Abstract

In Marxian analysis, both PCP and reserve army are integral parts of the capitalist system. Both help in the accumulation process. PCP allows large capitalists to lower their costs and to lower the cost of workers' consumption. The reserve army acts as a check on wage-workers in large enterprises and their wage 22 fund. Because of the contribution to the accumulation process, IS does not disappear. This paper studies the characteristics of the workers in the informal economy and whether internal migrants treat this sector as a temporary location before moving on to the organised or formal sector to improve their lifetime income and living conditions. We limit our study to the Indian urban (non-agricultural) sector and study the characteristics of the household heads that belong to the informal sector (self-employed and informal wage workers) and the formal sector. We find that household heads that are less educated, come from poorer households, and/or are in lower social groups (castes and religions) are more likely to be in the informal sector. In addition, our results show strong evidence that the longer a rural migrant household head has been working in the urban areas, ceteris paribus, the more likely that individual has moved out of the informal wage sector. These results support the hypothesis that, for internal migrants, the informal wage labour market is a stepping stone to a secured life in the formal sector.

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