Labour reforms can lead to better wages, more jobs, says World Bank
- The World Bank report said the share of trade in India’s GDP has fallen from 55.8% to 41.1% between 2012 and 2017
- The Indian economy grew at a rate of 7.2% in 2017, bringing down the number of people living in poverty
Reforming labour markets and increasing exports can create more employment and better wages in India, the World Bank said on Thursday, adding the biggest beneficiaries of wage gains would be high-skilled male workers.
Higher exports can lead to better and more formal jobs for youth and women, the World Bank said in a report titled ‘Exports to Jobs: Boosting the Gains from Trade in South Asia.’ Labour market policies can help different groups of workers acquire the right skills and ensure that the gains of increased exports are shared more broadly across society, it added.
“The biggest beneficiaries of the wage gains would be the high-skilled, urban, more experienced, and mainly male workers,” said the report, adding that for low-skilled workers, increased exports would result in an increase in formal jobs.
The Indian economy grew at a rate of 7.2% in 2017, bringing down the number of people living in poverty.
However, most Indians do not have regular jobs in the formal economy and differences in wages across regions and in the quality of employment opportunities prevail, the World Bank said.
The increasing population also puts pressure on labour markets, said the study conducted jointly with International Labour Organization.
The report said the share of trade in India’s gross domestic product (GDP) has fallen from 55.8% to 41.1% between 2012 and 2017.
“Our research shows that exports can improve the performance of local labour markets and that policies need to be put in place to increase exports in South Asia, while ensuring that the benefits of higher exports are shared more broadly,” said Gladys Lopez-Acevedo, World Bank lead economist and one of the authors of the report.
Lopez-Acevedo, however, advocated free labour mobility to take advantage of the situation. “Addressing constraints that prevent people from moving and taking advantage of new job opportunities is important.”
With the right policies, India can ensure that greater export orientation can boost workers’ gains from trade and spread them more widely, benefiting disadvantaged groups, the report said.
According to the study, in India, average annual real wages went up from ₹47,424 to ₹76,908 between 1999 and 2011, an average annual growth 4% and “wages have continued to grow at a similar pace since then”.
But there are large deviations from these averages depending on socioeconomic background. For example, whereas men earned about ₹83,720 in 2011, women earned only ₹53,508. Workers in urban areas earned ₹124,384 compared to ₹52,312 for workers in rural areas, the report said.
“Economists and policy makers need a better understanding of how exactly globalization affects both workers and national labour markets,” said Daniel Samaan, co-author of the report and a senior economist with ILO.
“Our research shows that more exports can create benefits for workers by raising wages and reducing informality, but we need stronger policies to ensure these benefits reach everyone in the labour market, and don’t leave any groups behind,” Samaan added.
Some 12 million people enter the workforce every year and the generation of decent jobs is not keeping pace with demand.
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First Published:1 Mar 2019, 12:10 AM IST
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