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Decomposing Skill Based Wage Inequality in India: An Application of Theil Index

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Abstract

Wage inequality is one of the most prominent topics of discussion across the world. The study is an attempt to estimate wage inequality in-between and within various skill-based occupational groups in India. For the purpose, Theil index, one of the most important measures in generalised entropy family, has been utilised on the unit-level data of Periodic Labour Force Survey, 2017–18 (PLFS) pertaining to 94,460 workers employed across skill-categorised broad occupational groups. Wage inequality has observed to be highest in occupational groups requiring highly skilled workers (skill level 4), and the same is witnessed lowest among workers in occupations requiring low level of skill (skill level 1). The study found occupational diversity, diverse nature of work assignment in accordance with cognitive ability of workers the main reasons behind increasing wage inequalities.

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  1. Department of Economics, Indira Gandhi University, Meerpur, India

    Sonu Madan & Manisha Yadav

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  1. Sonu Madan
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  2. Manisha Yadav
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Correspondence to Sonu Madan.

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Unit-level microdata have been obtained from the official website of the National Statistical Office (NSO), New Delhi, which is exempted from the individual consent of subjects.

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Appendix

Appendix

See Tables

Table 4 Criteria for selected skill levels
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4 and

Table 5 Occupational categorisation of skill level and workers
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5.

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Madan, S., Yadav, M. Decomposing Skill Based Wage Inequality in India: An Application of Theil Index. Ind. J. Labour Econ. 65, 967–979 (2022). https://doi.org/10.1007/s41027-022-00405-6

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