Labour market discrimination and employment probabilities in Indian manufacturing sector

Abstract

Development theories argue that economic growth leads to economic development; and higher the economic growth, higher will be the economic development (Todaro & Smith, 2012). The transformation of growth into development occurs through employment distribution. Economic growth creates employment, and employment empowers the people, which thereby prospers the economic development. However, economic growth fails to transform into economic development if the labour market does not function well. Economic development cannot take place if the generated jobs remain with hand-few of people. The tendency of recruiting people on the basis of certain socioeconomic and personal characteristics is denoted as employment discrimination. Nobel laureate Gary Backer, in his book The Economics of Discrimination, has classified the employment discrimination in two segments: taste-based discrimination and statistical discrimination (Backer, 1957). In the taste based discrimination, a presumed mind-set exists among the employers, employees and customers against a certain group of people. Resulting to this, people of disadvantaged community are continuously discriminated during recruitments (Agrawal, 2014). Statistical discrimination is another form of employment discrimination, where it is assumed that discrimination occurs unknowingly. The recruiters are assumed to have information deficit, which stimulates them to understand the candidature of applicant by using his or her social identity. This way, those who have good social identity are hired despite of not having the desired qualification. Conversely, people with lower social identity are ignored even if they are more qualified than others for the job (Agrawal, 2014). Employment discrimination has been one of the serious issue of the labour markets. It has no benefits; whereas, economies face numerous losses due to discrimination. The prevalence of employment discrimination brings excessive development opportunities for some people, while most other people are left-away from the development. In this process, the employment opportunities decline for disadvantaged groups, and increase for the advantaged groups. This has serious consequences for the economies. Employment discrimination reduces economic growth by reducing the rate of return to education (RRTE). The RRTE says that people invest significant share of their money and time on education if they know that it will give higher return in future (Kingdon, 1998). However, the existence of employment discrimination says that person’s socioeconomic and personal attributes are favoured than his/her qualification. Therefore, people will not go for higher education if they know that their higher education will not help them to secure a job of higher payment. Further, reduction in RRTE creates two problems for the aggregate human capital of the nation. First, human capital drastically reduces as a large part of people do not look forward to attain higher skills and education. Second, a wide gap emerges in existing human capital of the nation, wherein education of some group of people increases extensively; whereas other group of people have no incentive to get education. Decrease in human capital and increase in human-capital-gap jeopardises the economy. Economies with such phenomenon do not perform well in long-run (Darity & Mason, 1998). This is proved that discrimination degrades both health and happiness of people (APA, 2020); wherein, having healthy and happy human capital is an integral part of economic prosperity. Among all kind of discrimination, employment discrimination inculcates both physical and mental stress by increasing anxiety, depression, high blood pressure and obesity among people (APA, 2020). Consequently, the poor people enters into extreme poverty by facing employment discrimination; and thereby, lower RRTE, poor health and depression. Rather than becoming a boon, employment becomes a curse for the poor people in this way. The persistence of employment discrimination increases poverty in economies. It shall be noted that employment is one of the best solution to eradicate all kind of (multidimensional) poverty. The absence of employment discrimination breaks the vicious circle of poverty. Providing equal employment opportunities to poor people and eradicating discrimination against them widens the share of middle-income people in total population. Having larger share of middle-income people, and thereby lower share of poor people, definitely increases sustainable and inclusive growth in the economy.