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Corporate India’s profit boom during a pandemic has attracted a lot of attention in recent weeks. But the aggregate profit numbers seem to hide more than they reveal. The top decile (or top 10%) of roughly 3000 listed companies accounted for more than 95% of profits in the first nine months of fiscal 2021, data compiled by the Centre for Monitoring Indian Economy (CMIE) show. Data for the final quarter aren’t available for a comparable sample of firms but the available sample suggests that the broad trend hasn’t changed.

Across sectors, India’s largest companies have been able to limit revenue losses, and in many cases, even grow market-share as cash-strapped smaller firms struggled. Larger firms earned greater revenues and profits even before the pandemic. But the divide between the largest firms and the rest has never been as stark as it is today.

Unsurprisingly, this divide also shows up in their wage bills. The wage bill of the top decile saw a small dip during the June 2020 quarter when India went through one of the harshest lockdowns in the world. But it moved to positive territory the next quarter, and grew by 5% (in nominal terms) in the Dec-ended quarter. Contrast this with the bottom decile (or smallest 10%). This set of firms saw a 16% year-on-year decline in nominal wages during the June 2020 quarter and there hasn’t been any recovery. The wage cuts only deepened over the next two quarters. Even for firms which are slightly larger than this set, wages have seen double-digit declines throughout the past fiscal year.

Wage Bust

The aggregate wage bill of companies saw only a small dip in nominal terms (-0.4%) during the first nine months of fiscal 2021 but in inflation-adjusted terms, this translates into a 6.6% decline compared to the year-ago period. For small firms, the real wage cut is much sharper. The largest companies may have been able to protect their employee base but the rest have either slashed salaries or fired employees, or used a combination of the two to pare wage costs.

The real wage cut follows a decade of already sluggish wages. Compared to the wage boom during the 2005-11 period, wage growth fell sharply in the post-2011 period, a broad range of wage data show.

To some extent, the slowdown in wages reflects the post-2011 slowdown in almost all economic indicators, as corporate debt levels spiked and investments dried up. The lack of new investments meant fewer jobs. A weak labour market translated into subdued wage increases. The pandemic has only added to the sluggishness.

Unequal Gains

Even during the pre-2011 wage boom, not all workers gained equally. The decline of trade unions since the 1980s and the growing use of contract workers meant that the labour market had largely turned into a buyers’ market, leaving blue collar workers to accept the wages on offer. As in the West, ‘outsourcing’ has helped companies tame wages here as well. But the ‘outsourcing’ model here has relied on domestic contract workers, who can be fired without much fuss, rather than foreign workers. As in the West, a tiny sliver of educated white collar workers have benefited from rising productivity and growth. So even though blue collar wages barely budged, salaries of managers - who account for less than 10 percent of the industrial workforce - climbed rapidly.

Across the economy, well-paying jobs have been rare. Only 4% of salaried workers earn more than 50,000 a month, a Plain Facts analysis of the 2017-18 periodic labour force survey (PLFS) data showed.

Unequal Losses

During the pandemic, labour market inequalities have only widened. Those without much education suffered greater income and job losses than others, an analysis of CMIE’s household survey data by researchers at Azim Premji University (APU) showed. Vulnerable demographic groups - young workers and women - saw much higher job losses.

Nearly half of salaried workers moved to informal employment, entering the ranks of the self-employed and casual labourers, the APU analysis suggests. The self-employed and the temporary workers among the salaried class saw the biggest drop in earnings, forcing many households to cut back on food, and take loans to survive.

The pandemic has been hard on everyone. But for informal workers and employees of small firms teetering on the verge of bankruptcy, the economic shock has been most catastrophic, the evidence suggests.

(This is the third of a four-part series on how the pandemic is widening economic inequalities. The first part looked at growing inter-country inequality and second part examined regional inequalities)

Tauseef Shahidi contributed to this piece.

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