PremiumInformal workers in India suffered a 22.6% fall in wages, even as formal sector employees had their salaries cut by 3.6% on an average, according to a report by the International Labour Organization (ILO).
Real wage growth in India was one of the lowest in the Asia Pacific, lower than even Pakistan, Sri Lanka, and Vietnam, according to the global report, Wage and minimum wage in the time of covid-19. “In India, recent evidence suggests that formal workers’ wages have been cut by 3.6%, while informal workers have experienced a much sharper fall in wages of 22.6%," the report said.
Countries the world over, or parts thereof, either delayed, froze or rolled back announcements of a minimum wage hike in 2020, ILO said citing Punjab’s decision to withdraw its announcement on minimum wage.
In purchasing power parity (PPP) terms, India’s average monthly gross wage of $215 was third from the bottom among the 30 country grouping in the Asia Pacific region for 2019, just above Bangladesh and Solomon Islands, ILO said. India’s “real wage" grew by a paltry 2.8% in 2015, 2.6% in 2016, and 2.5% in 2017, while it remained flat in 2018. ILO did not give a number for 2019.
It said following years of poor inflation-adjusted wage growth, it will be a net negative for the country as wages fell further in 2020. This has the potential to impact economic recovery and poverty alleviation efforts in the post-covid recovery phase.
Even among its immediate neighbours, such as Pakistan, Sri Lanka, China, and Nepal India’s real wage growth was poor. Pakistan’s wage grew 8.9% in 2015, and 4% each for the next three years, Vietnam grew between 3.7% and 12.4%, while China grew by 5.5-7% in past four years.
Economists said the ILO report brings to the fore a crisis that was silently being pushed under the carpet in the name of ease of doing business and labour reforms, and the fall in wages will have a direct impact on the economic recovery and poverty alleviation.
“The wage growth rate before the pandemic was very sluggish and now it has fallen…it will impact economic recovery. The ILO report must have taken the first few months of the lockdown and if it takes the past eight-nine months’ situation, then the fall of formal sector salary will be much more than 3.6%, as it seems a gross undervaluation. That’s because we have seen millions of job losses and those who have not lost jobs have faced a good pay cut," said Arup Mitra, a professor of economics at the Institute of Economic Growth, New Delhi.
