Home >opinion >online views >The war about wages

The Mint newsroom and, indeed, policy wonks, are divided on the International Labour Organization (ILO) report that shows a decline in real wages in India.

It started when the report released on Friday said India’s real wages fell 1% between 2008 and 2011, even as labour productivity grew 7.6%.

The implication was that the benefits of India’s economic reforms had not translated into better pay for workers.

Some experts said the data proved that India was not creating enough jobs—interestingly, there was a controversy over employment data last year when the government’s own survey showed that just between 1 and 2 million jobs were created between 2004 and 2009, forcing the head of the state’s statistics department to argue against his own data in an op-ed in Mint—and that a slowdown in manufacturing and rigid labour laws were wreaking havoc on employment as well as wages.

Mint’s columnists weighed in on the data, with deputy managing editor Anil Padmanabhan arguing it showed that over a 10-year period, the benefit of India’s economic growth was being inequitably distributed between two key factors of production—capital and labour. In essence, his argument was that reforms had helped owners and providers of capital, not workers.

Indeed, that argument would seem to be backed by other data, including that from the Planning Commission. As Mint’s consulting editor Manas Chakravarty wrote, India’s employment elasticity, or the number of jobs created for every percentage point of gross domestic product (GDP) growth, has come down from 0.44 in the first half of the 2000s to 0.01 in the second half, implying that every percentage point in GDP growth resulted in only a 1 basis point (one hundredth of a percentage point) growth in employment.

Yet, as Mint pointed out in an editorial, the newsroom’s view is that ILO’s data run counter to data from the Reserve Bank of India (which has based its tight monetary policy on the premise, based on data, that an increase in both rural and urban wages are exerting cost-push pressure on inflation).

Indeed, as Mint’s executive editor Niranjan Rajadhyaksha wrote in an internal memo, “the overwhelmingly large size of the unorganized economy makes all labour data suspect for countries such as ours".

He added that ILO itself has qualified its data on real wages in India thus: “In India, wage trends are somewhat unclear. The authoritative sources of data on wage growth in India are the Annual Survey of Industries by the Central Statistics Office and the real wage index published by the Labour Bureau. Both data sources indicate that real wages declined in a majority of recent years, shrinking the purchasing power of wage earners. This would explain the many concerns expressed by workers in India about rapidly increasing prices, particularly food prices. The trend, however, is surprising in the light of the country’s rapid economic growth over the last decade. It also contrasts with our analysis of the Employment-Unemployment Survey from the National Sample Survey Office (NSSO), conducted every five years along with the Consumer Expenditure Survey, in which salaried and casual workers report a 150% increase in their earnings—much higher than the 52% increase in the consumer price index—in the five years between 2004/05 and 2009/10."

Rajadhyaksha said that the report seems to contradict itself. While it uses data to show wage growth in China is strong, it also features data showing that employment growth in India in 1997-2007 was around 2.2% a year, higher than Chinese employment growth. That’s “hard to believe" he wrote.

Clearly, this is a debate that will, and has to, continue both in the Mint newsroom and in New Delhi’s policymaking circles.

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