Labour market friction: India needs more jobs with better work conditions

The violence that swept through Noida’s industrial clusters in recent days should not be seen merely as a breakdown in law and order. Rather, it reflects the growing strain within India’s labour market. What began as a demand for higher wages quickly escalated, but the discontent has been building over time. The immediate triggers are clear. In neighbouring Haryana, minimum wages were raised by 35 per cent following protests in Manesar. In an integrated labour market like the National Capital Region, such disparities are untenable. They encourage comparisons, intensify grievances, and place pressure on state-level wage policies. At the same time, inflationary pressures, exacerbated by the conflict in West Asia — leading to an increase in prices of cooking gas, particularly in unorganised markets — have sharply increased the cost of living. The Uttar Pradesh government has now announced an interim wage increase of 21 per cent in Noida and Ghaziabad. Elsewhere in the state, the increase is more modest.

 

Nevertheless, the unrest points to deeper structural problems. Workers allege irregular wage payments and exploitative practices. Much of this stems from the widespread use of contractors, which blurs accountability and weakens enforcement. For many workers, there is little clarity on what they are entitled to, and even less assurance that they will receive it. The data from the recent Periodic Labour Force Survey’s Annual Report reinforces this picture of vulnerability. Wage growth in India has been slow and uneven, particularly for casual workers, who remain the most exposed. Even where wages have risen, they have often failed to keep pace with inflation. In fact, a closer look at the composition of employment tempers any optimism. A majority of India’s workforce remains self-employed, over 56 per cent in 2025, only marginally lower than the previous year. Regular salaried employment has inched up, but not enough to signal a meaningful shift. Casual labour, which accounts for about a fifth of total employment, has seen little change. In other words, the structure of employment remains dominated by forms of work that are typically informal and insecure. This is primarily because India is not creating enough jobs for its rising workforce.

 

The institutional response has also been inadequate. Revisions in minimum wages, meant to be periodic and predictable, have often been delayed, turning them into reactive measures rather than instruments of stability. As recent events show, such ad hoc increases cannot substitute for sustained negotiations and credible grievance-redress mechanisms. The delay in implementing the four labour Codes has compounded the problem. These reforms were intended to create a more uniform wage framework and extend protections to workers. The Code on Wages, in particular, aims to establish a statutory national floor wage to ensure fair remuneration, while mandating that the government shall revise the minimum rate of wages at an interval not exceeding five years.  Yet, with the rules still not notified, both employers and workers remain in a state of uncertainty, fuelling confusion and mistrust. None of this justifies the violence witnessed in Noida and Manesar. But it does highlight that fair wages, effective enforcement, and continuous engagement are essential for economic stability.