The document discusses the key features of India's labour market. It defines the labour market and outlines its main functions, which include distributing employment, facilitating training, serving social purposes, and playing a political role. The labour market is segmented along dimensions like gender, age, geography, profession and education level. It is also rigid and inflexible in some respects. The interaction between supply of and demand for labour determines employment levels, while factors like education, demographics, and economic conditions impact both supply and demand.

1. Labour Market in India
by
K. Murugan
Assistant Professor
Dept. of Economics
Guru Nanak College
Chennai-42.

2. Definition of the Labour Market
Derek Bosworth, Peter Dawkins Stromback
(1996) who state that the labour market is the
place where supply and demand meet, working
to determine the price and quantity of the work
performed.
Michel Didier (1997) defines the market as a
means of communication through which
sellers and buyers will inform each other about
what they have, what they need and the prices
that they ask or propose, before closing the
transaction.

3. The Functions of the Labour Market
Distribution function of employment on
sectors, industries, professions (occupations),
Qualifications, territorial areas in line with
volume and structure of the labour demand;
Training function and revenue sharing of
economic operators; through this function the
labour remuneration is achieved;
Social function; through the labour market the
supply and demand of labour meet.

4. Improvement of labour conditions, the
humanization of labour, social protection of
the unemployed and their retraining are done;
Educational and training function,; this feature
provides the information necessary for
education, vocational training, retraining and
reintegration of labour, the accumulation of
work experience;
Political function; the feature that reinforces
social and political stability.

5. The labour market ensures the balance
between the needs for labour resources of the
national economy and the possibilities for their
coverage.
It features a self-regulation mechanism, which
in principle is the same on all markets.
Common elements of this mechanism are
supply, demand and price.
Having as main transaction objective the
labour factor, the labour market by its structure
and operation.

6.  Features of Labour Market
 Labour market is Segmented
 Arthur Cecil Pigou, a classical economist sought to
explain the discrepancies between labour supply and
demand since the 1940s, saying that the labour
market is segmented due to restricted mobility within
the industry and between industries.
 Labour market is composed of three "levels":
primary, secondary and tertiary (the tertiary contains
undeclared work, determined by the evolution of the
underground economy).

7.  The first level includes the workers who benefited
from a higher education and training, where incomes
and employment stability are higher and where there
are real professional growth opportunities.
 Companies that promote individuals, their career and
salary, levels are determined largely by their
evolution on the "internal markets“
 This segmentation jobs that are "good", well paid
and "bad", low paid, not only deepen the gap between
the two sectors but even determine employees in the
secondary sector to resort to illegal labour to get
higher income, on the medium and long term.

8. Gender between men and women;
Age groups of working age (15-64 years,
16-65 years, 20-65 years,);
Territorial - rural; urban area
Professional categories;
Qualification degrees;
Level of education (primary, secondary,
tertiary).

9. In terms of demand for labour following
segmentation criteria
According to professions; depending on the
jurisdiction - urban, rural, cities, towns and
communes;
Depending on the working schedule - full or part
time;
Depending on the duration of the contract -
indefinite or fixed;
Depending on the location of the labour - inside
or outside the company.

10.  Rigid and Inflexible
 The labour market rigidity is natural, as a result of
geographical evolution, lifestyle, professional training, as well
as by legal and institutional aspects that are determined by
gaps within these systems.
 The minimum wage takes into consideration the need to hire
new employees reported to the level of productivity. If the
employee's productivity level is below the minimum wage, the
employer may decide to dismiss or not hire new personnel.
 If the minimum wage is set at a high level, the negative
consequences related to employment are higher for people
with low productivity such as young people without
experience or education, who are somewhat directly excluded
from the workforce market.

11. Flexibility means promoting employment and
accepting typical positions: part-time jobs
(reduced working hours), jobs with variable work
schedule, working at home, self-employment,
employment with temporary contracts, occasional
contracts, contracts per project or fixed contracts.
The need for flexibility is determined by
increasing competition on a national level, but
mostly internationally. Due to the use of flexible
labour there is an increase in the workforce
efficiency by reducing labour costs but mostly
balancing supply and demand of labour.

12. The secondary market from other markets (capital
market, goods and services market), receiving the
influences of both, being constantly linked with
them, anticipating trends in the labour supply and
demand, the reaction of economic operators,
receiving and transmitting, in return, medium and
long term signals and determining effects that are
fund in all social-economic sectors.
The structure and volume of the workforce supply
are dependent on the demand for labour, just as
the demand for labour is dependent on the
demand of goods and services, and how they are
produced.

13.  Labour market is regulated; this feature results from
the particularity of the workforce as well as
requirement to ensure employee protection, control
the loyal competition through trade unions, allowing
the grouping of entrepreneurs who hire wage labour.
 It is a contractual and participatory market.
 The contract and negotiations between employers and
employees give the instruments for regulating supply
and demand of labour with quantitative, qualitative.
The relations between sellers and buyers are governed
by laws and agreements between representatives of
employees, employers and public power.

14. Education, training, demographic factors
determine the value of labour. The labour market
is very "alive" and in a constant change.
Labour market is an administrative market
because at this level companies manage their
available resources according to the demand for
necessary goods and services, that involves the
workforce and personnel wage plan.
Labour market has a multidimensional character
given by the geographic, economic, educational
and social scale. The geographical scale is given
by the profile of the available workforce,
population on age categories and the working
population.

15. The economic scale refers to the population
distribution by areas of activity, professions,
the public participation in the economic
process, the costs implied by the inactivity of
the population.
The educational scale refers to average
duration of learning, the population level of
training, the number of people that are in a
particular form of learning.
The social scale refer to the costs of social
protection, reconversion or insertion of
employees on the labour market;

16. Labour market is inconsistent, workers having
different levels of training, education,
qualification, coming from different
geographical areas, of different ages, genders,
aspirations and standards;
 It is an imperfect market in the contemporary
economy, the labour market is not perfectly
competitive
The price of labour, which is the wage, is not
formed in relation with the supply and demand
on the market, as it would be natural.

17. It is very important for the performance of the
labour market, to be close to the conditions of the
perfect competition.
The state could intervene to orient the labour
market as close to perfect competition as possible
or to limit the negative trends of imperfect
competition.
Most often trade unions are pressuring companies
to increase wages regardless of the financial
situation of the companies or the state of national
economy, taken as a whole, which leads to low
economic efficiency of companies.

18. Man Power Supply
Education may be considered either as an
investment good or as a consumption good.
It is the former which is more relevant to
manpower policy on the assumption that
education can increase the economic well-
being of society.
One of the objectives of manpower policy is to
remove the discrepancies between the supply
of and demand for manpower with a minimum
of lost income and production.

19. Bombach (1965) discussed manpower forecasts
and concluded that there are several similarities
between education and infrastructural investment.
Harbison (1964) defined manpower policy as a
combination of employment policy (aimed at
providing employment opportunities), human
resources development policy (designed to
increase the skills, knowledge, and capabilities of
the labor force), and manpower allocation policy.
It is the human resources development policy
which is essentially concerned with education and
training.

20. Most of the developments in manpower planning
have taken place within government, either at the
national or state level.
However, in recent years, there has been an
increase in private manpower planning at the
individual firm level.
The main objectives of this planning are for
costing purposes and system analyses. By
cooperating with the educational institutions of
the community and the local branches of the state
employment service, however, firms can make
their own requirements known and can contribute
to a situation of equilibrium in the local labor
market.

21. The Interaction of the Supply of and Demand
for Labor
Unfilled jobs and unused human resources are
constraint on any nation's economic growth.
The unemployed labor is essentially the gap
between the total supply of and demand for
labor when labor supply exceeds the demand.
The job vacancies, is the gap when the demand
is greater. Yet both can occur at the same time
because of structural deficiencies of the
economy and imperfections in the structure
and behavior of labor markets.

22. Ross (1966) explained the concept of labor
shortage and how a shortage could exist even
when there were no actual unfilled vacancies.
The shortage was that a change in consumer
preference could cause a sudden upsurge in
demand for one product before supply
adjustments could take place, particularly in
those occupations which require a long
training period.

23. Unemployment may result from a
geographical imbalance which could be
remedied by migration or from overall
occupational imbalance which can be
remedied only by retraining.
Unless forecasts of manpower requirements
can be made more accurately, the prime
solution to this structural unemployment in a
time when technological change is a
continuing process and shifts in demand are
common is to have a labor force which is more
mobile and which can adjust quickly.

24. High rate of unemployment was caused by an
inadequate level of aggregate demand and those
who thought it was caused by basic structural
changes in labor supply and demand.
Inadequate demand is due mainly to cyclical
variations and lack of suitable economic growth,
while structural maladjustment is caused by
technological changes, changes in regional
industrial structure, and market changes reflecting
shifts in consumer tastes and preferences.
The differences center around the measurement of
the relationship between inadequate demand and
unemployment, or the structural change and
unemployment.

25.  Demand for Labor
 In the examination of demand for or supply of labor,
is important to take account of price-since more
individuals would seek employment if wages were
sufficiently high, and employers would hire
additional workers if wages were sufficiently low.
 In general, demand for manpower is influenced by (a)
demand for goods and services and (b) state of the
technology.
 Demand for Goods and Services. Demand for
manpower will be dealt with first as a function of
demand for goods and services.

26. A change in demand for goods and services
will affect the individual firm by either a
movement in price and/or production,
depending upon the nature of the firm's capital
and inventory structure, the degree of price
competition in its market, and the state of the
labor market. Three factors like inal demand,
employment-output relationships, and
interindustry relationships.

27. The production a result of an increase in demand
for the end product, generates a secondary
demand for resources, men, and materials,
depending on the product mix.
An increase in demand will lead to overtime
and/or new job vacancies; conversely, a decrease
in demand prompts layoff and cancellation of job
vacancies or a shortening of hours.
The size of a firm's demand for labor will rest on
the interplay of numerous variables. Therefore, in
contemplating any rise in wage rates in order to
attract additional workers, a company must
consider that a rise in unit labor cost may cause a
decrease in demand for the product.

28. Within an economy's institutional framework
(government minimum wage rate regulations,
competitive strengths, union strength,), a firm will
tend to seek, initially, to hire productive workers
at relatively low wages.
Similarly, the average worker, on entering the
labor market, will reject offers of employment
below his minimum acceptance wage, but will
probably lower his expectations as the amount of
time spent in job-seeking activities lengthens. The
criticism of this analysis is that it deals with only
one important factor in the individual's acceptance
of employment and chooses to ignore the
elements of working conditions, psychic benefits,

29.  State of the Technology.
 Demand for manpower is also a function of the state of
the technology. The direct impact of the state of the
technology may be that capital is substituted for labor.
Some jobs will be abolished, although others may be
created. The economic dimensions will be measured by
the firm in the savings per unit of output achieved.
 Technological changes involve occupational changes
and, therefore, alterations in skill requirements. In
addition, the frequency of occupational changes is an
important variable in the manpower adjustment
process, for a gradual alteration of labor requirements
allows a gradual adjustment in labor supply. Moreover,
the range within which skills are interchangeable and
the particular degree to which they are substitutable in
the production process depends on the state of the
technology.

30.  Supply of Labor
 The is equal to the sum of the employed and the
unemployed workers. When examining the supply of
labor, is necessary to take into account the distinction
between the potential and the actual labor force.
 The supply of labor may also be modified by changes
in the hours of work.
 There is the rate of population increase and the
breakdown of the population by age and sex, but the
problems involved therein are more concerned with
scarce or inadequate data than with theoretical or
conceptual problems.
 Second, there are non-participants in the labor force,
such as those excluded by age and those alienated by
either lack of education or other socioeconomic factors.

31.  Labor Force Participation. Stein (1967) attempted to
determine the reasons for nonparticipation in the
labor force and divided the findings into voluntary or
no voluntary categories.
 The former included housewives and students, while
the latter included those with physical disabilities,
those unable to arrange child care, and those who
believed it would be impossible to find a job.
Voluntary nonparticipation thus occurred when the
marginal utility of studying or of leisure was greater
than the marginal utility of income.

32.  Changes in the supply of labor can occur in response
to short-run changes in the demand for labor.
 The decrease in the demand for manpower causes a
fall in participation rates by discouraging primary
workers.
 But, eventually, if the decreased demand sufficiently
affects the family income, there will be an offsetting
effect because of the incentive for secondary workers
to enter the labor force in order to maintain their
incomes.

33.  Another cause of nonparticipation may be rigidities in
the structure of the labor market. Union restrictions
may prevent a nonunion member from entering a
trade in order to protect the members' own interests.
 Collective bargaining agreements and governmental
action in the raising of minimum wages may prevent
the youthful unskilled worker from obtaining
employment. Although the action would be intended
to improve the situation of the lowest paid workers, it
may not be economical for the employer to hire them
if their marginal productivity is lower than the wage.

34.  Labor Mobility.
 A mobile labor force can make supply adjustments
less painful. Mobility can be either occupational or
geographic (the ability to move between states). The
former will enable adjustment to occupational
imbalances of supply and demand and the latter to
regional imbalances.
 Saben (1964) pointed out that work-related factors (to
take a job, look for work, or make a job transfer)
accounted for half of the migrants, while Gallaway,
Gilbert, and Smith (1967) found that per capita
income differences are significant determinants of
interstate population movements.

35.  As long as these imperfections of labor markets exist
and our goals are low rates of unemployment at stable
prices, efforts should be made to improve labor
mobility through general education, special training,
and relocation programs.
 Quality of Labor
 It cannot be neglected is the quality of the labor force.
Quality in this sense is an arbitrary term covering
education and training, age and experience,
motivation, and all of those factors which affect the
ability to do a job efficiently. There is still insufficient
research in this area.