Labour market dynamics and livelihood sustainability in India

Abstract This study examines labour market dynamics and livelihood sustainability in India by analysing pooled microdata from the periodic labour force survey (PLFS) for the period 2017–18 to 2023–24. It provides a comprehensive assessment of employment quality and welfare by jointly analysing informal employment, access to employment-linked social security, individual earnings, household consumption, and a multidimensional livelihood sustainability index (LSI). Survey-weighted models incorporating state and survey-year fixed effects indicate that informal employment remains widespread and has increased over time, despite rising average incomes and consumption. Informality is consistently associated with significant disadvantages in earnings, household welfare, and overall livelihood sustainability. Education and access to social security emerge as important protective factors. However, their effects vary substantially across regions and socioeconomic groups. A Blinder-Oaxaca decomposition of earnings differentials suggests that a significant portion of the formal-informal wage gap is attributable to structural differences in returns to observable characteristics, reflecting persistent labour market segmentation rather than differences in endowments alone. The findings underscore enduring spatial disparities and the limited capacity of employment growth, by itself, to improve livelihoods. Sustainable development policies must therefore prioritise employment quality, expansion of social protection, and region-specific labour market interventions alongside job creation.