Low labour force participation rates in developing countries are a common challenge and likely contribute to a lack of productive growth. While this has often been studied through the lens of low labour market demand, factors on the supply side also affect this problem. Labour absenteeism and high worker turnover are typical attributes of the labour supply in low-income countries. Seasonal jobs or flexible informal work can often contribute to this, and may not give workers opportunities to develop regular working habits. Regular labour supply is essential for growing the urban sector, and this project considers the factors that are preventing workers from obtaining regular working habits and examines the flexibility of workers preferences and abilities for long-term jobs in response to incentives.
To test worker preferences, the researchers conduct a randomised controlled trial in urban India focusing on the construction sector. Workers in this sector find daily jobs or short-term work contracts through labour stands, which are common in many low-income countries. This setting allows the researcher to directly measure worker willingness through daily attendance. The treatment group in this study receives daily pay, whereas the control group of workers receive a weekly lump sum payment that is randomly assigned. All participants are surveyed before, during, and after the treatment to determine how behaviour changes in response to incentives and whether or not habitual labour patterns were formed.
While focused on India, this research is applicable to a wide set of countries that face challenges with establishing a regular labour supply. Many countries in Sub-Saharan Africa have high rates of labour informality and agricultural work, both of which tend to have irregular or seasonal work patterns. If the programme being studied in India is successful, it can attest to the importance of incentive schemes for establishing a consistent and productive labour force. Additionally, policymakers can provide various incentives based on the sectoral context, and this can provide a better cost-benefit ratio than traditional, and potentially time-intensive, training programmes. By better addressing the preferences of workers and targeting policies that make the labour supply more productive, policymakers can foster productivity and economic growth as a whole.