Short-Term Contracts and Its Effect on Wages in Indian Regular Wage Employment: An Unconditional Quantile Regression Approach

The increase in regular wage employment in the Indian economy between 2004-05 to 2011-12 was accompanied by a significant deterioration in job security; more workers find themselves on short-term and insecure contracts. Using data from the 68th and the 61st Round of the National Sample Survey Organisation on Employment covering the period 2004-05 to 2011-12, it was found that workers on short-term contracts earn significantly lesser than workers on long-term contracts after controlling for various factors such as education, union membership etc. Using unconditional quantile regressions, it can be seen that the maximum impact is felt by workers earning the median wage. High-wage workers face just as much of a penalty – if not more – from short-term contracts as low-wage workers. This is in contrast to studies on the phenomenon of temporary work in Europe, which found that low-wage workers were affected disproportionately due to short-term contracts. The negative impact on wages due to short-term contracts has increased for high-wage workers in 2011-12 as compared to 2004-05, while there has been no real change for low-wage workers.