Wage Floors in Agriculture Labor Markets

In many rural settings, from Malawi to India, active rural labor markets exist. However, research suggests that daily wages are too high for firms to be able to hire all workers who want jobs. Researchers are conducting a pilot evaluation in Odisha, India to test whether high wages result from informal collusion between workers, such as if workers choose not to take up jobs at a lower wage to avoid social punishment from others. In each study village, researchers partner with a local agricultural employer during non-peak times to hire workers for one day on their land. Importantly, workers in the study make decisions about real job opportunities, often involving work for a familiar farmer in their village. Researchers will randomly vary the wage offered by the employers and whether other job seekers can observe the wage, measuring the effects on workers’ acceptance of job offers. Researchers will also use a lab-in-the-field exercise to test for the presence of worker sanctions against laborers who would choose to accept employment below the wage floor. Lastly, researchers will explore whether employers would hire more labor if the wage were lower. Results forthcoming.