Rahul Menon

The increase in regular wage employment in the Indian economy between 2004–2005 and 2011–2012 was accompanied by a significant deterioration in job security; more workers found themselves on short-term and insecure contracts – a continuing trend. Insecurity of tenure results in a significant wage penalty for short-term workers, compared with those with longer term contracts. This article estimates the negative effect of short-term contracts on the wages of Indian regular wage workers all along the income distribution – unlike earlier studies – using the method of unconditional quantile regressions on data from the 68th round and the 61st round of the National Sample Survey Organisation on Employment covering the period 2004–2005 and 2011–2012. It finds that the wage penalty due to short-term contracts is higher for high-wage workers than for low-wage workers, with the maximum impact felt by median wage workers, and has increased for higher paid workers from 2004–2005 to 2011–2012. The spread of informal employment arrangements within India’s formal labour markets has resulted in an increasingly unequal distribution of workers’ access to the benefits of growth, reflecting a shift in power in favour of capital. These findings, specific to a developing economy like India, stand in contrast with studies in European countries, where high-wage workers do not face as much of a penalty for short-term contract work as low-wage workers. JEL Codes: J31, J41

Thomas Piketty's work has drawn attention to the prevalence of significant inequality within the wage distribution, i.e. inequality between workers. This work attempts an analysis of the factors that drive inequality amongst workers by utilising rounds 50 to 68 of the NSS surveys on Employment and Unemployment, covering the period 1993-94 to 2011-12. Through the use of decomposition exercises, this paper is able to estimate the relative contributions of different factors to inequality. Moreover, through the use of Yun's decomposition, this paper estimates the contribution of inequality that come through changes in returns to the factor as well as the share of that factor in the workforce. This paper finds that the single largest contributor to inequality amongst the regular wage workforce in India is access to higher education. However, institutional factors such as union membership and the public sector also play important roles in determining inequality, indicating that inequality cannot be simply reduced to demographic or technical factors, but must also take into account the institutional structure of an economy.

Paul Romer’s critique of modern growth theory, though important,
errs in holding Joan Robinson as an early proponent of flawed methodological practices which he believes affects economics
even today. This note argues that Robinson’s work on aggregate production functions highlights much of the problems that Romer calls attention to in the present. In neglecting her contributions, the discipline of economics has emerged poorer.

Notwithstanding the conventional narratives of the anti-immigrant sentiments holding sway during the referendum for Brexit, an empirical investigation of the possible factors leading to Brexit does not show any signifi cant correlation between the share of migrants from European Union countries and the regions that voted for Brexit. Share of social security transfers in income was most important in determining if a region voted leave. Decreased employment opportunities and increased hardships that necessitate reliance on welfare payments could have fuelled the anti-immigrant and anti-European sentiment.

Thomas Piketty's work has drawn attention to the prevalence of significant inequality within the wage distribution, i.e. inequality between workers. This work attempts an analysis of the factors that drive inequality amongst workers by utilising rounds 50 to 68 of the NSS surveys on Employment and Unemployment, covering the period 1993-94 to 2011-12. Through the use of decomposition exercises, this paper is able to estimate the relative contributions of different factors to inequality. Moreover, through the use of Yun's decomposition, this paper estimates the contribution of inequality that come through changes in returns to the factor as well as the share of that factor in the workforce. This paper finds that the single largest contributor to inequality amongst the regular wage workforce in India is access to higher education. However, institutional factors such as union membership and the public sector also play important roles in determining inequality, indicating that inequality cannot be simply reduced to demographic or technical factors, but must also take into account the institutional structure of an economy.

In mainstream analyses that make use of a production function, income distribution in the face of technological progress is determined by the elasticity of substitution; this concept plays a central role in mainstream criticism of the work of Thomas Piketty. Yet the conception of the elasticity of substitution is not without severe problems. Econometric analyses of the elasticity of substitution assumes that it remains constant over time, and that factor rewards equal marginal productivities, an assumption that cannot be justified given a large literature that looks at the impacts of various institutional and extra-economic factors on wages, such as unions, caste and gender discrimination etc. This paper attempts to show that in an economic system comprised of opposing classes, mainstream concepts such as the substitution elasticity and forms of technological change merely reflect changes in wages and distribution rather than determining them. An analysis of data for organised manufacturing in India show that the behaviour of output and wages per worker have experienced significant structural breaks, which makes it hard to conceive of a substitution elasticity that remains constant over time. A proper study of inequality under capitalism requires an institutional – rather than purely technical – look at the factors determining wages, profits and income distribution.

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 61st and the 68th rounds 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.

Hansen's theory of secular stagnation has been resurrected in mainstream discourse today through economists such as Lawrence Summers and Paul Krugman. The modern theory of stagnation believes that excess savings – brought about due to slowing population growth and the savings habits of developing economies-cannot be absorbed due to the inability of the nominal interest rate to go below zero. This theory is flawed in calling itself " Keynesian " since its focus on the interest rate as bringing savings and investment into equilibrium runs counter to Keynesian thought. A search for the theoretical antecedents of modern stagnation theory leads one to the under-consumption theories of Hobson and Malthus, in its focus on excess savings and constraints on consumption. As such, the central flaws of under-consumption theories find themselves repeated in modern stagnation theories, namely, its neglect of investment and its mistaken conception of the capitalist production process.