It isn’t just companies and shareholders who have gained from economic growth in the past decade. Workers, at least those in the formal sector, have gained quite a lot.
A Mint research of 2,289 non-financial, publicly traded firms shows that while net profit has increased at an average annual growth rate of 18.47% between 2000 and 2011, employee expenses, which include wages, salaries and other benefits such as provident fund, increased at an average annual growth rate of 14.05%.
Also see | Tracking Gains (PDF)
True, that’s lower than the rate at which profit has increased, but it’s not bad at all. The average growth rate for sales over the period was 13.68%.
Did public sector workers do better? They didn’t. For all their supposedly strong unions, worker compensation in public sector units in the non-financial sector (57 firms) rose at an average annual rate of 9.97%, while net profit increased at an average annual rate of 11.39%.
That means workers in the private sector did much better, on average. But then, profit growth, too, was higher, as can be seen from the accompanying chart.
Have these firms, which form the crème de la crème of the non-financial corporate sector, done well simply because economic growth has been high?
Or, are these large firms cornering a progressively larger share of the market? We find that the sales of these 2,289 companies added up to 36.9% of nominal gross domestic product (GDP), or the value of goods and services expressed in current market prices, in 2000-01. In 2010-11, their sales accounted for 39.8% of nominal GDP. So yes, their share of GDP has increased, but not by much. This means that the share of smaller firms, farmers, professionals, mom-and-pop stores and the like hasn’t gone down much, which is a good thing.
Graphic by Sandeep Bhatnagar/Mint
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