Wages and earnings do not back the euphoria over our economy | Mint

Wages and earnings do not back the euphoria over our economy

Together, regular and casual workers account for almost half of all the workers in the economy.
Together, regular and casual workers account for almost half of all the workers in the economy.


  • These still trail pre-pandemic levels in real terms and should temper the excitement over strong GDP

How is the economy doing? The answer depends on the lens from which it is viewed. Based on the aggregate data from the national accounts, there is a general sense of euphoria that the worst phase of the economy marked by the pandemic-led disruptions and the slowdown that preceded is now almost over. With gross domestic product (GDP) for the April-June quarter having grown 7.8%, most projections suggest annual growth this year to be in the 6-6.5% range. That’s still lower than the average rate of growth a decade back, but at least it appears to be back in the ‘normal’ range for the Indian economy.

Unfortunately, that euphoria is not shared by the average worker whose wages and earnings continue to show a real decline. Among them, casual workers are the at the bottom of the hierarchy, facing low wages and difficult working conditions. Monthly data on their wages is available from the labour bureau. These estimates are available until June, and encouragingly they suggest that real wages for casual workers in rural areas has finally started to rise. Nominal wages in agriculture for the April-June quarter rose 6% from a year earlier. For non-agricultural wages, the rise was 7.3%. These imply real wage rate growth of 2.6% and 1.4%, respectively, the highest quarterly rates in five years. It is too early to say whether these rises are thanks to a price-wage spiral given inflationary trends or just a base effect as wages had declined sharply until last year. However, even this rise is not sufficient to maintain real earnings at levels that prevailed pre-pandemic for casual workers in rural areas. Despite this rise in wages in the last one year, real wages of casual wage workers in agriculture shows a negligible growth of 0.1% per year compared to the wages in 2019. For non-agricultural wages, they are yet lower than the level in 2019, with a decline of 1.1% from a year earlier.

The situation for regular workers is no better. They are better protected, have security of tenure and, in general, have better earnings as well as working conditions. The latest Periodic Labour Force Survey (PLFS) gives their earnings in 2022-23. Still, they fare worse, with real earnings remaining lower compared to the pre-pandemic levels. For the April-June quarter, real monthly earnings of regular workers have declined 0.5% per annum compared to their 2019 level. This is also true for the July-September quarter of last year, which shows real earnings decline at 1.6% per annum compared to their 2019 levels. But even compared to 2017-18, which is the year when the PLFS series begins, real earnings are lower for every quarter of 2022-23 compared to their levels in 2017-18. The decline is greater when compared to 2017-18, at an average 1.8% per annum. However, the PLFS does show a higher rate of growth of casual worker wages, with average wage rate growth of 4% per annum. On the other hand, several other indicators of employment in the economy also suggest a worsening of the workforce structure and a retrogression in the process of structural transformation away from agriculture and into manufacturing as well as services.

Together, regular and casual workers account for almost half of all the workers in the economy. Even if one takes the casual worker wages from the PLFS, the growth in average wages of all the wage workers is barely 2% per annum. Unlike the casual workers who are mostly subsistence level workers, it is the regular workers who generate the discretionary demand in the economy. With signs of sluggishness in exports and rural demand yet to recover fully, declining earnings of regular workers are likely to create further problems of demand management in the Indian economy.

While the two perspectives on the state of the economy may not be entirely contradictory, they do suggest a persistence of structural factors as far as its recovery and future growth are concerned. Concerns remain over an unequal trajectory of growth, popularly referred to as a ‘K’-shaped recovery. This recovery, however, may be pushing the aggregate growth along with government spending. However, it is unlikely to sustain without a broad-based recovery in the economy, which would require worker incomes to rise. While there are signs that the worst of the slowdown and the pandemic may be over, future growth sustainability will depend on the broadening of the demand base driven by worker earnings. With inflation further eroding the purchasing power of majority of the lower and middle classes, a strategy to protect the workers may be a necessity.

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