard D. On.cit. 6. James Ralp C., 'The Casua.l Labour Problem in Indian

Manufacturing', The Quarterly ,TournaI of EconoF.lics, February, 1960.

~ ..

31

verification of Hicksian proposition that a casual labour

market tends to accumulate labour in quantities larger than

de~and; and found it true in Indian case. Danial Thorner

attempted for the first time the question whether employers

ever try to value a stable and committed labour force and 1 if so, did they succeed. He found that, v,'hen the employers

in India 1.Janted to have a permanent labour force, and when

this desire has been more than a verbal expression, they

have not found it difficult to get one. On the contrary,

workers are Hilling to continue in one inciustry if they are

provided subsistence wages, social security and housing

facility. But as Mukerjee has said, the employers them-

selves preferred consta,nt change in vlork. force vlith a vievT

to reduCing 1\rage-bill. 2 Morris attempted to examine the

commitment problem in the context of cotton textile indus-

try and also analysed the trends in the supply of labour

to Indian industry. He brought the term 'labour market'

in currency in the Indian context. 3

1. Thorner Daniel, 'Casual Employment of' a Factory Labour Force - 1851 to 1939', The Economic Weekly, Annual, January, 1957.

2. Morris, Morris, D., 'The Emergence of an Industrial Labour Force in India: A Study of the Bombay Cotton MilJs (1854) to 1947)~, Oxford University Press, Bombay, 1965. Also, see, by the sa.me author, 'Some comments on supply of labour to the Bombay Cotton Textile Industry', Indian Economic Journal, Vol. I No.2, October, 1953.

3. Mor~is, Morris D., "Labour Market in India ", in '.-1.E. t'!oore and A.S. Feldman Edt., 'Labour Commitment and Socia.l Changes in DevelOping Areas' . Social Science Research CounCil, Nel'l York, 1 9 O.

32

The aspect of manpower planning came to be studied at

economy-wide level as well as for some specific occupations,

in, national and regional contexts. With this end in view

Research Programmes Committee of Planning Commission sponsored

some labour market studies at city level. 1 'The Future Man­

power Situation in India,2 is an example of national level

study. 'Engineering Manpower - A Study of our Resources and

Requirements',,3 'Job Outlook' for Managerial Personnel in India

- A Study of Requirements for IV and V Plans' ,4 and 'Supply

of and Demand for secondary and higher educated ~funpower,

1960-61 to 1975-76 5 are Some representative instances of

occupational manpower studies. ~1ost of the studies upto

early sixties followed the Institutionalist approach and

were descriptive in nature. The studies

1. These includes: (a) Contract Labour, by Labour Bureau, Ministry of Labour and Employment, Government of India, Simla, 1961, (b) The Madras Labour lllarket - A Pilot Study, by DGET, New Delhi, 1964, (c) Poona : A Resurvey, by Gokhale Institute, Poona, 1965, (d) Labour }~rket Behaviour in Developing Economy, Indian Institute of Social Welfare and BUSiness Management, Calcutta, 1966, (e) The Bombay Labour Market, by Bombay University, Bombay, 1966.

2. V.K.R. Tilak, The Future Manpower situation in India,1961-76, International Labour ReView, May, 1963.

3. K.N. Sundaram, 'Engineering Manpower - A Study of our Resources and ReqUirements', Manpower Journal, Vol. I, No.3, Oct. : Dec., 1965.

4. B.L. Agarwal, Job outlook for Managerial Personnel in India -A Study of Requirements'~or IV & V Plans', ~illmpower Journal~ VOl. II, No.1, April-June, 1966. ' ,

5. H.N. Pandit, 'Supply of and Demand for Secondary and Higher Educated ManporTer 1960-61 to 1975-76', :r.1anpower Journal, VOl. II, No.2, July-Sept., 1966.

33

attempting to examine labour market processes in analytical

frame '-!ork are not many. Among the firs t of its kind is a

study by Laxminarayan, 1:.'ho attempted' the study of the

Indian labour market and its Impact on Regional 'rlage

Differentials. 1 He_explained the regional wage differen­

tials in terms of the diffcrt:,)nces in laboar supply condi-

tions. Singh studied the v!age patterns, mobility and

2 saving of \-lorkers in K?npur Cot ton Industry, \.;i th empha.s is

on sources of labour supply, recruitment processes and their

impact upon the wage structure. Papola studied the criteria

f d t . ' . . tt t +-' ] • i . T d' 3 o wage e ermlnatlon ln co on eX~le lnaustry ln ~n la,

with reference to Ahmedabad, Bombay and Kanpur tex~ile

markets. It 'Has the first study of its kind in the for:n

of inter-regional labour market comparison of a \<Jell

established and large employment providing cotton textile

industry in India. He evaluated the role of market forces

in determinin~ v!ages and geo£;raphical vlage differentials

in this industry. Using secondary data from Ann1..l-1..l.Sl!,rvev

Indus t.r.:ies, he also studied various aspects of wage

1. Laxminarayan, "The Indian Labour Market and its Imnact on Regional Wage Diffe rcntials" , I!lcLt.a_11._E_~QDO!!1:b.Q.J1~view , February, 1956.

2. V.B. Singh, . vlag~J:~tteX!l~~JiQ.1?jJ;..t.ty.J311c.._S;:n:..im·;..~._Q..t \{ 0 :t:l5. ex§._tn Jia.,.JlJ.11l)2 __ Q,Q tt. Q.,1l.))l9-.l1s. t..r.y , (Re port 0 f EPe sponsored project) Department of Economics, Lucknow Uni vers i ty, LucknO'lJ, 1 966.

3. T.S. Papola, · Prt..y!c.i.p).:.~~_Q:C. Hcu:';.c-RG..terrrr:hl12. tion. ' Somaiya, Bombay, 1970. --- --,

strJ.cture in relation, to labour market efficiency.1 Besides,

a number of other stndies also dealt '·lith the Hagc str~J.cture

issues in the industrial labour market context. 2

The studies examining the role of labour market on

wages and wage variations have taken demand for labour as

generally indicated by actual employment implying the assump-

tion that there are no unfilled vacancies. The estimation

of labour supply 'vi th the help of the general concept of

labour force has also limi ta tions particularly v!hen the

study is specifically concerned with manpmver planning

relating to some area, industry or occupation. This prac-

tice raises some important issues in labour market analysis.

10 As illustrations see some studies by T.S. Papola: "Wage Differentials and Competition in the Labour Harket", Th~Jjtct:hC1.ILJ01!:r.TJ.Cl.:L_Qf_~a bQn.r_EcQ_IlQ,ffiiC$.., Vol. XVII, No 01 -2 (April-July, 1976) pp. 39-56; "Inter-Industry wage Structure: Te chnology Hypothes is", Any'~sak, Vol. II ~ No 0 1 (June 1972), pp. 50-73; "Regional Differentials in Industrial Wages in India; 1950-61+", Anv~$..ak, Vol. I, No.1, pp. 56-77 and "Inter-Regional Variations in

. Hanufacturing Wages in India :"Industrial Struc'J.tre and I

Region Effe cts", Inctt:t..ll ~-I.Q_urnCLl_Q,t _tTJ.dJ-!:?_t.r:i..aJ~)i~l a tion~, Vol. 7,· No.3, January 1973, ppo 355-376.

2. For example, please see, C.K . .Johri and N.C. Agarwal, "Inter-industry 'vIage Structure in India, 1950-61: An Analys is", Ind_iJ3.)1..<TQu..r.Dal._9_f_IIld_lls..tr::L[).),.JiG..la_t..i.on$.., Vol. I, No.4, April, 1966, pp. 3Tl-1+1l\-; P.K. Sa'Vihney, HInter-Industry Wage Differentials in India", Incli_a}l_J_Q'.l_r!1~~_of .E~ono~ics , Vol. XVII, No.1, July-September 1969, pp. 28J+7 and Pramod C. Verma, "Inter-ind:.lstry \(~age StructClre in India: Further Evidence", Indian_.[oJ.:~!1a] __ oX __ I1J.<l~st~t~3...l Relations, Vol. ~, No.3, January, 1971, p~. 289-296. In thls connection for an Inter-country Analysis, please see, T.S. Papola and V.P. Bhardldaj, "Dynamics of Indus­trial Wage Structure: An Inter-country Analvsis " The Economic Journi'Ll, Vol. LXXX, Ma.rch,1970: PP': 72-90

~-

35

For instance, how to take account of unfilled vacancies

in general and in particular skilled or semi-skill'ed occu­

pation? Studies in manpower demand attempt this question

assuming that demand for labour is based on technological

changes and project demand for labour over a period on the

basis of investment and technology used in industries. Such

projected demand is examined in relation to the supply of

labour projected v~th the help of available training faci-

lities for skilled or semi-skilled occupations and ~he gap

betw'een the two is conSidered as shortage occupation.

An example of the study of demand for labour is the

study of manpower requirement in industries in GIDC

Industrial Estate, Ankleohwar by the Directorate of

1 Employment and NanpovTer Training, Gujarat State, Ahmedabad.

v1 i th a view to organise training programme s for providing

skilled and semi-skilled labour to these industries, the

directorate surveyed the industries on s~nple basis and

estimated the future requirement of workers. An example

of the study of demand for labour and supply of labour is

1. The Directorate of Employment and Manpm'Ter Training, Gujara t State, Ahmedabad, l-lanpol'Ter Requirement for Industries in GIDC, Allicleshwar, Departmental Report: 1979-80, for the use of the department only.

37 .

of information in the labour market. Hany studies have

criticised the \vorking of the Employment Exchanges on

the ground that they,do not attempt to playas catalytic

in the matching process in labour market. Agra''-'al anc

Raj agopalan have provided a revimv of Labour market

'f t' , I d' 1 ln orma lon ln n lao

Studies following the vieH that informal information

sources play important role in the matching and allocating

function of labour market examine its i~tensity and extent

in area and industry specific labour market. For example,

Papola and Subrahmanian have examined this aspect in

"Wage St~cuure and Labour Mobility in a Local Labour

Market: A Study in Ahmedabad. 112 It found the informal

information source almost the main source and that the

extent of geographical mobility in the sense of inter-

state mobility is low and getting lo\\'er over the years.

Inter-plant job changes are not as fre~lent as inter­

industry ones. Vijay and Heather .Joshi3. studied migra­

tion aspect in the Bombay labour market analysing the

1961 and 1971 census data of migrants and selected basis

of analysis the linguistj.e group structure of migrants in

-------------,-----,--,----1. B.L. AgraYlal and V.K. Rajagopalan, 'Labour Market

Information in India', Manpo~e~.ron~Q~l, Vol. XV, !tpril-.June, 1979, pp. 21 - 31+-; Please see Balbirs ingh . . EmDloym~_nt ~~charr&.e.lLil'l_G.hangingJilQ.QrrQITIY.~:[_Instti, Ph.D. Thesis, Meerut University, 1974-73.

2. T.S. Papola and K.K. St~brahmanian, f\'Iag~ __ Str1..l~t.lreAnd La Q.Q.4.r..J19J2.ili t y: in LQ.~.A]'-1J2J:~Q'.lX. J1a r:.ke'l._!..,_A __ $J2~1(tLi.11 Ahmedabad, . Popular, Bombay, 1975.

3· Vij ay Joshi and Heather J osh1, "Sur':.nl}d.s_ka bQilLa_QcL.the citvi-A_Sj~.\ll!Y_o_t_t?.omb~y", Oxford University P~eSS, 1976.

,

the light of market information. They also considered

informal sector aspect of t.he market. They found that

some language-groups of migrants had better access into

38

the labour market due to the informal' channel of infor-

mation resulting in pre-arranged job migration and some

job and industry specific migration. The mobility aspect

in relation to the processes of labour allocation among

nel" and old indus tries in a nel11y indus trialized region

has been. studied by .Tohri and Misra. 1 They studied this

aspect ''lith reference to the five most important industries

by employment in the Union Terri tory of Delhi, Hestern

U.P. and Haryana. The study examined the extent and

pattern of labour mobility, measured its determinants a.nd

analysed the process of inter-industry labour allocation

of workers in those industries. They found the personal

factors such as age, non-earning dependents, skill and

average montta.ly income more. important in explaining volun-

tary mobility diffel'Emtials than the institutional factors

such as, industry, size of firms, ~orkers within or out­

side the region and rural/urban back grounds of the YJorkers.

The relation between the location variable and mobility

was found more complex.

However, all these studies seem to have exa~ined the

matbhing function from the demand for labour side and c::;.vcid

looking from the supply side of labour. The st~dies that

1. C.K . .Tohri and V.N. }fisra: "Regional Labour Nobility: An Inter-industry Analysis", IDSiian .TournaI of Il).dustrial Relations, Vol. 8, No.2, October 1972, pp.159-199.

9 examine the matching function from the supply of labour

side maintain that the inflm·J of labour into the rr.arket

by mobility and migration exert greater pressure on labour

market process and along with the imperfection~ ca~sed by

union activities and high extent of use of informal channel

in recruitment give rise to a sector calJed the informal

sector. It is believed that, despite high rates of in~ls­

trial development and overall modernisation, the urban

economics in most developing countries continue to have an

increasingly large part of their activities in the non­

organised or inforna.l .sector. The extent of employment in

this sector is considerably large in many developing

countries.1

In India, for inst.ance, this aspect has been

studied in relation to Calcutta.,2 Bombay3 and Ahmedabad. 4

It has been found that this sector reveals certain positive

features in regard to the capacity to generate employment

and equitable pattern of distribution. The grovlth pattern

based on an emphasis on this sector is, therefore, likely

to be more effective in reducing poverty in urban area. 5

1. This includes ILO studies like (8) EmD} oyment. Ir.coT::e::: and Eauality : A Str2 t.ep;y for Increas inv Prod:lctive Employment in Kenva, ILO, Geneva, 1972, (b) EmploY!T!ent Problems in t~e Rural and Informal sectors in Ghana, Report of an ILO/J"ASPA Hission, Add is Ababa,197'l. (c) Urban Deve] o~D1cnt 8 nd Employment, 11,0 Geneva, i 976, (d) StJBBIAH Kanappan Edt., Urban LRbour Market Beh8vio'lr in Develoning Countries, ILO, 1977.

2. A.N. Bose, The Informal Sector ~.p C::!..J-cuttg. HetroDolitan EcoD_Qmy, ILO, Geneva, 1 971t-. . .

3. Vijay and Heather J"oshi, ·Surnlus.JJab_Q'lr and the city: A Study in Bombay, Oxford Universit.y Presf, 1976.

4. T.S. Papola, Urban Informf:...L Scu;tCI' in a Develoning Economy, Vikas, Delhi, 1981.

5. Ib id , p. 2.

In a study of informal sector, follm:ing the

classifica tion bet\o.Teen formal and informal sector provided

by Jhon Weeks1

on the basis of exchange relationship

between the enterprise and the state, Hein Streeke~k has

considered the informal sector as represented by the s~all

scale industries, named by him as 'light industries,' and

has studied the employment, \,rorking conditions and labour

relations in small scale incnstries in rural South GUjarat. 2

His study' gives some interesting insights in the labour

market processes in this sector. He has fOlIne that the

temporary workers were not really temporary in the sense

tha t they vlere not attached to the factory; but their names

were listed in the different sections or departments of

the factory at different times to avoid strict observance

of the factory-rules. He observes that, the reason for

the 'Light-industries' remaining light for ever is the

a tti tude of the OI,mer-entrepreneurs to take maximum

advantages from the governr1ent in the form of subsidies,

tax holidays etc., and to take minimum responsibilities

tovlards labour in the form of avoidance of observance of

the factory-rules.

1. Ib i d . P . 9.

2. Hein Streefkerk, 'Too Little to Live on, Too Euch to Die on', E.P.W., Vol. XVI, No. 15, April 11, 1981.

41

VI. Need for Furthe~ Stud~r.

Thus, though the analyticp,l studies in labour r.1arket

have gained. re cently, these are s till fl.';'" in number. In

most of the studies, social background, language, rural

link and labour commitment and social barriers to mobility

have received the top most attention of researchers. The

sociological aspects of labour market have been so r.1uch

emphasised that, "\-:e have Literature on much of 'Sociology

of labour markets' but relativeJy very little on tl:.e leco­

nOr:1ics of labour market., .. 1 This is not to deny the ircpor-

tance of social aspects -in labour market analys is bnt to

indicate .that it constit:,_tes only onc fourth aspect of the

labour market-studies. 2 The need is therefore tc study

labour market at sub-national or regional level \.,Thich is

more amenable to analytical treatment and can land itself

to the use of primary sources of information enabling the

analysis more realistic. The present study ther~fore atte-

mpts to uncertake an analysis of the local labour market in

the context of developing industrlal centres of a b2.ck\-:ard

area.

1. T. S. Pa pola, 'Economics of La bo'~r 1'1ar ke t ' in V. B. S in9'h Edt.,Labo:lr Research in India, PopUlar, Bombay 1970,p.182.

2. K.G. Seth, 'A Review of Research in Industrjal Relations in India', Indian Journal of Industrjal ReJations,Vol.I, No.3, .January 1966, p.276, "There are four deterr.1inants of the structure of the labour markets. (a) the nature and source of labour sup:=,ly and mobility, (b) the m:ture of demand, its ql~antity, q:lality and

concentra tion, (c) elements of competition or monopoly both in case of

labour s'-1p~ly and demand and Cd) a:nther in~~ibltio~al and soci.al factol;'s th2t influence

t e.operGtlons o~ l~bour marYet AnQ ceterm~ne tl:.e .dor.nnance or other\·."ls e of economic fa ctors . II