Manufacturing jobs yet to recover

Listed companies made record profits in the quarter ended September 2021. Net profits touched Rs 2.5 trillion, which is the highest ever profits made by such companies. Salaries and wages also reached a record level at Rs 2.1 trillion. But while the wage bill rises steadily over time, the profit trajectory is volatile. Wages march at a steadier pace.

The record wage bill of listed compa­n­ies in the quarter ended September 2021 was 4 per cent higher than in the quarter ended June 2021. In the preceding two quarters, the quarter-over-quarter growth was around 2 per cent, while in the quarter before that it was nearly 5 per cent. As a result, the growth in wages over the year-ago quarter of September 2020 works out to nearly 13 per cent. This is an impressive growth rate given that inflation was 4.4 per cent. It is likely that real growth in the wage bill of arou­nd 8.4 per cent over the year ended Sep­tember 2021 was the result of an increase in both real wages and employment among listed companies. The break-up, however, is not available.

The wage bill of non-finance companies grew faster, at 13.6 per cent y-o-y, compared to the overall growth in the wage bill of 12.8 per cent. The relative y-o-y growth of finance and non-finance companies has flipped in the first two quarters of 2021-22. During most of the pandemic quarters — from March 2020 through March 2021 — wages of finance companies soared, while those of non-finance companies systematically shr­ank in real terms and often even in nominal terms. In the first two quarters of 2021-22, the wage bill of finance comp­anies has continued to grow well — in double digits. The wage bill of non-finance companies is faster in the recent two quarters because it is recovering from the contraction it suffered in the first two quarters of 2020-21.

Within non-finance companies, the two major segments are manufacturing and non-finance services companies. Together, they account for over 90 per cent of total employment in non-finance companies.

The wage bill of manufacturing companies had seen a very sharp contraction during the quarter of June 2020. This was the quarter of the severe lockdown. Wages had shrunk by 8.4 per cent over the previous quarter and by 9.2 per cent over the year-ago quarter. In real or inflation-adjusted terms, the y-o-y fall in wages in the manufacturing sector was a massive 14.8 per cent. Gro­wth in wages in the Indian manufacturing sector had star­t­ed weakening from mid-2018-19. By mid-2019-20, well before the pandemic and the concomitant lockdowns hit bus­iness, real growth in wages in manufact­uring had slipped into the negative zone. Real wages shrank by 2.8 per cent y-o-y in the quarter of September 2019, then by 3.6 per cent in the quarter of Dec­em­ber 2019 and 5.3 per cent in the quarter of March 2020.

The pandemic only made a terrible employment situation in the manufacturing sector much worse. Real wage bill of listed manufacturing companies sh­rank by 2.7 per cent in 2019-20. Then, in the pandemic year of 2020-21, it sh­r­a­nk further by 3.9 per cent. In the first two quarters of 2021-22, wages are recovering from these falls. Real wa­ges grew by 10.4 per cent and 6.8 per cent, respectively, in the first two quarters of 2021-22.

The nominal wage bill of manufacturing companies stagnated at around Rs 530 billion for two years from the quarter ended September 2018 through the quarter of September 2020, with a fall to Rs 485 billion in between in the quarter of June 2020. Evidently, employment in manufacturing must have fallen both before and during the pandemic. The wage bill climbed to Rs 570 billion in the quarter of December 2020 and it reached Rs 600 billion in the quarter of September 2021. Even after this recent correction in the wage bill of listed manufacturing companies, the growth since 2019 is modest, at about 6 per cent per annum. The growth since 2018 works out to only 4 per cent per annum. Either way, the growth in the wage bill of listed manufacturing companies is negative in real or inflation-adjusted terms even after the recent recovery.

Wages have grown at a faster rate in the non-finance services sector compa­red to manufacturing. As a result, wages given by non-finance services sector companies now exceed those in the manufacturing companies. Till 2015, wages in the manufacturing sector exceeded those in the non-finance services companies. Between 2016 and 2017, they were similar. Since 2018, the wage bill of non-finance companies has systematically exceeded that of the manufacturing companies.

The wage bill of non-finance services companies has grown from Rs 560 billion in the quarter of September 2018 to Rs 620 billion in the quarter of September 2019, and it was at Rs 750 billion in the quarter of September 2021. The fall during the pandemic quarters of June and Septem­ber 2020 was relatively small, to Rs 635 billion. Inflation-adjusted growth in the wage bill of non-finance services compa­nies has been positive at 1.1 per cent per annum since September 2019 and 3.7 per cent per annum since September 2018.

While employment in the non-finance services sector, as reflected in the wage bill, seems to have recovered from the pandemic, the manufacturing sector is yet to recoup from the pre-pandemic and pandemic shocks to its employment.

The writer is MD & CEO, CMIE P Ltd