Gap between private and public sector wage bills widens in 2022-23

The wage bill of the private sector was 12.7 per cent in the FY22, compared to 11.8 per cent for the public sector

The wage bill gap between the private and public sectors has grown to nearly a percentage point, an analysis of employee compensation data by the Economic Times has found.

As a percentage of nominal gross domestic product, the wage bill of the private sector was 12.7 per cent in FY22, compared to 11.8 per cent for the public sector, the analysis found.

In FY12, the public sector had a larger - 12.4 per cent share  - of the GDP at current prices compared to the private sector's 9.2 per cent. In FY20, just before the Covid-19 pandemic, private sector's wages surpassed those of the public sector.

Madan Sabnavis, chief economist at the Bank of Baroda, told ET that private sector salaries are rising more quickly than those in the public sector and job growth is also higher in the private sector.

He further said that the central government was not replacing jobs, suggesting that the government's muted job growth may also be a factor.

N R Bhanumurthy, vice-chancellor of Dr BR Ambedkar School of Economics University, Bengaluru, said that the employment level has seen this kind of tilt between private and public sectors. Additionally, the private sector's wage growth has been faster than that of the government.

He added that another factor contributing to the government's lower compensation is some states' slow adoption of the 7th Pay Commission.

Meanwhile, a survey conducted by consultancy firm AON found that salaries in corporate India rose by 10.6 per cent in 2022 and are projected to increase by 10.4 per cent in 2023.

From FY20 to FY22, compensation in the private sector increased by 20.3 per cent, whereas growth for the public sector was 12.5 per cent. During this time, the nominal GDP also grew 16.8 per cent.