ABSTRACT
This paper looks at the impact of growth in the productivity of workers in both the formal and informal sectors, on the informal wage and employment. It is now more or less established that the recent surge in the Indian growth rate is much more related to a productivity boost than to a rise in investment (see, for example, Guha-Khasnobis and Bari 2003; Marjit 2005, etc.). If such income growth precipitates on the lower deciles of the income groups, then it is expected that the social consequences of the overall increase in the growth rate must be reflected on the quality of life of the poor people. It is clearly a difficult task to measure such impact at the micro level and in terms of the various indicators of human development, and therefore, we argue that the informal wage is a good indicator to capture the income element, given that most of the workforce in India is absorbed in this segment. Hence, for example, one may like to know how a productivity growth in the skilled sector affects the wages of unskilled workers involved in the informal sector, or how a productivity growth of unskilled workers working in the organized/formal sector affects their informal counterpart. Before we provide further details on the plan of work, let us briefly visit the existing literature dealing with informal labor markets in developing countries.
