ABSTRACT
An important question on which answers are needed but not yet available, is what has been the impact of the fall in formal sector wage on labor productivity. If urban households have been forced by the decline in wages to revert, at least partly, to the old system of migratory labor, then we are back to the world of the Carpenter Commission and its concerns about the impact of labor instability on productivity. It is possible that the urban informal sector has developed so much in the years since the Carpenter Commission produced its report, that a household could cope with the falling formal sector wage by devoting more of the labor time of its members to the informal sector in the urban economy, rather than split its time between urban and rural areas. Alternatively, aspects of information systems might have improved so much that workers in the urban labor market could conveniently leave some members of the household in the rural areas, and work in urban jobs for long periods. In this case the fall in wages will not lead to a significantly higher incidence of circulatory migrants and high labor turnover in the urban formal sector. But such thoughts remain at the moment as hypotheses. Case studies are needed to throw light on the impact of real wage decline on labor turnover and productivity, as well as on the labor market adjustments of households.
