Factors influencing the decision to hire contract labour by Indian manufacturing firms

Jaivir Singh, Deb Kusum Das, Kumar Abhishek and Prateek Kukreja

Oxford Development Studies, 2019, vol. 47, issue 4, 406-419

Abstract: Over a third of workers employed in the Indian formal manufacturing sector are ‘contract’ workers – hired through the services of labour contractors, facing lower wages and no job security in relation to regular workers. We investigate the role of a variety of factors that influence the decision of employers to hire in contract workers, using information from a specially commissioned survey of manufacturing firms. While there are immediate cost advantages that tilt firms towards hiring in contract labour, a counterforce has employers favouring regular workers in firms that have a large proportion of their workforce concentrating on production activity – probably instances where long-term human capital investment by regular workers is important for the firm.Abbreviation: CLA: Contract Labour (Regulation and Abolition) Act, 1970 ASI: Annual Survey of Industries NIC: National Industrial Classification MSME: Micro, Small and Medium Enterprises SEZ: Special Economic Zone ICRIER: Indian Council for Research on International Economic Relations

Date: 2019
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DOI: 10.1080/13600818.2019.1624705

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