Literature review

There is a deficit in the quantity and quality of employment in India (Basole et al Reference Basole, Jayadev, Shrivastava and Abraham2018; IHD 2014; International Labour Organization [ILO] 2024a; NCEUS 2009). The high rate of economic growth is accompanied by low employment growth, often termed as ‘jobless growth’ (Kannan and Raveendran Reference Kannan and Raveendran2009, Reference Kannan and Raveendran2019; Kannan Reference Kannan2022; Tejani Reference Tejani2016; Unni and Raveendran Reference Unni and Raveendran2007). When gross value added (GVA) was growing at 6.2% between 2000 and 2012, the employment growth rate was 1.6%, which declined further and was nearly negligible at 0.01 between 2012 and 2019, while the GVA continued to grow at 6.7% (ILO 2024a, 52). Although the employment growth rate has improved since 2019, the increase in employment is mainly in self-employment-based activities as own-account workers and unpaid family workers. (ILO 2024a, 52).

Moreover, the majority of the workforce in India is engaged in the informal sector, accounting for about 82% working in vulnerable conditions (Basole et al Reference Basole, Jayadev, Shrivastava and Abraham2018; ILO 2024a; Kantor et al Reference Kantor, Rani and Unni2006; Papola and Sahu Reference Papola and Sahu2012; Verick and Chaudhary Reference Verick and Chaudhary2016). Although the share of formal sector (FS) workers has increased from 11% to 19% from 2009 to 2022 (and was 20% in 2019), the increase in jobs in the FS is mainly of an informal kind (Basole et al Reference Basole, Jayadev, Shrivastava and Abraham2018; ILO 2024a; Kannan Reference Kannan2022). Most intriguingly, informalisation is increasing even among the regular salaried/wage workers, i.e., among the most privileged category of workers (Basole et al Reference Basole, Abraham, Rakshit, Vijayamba, Shrivastava and Halder2023; ILO 2024a). Besides, job instability among regular workers is growing. A large proportion of regular workers are without any written contract, and the share of regular workers with long-term contracts has also decreased over time (ILO 2024a, 25). In addition, in recent years with digitalisation and the introduction of new technologies, the types of new jobs with limited/no social security coverage are rising (i.e. mainly in the platform or gig economy) (ILO 2024a, 46; ILO 2024b).

Next, literature is scanty regarding the probable determinants of the quality (or lack of quality) of employment in India, particularly regarding macroeconomic factors. However, many studies exist examining the (individual-level) determinants of formal/informal sector employment. Researchers, notably Abraham (Reference Abraham2016, Reference Abraham2017), Bairagya Reference Bairagya(2012), Narayanan (Reference Narayanan2015), and Sheikh and Gaurav (Reference Sheikh and Gaurav2020), have found that factors such as age, gender, education, skills (i.e. technical and vocational education), socio-religious identities, and place of residence of individuals are significant in explaining their participation in the formal/informal sectors as formal/informal workers. For example, an increase in age (up to about 60 years), and higher levels of education and skills, increase the probability of getting a job in the FS as formal workers rise (Abraham Reference Abraham2016, Reference Abraham2017; Bairagya Reference Bairagya2012; Narayanan Reference Narayanan2015; Sheikh and Gaurav Reference Sheikh and Gaurav2020). In addition, higher quality employment is more likely for males rather than females, for workers in the urban areas rather than rural areas (in the non-farm sector), and for the upper caste than the formally designated Scheduled TribeFootnote ⁶ (STs) and Scheduled Caste (SCs), and Other Backward ClassesFootnote ⁷ (OBCs) (Abraham Reference Abraham2016; Sheikh and Gaurav Reference Sheikh and Gaurav2020).

Regarding macro-level factors influencing employment quality, researchers argue that high economic growth does not necessarily lead to high employment growth, especially with regard to better productive and remunerative employment (Aggarwal Reference Aggarwal2018; Dev Reference Dev2006; Ghosh and Chandrasekhar Reference Ghosh and Chandrasekhar2007; Papola Reference Papola2013). Moreover, the earlier Institute of Human Development (IHD) report (2014) recommends that organised sector growth, particularly growth in the manufacturing sector, leads to a process of economy-wide productivity growth, along with growth in employment and the condition of workers. However, informal employment should not grow at the cost of formal employment in this sector. Furthermore, there is a huge ongoing debate on the impact of business regulatory environment reforms and labour market reforms on employment (Bhattacharjea Reference Bhattacharjea2006, Reference Bhattacharjea2021; Rodgers and Menon Reference Rodgers and Menon2013). In this respect, Besley and Burgess (Reference Besley and Burgess2004) and Hasan et al (Reference Hasan, Kapoor, Mehta and Sundaram2017) found that states which adopted pro-worker policies experienced lower output, productivity, investment, and employment in the FS. However, other researchers, notably Rodgers and Menon (Reference Rodgers and Menon2013), found that pro-worker policies improved job quality (in terms of job security, likelihood of full-time work and cash wages), particularly for women.

Specific questions

Given this literature gap, a few fundamental questions arise:

1. 1. What is the over-time trend in the quality of employment? Is it improving or deteriorating over time?

2. 2. What is the theoretical framework that could explain the specific trend (increase/decrease) of quality of employment? Whether good growth and good governance influence employment quality or not?

3. 3. Is the theoretical framework corroborated by the Indian data?

Empirical analysis and findings

In this section, we focus on the over-time trend of the quality of employment in India.

• Index-1(I ₁ ): The overall quality of employment in India for the majority of the workers (15–64 years of age) is not only poor but is deteriorating. In terms of the composite index I ₁ (combining three dimensions, as derived earlier in the paper), the score for more than two-thirds of the workers is very low i.e. 0.33 (refer to Table A2 and Figure 1; appendix). In addition, the share of workers with the lowest scores has increased by 7% between 2009–10 and 2022–23. This is essentially because, most of the working-age people are employed as informal workers, and are deprived of job contracts and social security benefits. Most importantly, the increase in shares of these workers over time indicates the proliferation of informality.

  

  Figure 1. The quality of employment index-I₁ values/scores in India.

Strikingly, only for about 9% of the workers in the entire labour force, the index score is highest (i.e. 1.66). Moreover, the share of workers at the higher levels of the index value has either reduced or remained stagnant over time.

• Index-2 (I ₂ ): The quality of employment as per this index (i.e. combining only two dimensions, excluding ‘employment opportunities’) is low and not improving for most of the workers (Table A3 and Figure 2). As such, the index value is ‘0’ for about two-thirds of the workers, indicating that a large share of workers is deprived of both job contracts and social security benefits. Moreover, the condition of the workers has remained almost stagnant over time.

  

  Figure 2. The quality of employment index-I₂ values/scores in India.

• Index-3 (I ₃ ): The scenario of quality of employment is not very encouraging even in the FS. More than half of the FS workers have low index values, indicating persistence of informality even in the FS (Table A4 and Figure 3). Although the percentage of workers attaining the highest index value has increased in 2022–23, the share of these workers is still less than 50%.

  

  Figure 3. The quality of employment index-I₃ values/scores in India.

Overall, we find that the quality of employment is not only poor in India but is either not improving over time or deteriorating. Now, the question arises: What are the plausible reasons that have led to the stagnation and deterioration of employment quality in India despite high economic growth and good governance?

To identify the probable factors (mainly focussing on macroeconomic characteristics) that could explain the lack and deterioration/stagnation of quality of employment, we develop a theoretical framework in the section below.

Theoretical framework

We build this theoretical framework following the works of Bhaduri, Reference Bhaduri2018), Chakrabarti (Reference Chakrabarti2013, Reference Chakrabarti2016), Sadhu and Chakrabarti (Reference Sadhu and Chakrabarti2018), Sanyal (Reference Sanyal2007), and Sanyal and Bhattacharyya (Reference Sanyal and Bhattacharyya2009).

The basic structure of the framework is illustrated in Figure 4.

Figure 4. Dynamics of the framework.

Note. The numbers represent the sequence of the framework.

Probable determinants of quality of employment in India

To find out the probable determinants that could influence the pattern (deterioration/stagnation) of quality of employment in India, we take up the composite indices (I₁, I₂ and I₃), which we constructed earlier, as dependent variables. As noted above in the methodology section, we take the individual-level aspects such as age, gender, education, skills, rural-urban locations, and socio-religious identities of an individual as control variables.

Now, we turn to the main determinants, i.e. the macro-level determinants of employment quality, following the theoretical framework and literature. We take up aspects such as expansion of the macroeconomic activities, extension of the organised sector, improvement in the quality of governance, increased flexibility of the business regulatory environment, and the relaxation of the labour regulations. Accordingly, ‘Net State Domestic Product (NSDP) per capita’ is taken as a proxy variable for capturing the increase in macroeconomic activities. Next, we use a variable ‘the share of GVA (gross value added) of the organised/formal manufacturing sector out of the total NSDP’ representing the expansion of the organised sector. ‘Public Affairs Index’Footnote ¹¹ data, as reported by the Public Affairs Centre, has been taken as a substitute for measuring good governance. The ranking/rating of Indian states on the business regulatory environmentFootnote ¹² and labour law-related complianceFootnote ¹³ in the manufacturing sector, as given by the Planning Commission, Government of India (2014), have been used as proxy variables for measuring the business regulatory environment and better labour law regulations.

Moreover, the population of a state is the proxy for state size, and a greater size should have administrative issues and should adversely affect the overall quality of employment. However, we are using state population mainly as a control variable.

Lastly, our understanding is that the overall economic environment is crucial for getting decent work for the people. If the environment becomes conducive, there is a higher probability of getting quality employment. Consequently, as a method, we have taken the following strategy: for all the individuals of a particular sub-national state, we assign the same state-level value; as we move to another state, for the other group of individuals, we assign a different state-level value (as per data for this second state).

Taking these variables, we run the ordered logistic regressions on three composite indices. The regression models are given below in Box 1, while the details of the variables are given in Table 2. Table A5 (appendix) gives the mean and standard deviation of the variables we deal with.

Box 1. The ordinal logistic regression model

Equation 1:

$$\eqalign{ & {Y_{1i}} = {\rm{ }}{\beta _o} + {\rm{ }}{\beta _1}{X_1}_i + {\beta _2}{X_2}_i + {\beta _3}{X_3}_i + {\beta _4}{X_4}_i \cr & + {\beta _5}{X_5}_i + {\rm{ }}{\beta _6}{X_6}_i + {\beta _7}{D_1}_i + {\beta _8}{D_2}_i + {\beta _9}{D_3}_i \cr & + {\beta _{10}}{D_4}_{i{\rm{ }} + }{\beta _{11}}{D_5}_i + {\beta _{12}}{D_6}_{i{\rm{ }} + }{\beta _{13}}{D_7}_i + {\beta _{14}}{D_8}_i + {\rm{ }}{\mu _{ii}} \cr} $$

Equation 2:

$$\eqalign{ & {Y_{2i}} = {\rm{ }}{\beta _o} + {\rm{ }}{\beta _1}{X_1}_i + {\beta _2}{X_2}_i + {\beta _3}{X_3}_i + {\beta _4}{X_4}_i + \cr & + {\beta _5}{X_5}_i + {\rm{ }}{\beta _6}{X_6}_i + {\beta _7}{D_1}_i + {\beta _8}{D_2}_i + {\beta _9}{D_3}_i \cr & + {\beta _{10}}{D_4}_{i{\rm{ }} + }{\beta _{11}}{D_5}_i + {\beta _{12}}{D_6}_{i{\rm{ }} + }{\beta _{13}}{D_7}_i + {\beta _{14}}{D_8}_i + {\rm{ }}{\mu _{ii}} \cr} $$

Equation 3:

$$\eqalign{ & {Y_{3i}} = {\beta _o} + {\rm{ }}{\beta _1}{X_1}_i + {\beta _2}{X_2}_i + {\beta _3}{X_3}_i + {\beta _4}{X_4}_i + {\beta _5}{X_5}_i \cr & + {\rm{ }}{\beta _6}{X_6}_i + {\beta _7}{D_1}_i + {\beta _8}{D_2}_i + {\beta _9}{D_3}_i + {\beta _{10}}{D_4}_{i{\rm{ }} + }{\beta _{11}}{D_5}_i \cr & + {\beta _{12}}{D_6}_{i{\rm{ }} + }{\beta _{13}}{D_7}_i + {\beta _{14}}{D_8}_i + {\rm{ }}{\mu _{ii}} \cr} $$

where i=1,2,3……………………….n

Table 2. The details of variables taken for our study

Regression models: The regression equations are given in the boxes below.

Results of ordered logistic regression

The regression results (1–3) given in Table 3 illustrate that most of the macro-level factors (taken up in our study) have a significant negative impact on the quality of employment. Intrinsically, we see:

1. 1. The quality of employment (overall as well as in the FS) is likely to decrease with an increase in overall macroeconomic activities (as measured in terms of per capita NSDP).

2. 2. Although growth in the FS activities is likely to increase the overall quality of employment (in terms of both I₁ and I₂), it does not ensure improvement in the quality of employment in the FS (i.e. for I₃).

3. 3. The quality of employment in the FS is likely to increase with improvement in the quality of governance. However, in general, the quality of employment is likely to reduce with the extent of good governance.

4. 4. The quality of employment (overall as well as in the FS) is likely to decrease with a better business regulatory environment and flexible labour laws.

Table 3. The ordered logistic regression estimates

Note: *, ** and *** imply significance at 1, 5 and 10% levels, respectively.

So, the above regression results confirm our propositions 1 and 4 (mentioned in the earlier section) but reject propositions 2 and 3 with few exceptions. The increase in macroeconomic activities, a better business regulatory environment, and conducive labour law regulations have a significant negative impact on the quality of employment. However, propositions 2 and 3 are partly rejected: the growth in FS activities has no significant impact on the quality of employment in the FS but influences positively on employment quality in general (for both I₁ and I₂). Besides, a better standard of governance negatively influences the quality of employment in general but has a significant positive impact on employment quality in the FS.

Discussion on the above findings

The above findings indicate that despite consistently high economic growth and good governance in India, the quality of employment is not only poor but is either deteriorating or not improving over time. Intrinsically, the levels/scores of the quality of employment (as per the composite indices, including both formal and informal sectors) for the majority of workers are low. Most importantly, the shares of workers at the lowest levels/scores of indices (for I₁ and I₂) have increased, while they have either decreased or remained stagnant at the higher levels. Although the condition of FS workers seems to have improved after 2022, the share of these workers is less than half.

Next, the theoretical framework suggests that a high rate of economic growth, expansion of the FS, liberalised and efficiency-oriented governance, business-friendly environment, and flexible labour laws fail to improve employment quality. The expansion of the FS (induced by good governance, better business regulatory environment, conducive labour law regulations, and overall good economic growth) increases the growth of the modern informal sector (i.e. relatively capital-intensive sector), but the growth of the remaining large segment of the informal sector (both farm and non-farm) might be obstructed, mainly due to resource drain. Most importantly, the growth process in the modern sector leads to a distressed condition (the real income of farmers diminishes) in the agriculture sector. So, a huge section of the distressed labour force from this agriculture sector is pushed to the petty informal sector as other sectors (i.e. formal and modern informal sectors) are relatively capital intensive. The petty informal sector, due to resource constraints as well as low productivity, would be able to generate only poor-quality employment.

Furthermore, the confirmatory analysis also delineates similar results to that of the theoretical framework. In India, most of the macro-level factors, such as an increase in macroeconomic activities, the extent of quality governance, better business regulatory environment, and labour law-related compliance, have a significant negative impact on the quality of employment. These results indicate that with an increase in the volume of macroeconomic activities, there is a proliferation of informality, resulting in low employment quality. In addition, aspects such as good governance, better business regulatory environment, and labour law-related compliance influencing negatively to employment quality could be due to the bias of government policies towards large corporations at the expense of the medium and small industries and especially the workers. Government policies, perhaps, are favouring the big corporate houses, presumably to enhance capitalistic economic growth. Capitalists driven by accumulation motive use capital-intensive technologies and are in favour of labour flexibility. Consequently, this policy orientation reduces demand for labour, adversely affects the overall work environment, and also weakens the collective voice of the workers, leading to a lack of overall quality of employment. In this context, we could note that India’s rank moved up from 130^th in 2014 to 63^rd in 2020 in the World Bank’s Ease of Doing Business Index,Footnote ¹⁴ indicating a business-friendly environment.Footnote ¹⁵ However, this business-friendly environment, as argued just above, may have significantly curtailed the rights of labour in general.

By and large, the findings indicate that the very pattern of growth and so-called good governance initiatives are not helping to generate quality employment. Indeed, they are perhaps leading to deterioration of employment quality. Generating more and better quality employment opportunities is the primary benchmark of any progress, yet seemingly still inadequate in India. The projection of India as a country of economic progress and social progress (so-called good governance) is dubious. Perhaps, the outcome of the Indian Lok Sabha election 2024 (the ruling party’s significant drop in seats) could be an indication that the pattern of economic growth and model of governance are not people-centric.

In lieu of a conclusion: Summary findings and some policy options

The main concern of the article has been to understand how far good economic growth and so-called good governance initiatives are helping to improve the quality of employment in India. In this context, this paper analyses the quality of employment in India for the working-age group, using key dimensions as proposed by ILO. Most importantly, this study examines the probable determinants that could explain the specific trends (the absence, stagnation, and deterioration) of the quality of employment.

Our analysis suggests that the quality of employment in India within the working-age group is poor and deteriorating/stagnant over time. In addition, both the theoretical framework and the confirmatory tests suggest that the macro-level aspects, such as ‘economic progress’, ‘good governance’, ‘labour law compliance’, and ‘better business regulatory environment’, appear not to contribute in any substantial way to the quality of employment.

On the whole, our study indicates that the capitalistic economic growth based on the neoliberal dictum of liberalisation-privatisation-globalisation is not sufficient for improvement in the quality of employment for the vast mass of people. Indeed, the pattern of capitalistic growth puts a drag on the quality of employment.

From our analysis above, we have found that the existence and expansion of informality is one of the fundamental reasons for the lack of quality employment in India. This indicates that the spread of informality needs to be checked to reduce the deficit in decent work. Formalisation of informal employment in the FS is crucial to improve employment quality. To do so, support from the government is essential, as the market cannot take care of this problem on its own. The linkages between the formal and informal sectors should be improved such that the technology and knowledge spillovers may result in inclusive growth.

Going beyond such government intervention and formal-informal sector linkages, cluster-based industrialisation for small enterprises and petty traders (involving millions of small and micro enterprises) may add to the quality of employment through synergistic effects, economies of scale, and enhanced bargaining power in input and output markets, as well as, through improved productivity, knowledge, and skills for these micro-units. In addition, for those who are unemployed, employment generation programmes such as the Mahatma Gandhi National Rural Employment Guarantee SchemeFootnote ¹⁶ should be focussed in both rural and urban areas. However, for all these, massive support from the State and civil society is necessary; and if the State fails to deliver, the role of political movement then becomes important.