Productive employment

Policy must also focus on earnings

Discussions on labour market conditions are focused usually on the unemployment and labour-force participation rates. Real earnings often remain neglected. Amid the increase in labour-force participation numbers and lower unemployment rates, a recent report by the International Labour Organization and the Institute for Human Development cautions that all is not well with India’s labour market outcomes. The report highlights the decline in real wages in both urban and rural areas. The data for the period between 2012 and 2022 shows that the average monthly real earnings of regular salaried workers declined by about 1 per cent each year — from Rs 12,100 a month to Rs 10,925 in just 10 years. Moreover, urban areas seem to have performed worse than rural, exhibiting a much larger decline in real earnings. In urban India, real wages, on average, declined by 7.3 per cent between 2012 and 2022, while real wages in rural areas declined by 3.8 per cent during the same period.

This is particularly concerning, given that regular, salaried workers are engaged in better-quality work, with longer tenures and entitlement to some form of social security, and receive wages at regular time intervals. Among those regularly employed, salaries have increased for those in the government sector, but the deterioration in real wages happened primarily for people in private organisations. Of course, this can be attributed to stagnant earnings for low-skilled workers. Real wages for the self-employed category mirror a similar trend. Comprising nearly 55 per cent of all workers in the country, their earnings took a hit owing to pandemic-related shocks and the closure of economic activities during lockdowns. Surprisingly, monthly real earnings of casual workers increased by an average of 2.4 per cent each year in the decade until 2022. The trend in the real earnings of regular salaried workers and the self-employed, along with only a small increase in real wages for casual workers, can be seen as an indicator of deterioration in the quality of employment generation in recent years. This is also reflected by demand for employment under the Mahatma Gandhi National Rural Employment Guarantee Act, which is still higher than the pre-pandemic levels.

Unemployment figures frequently quoted in policy discussions, therefore, hold little relevance for the poor and large swathes of the Indian population. It must be noted that most poor people are rarely unemployed. They simply cannot afford to sit back at home and do nothing. With minor economic activities and part-time work, most of them are counted as employed in surveys. What should also matter is how much they earn. In-work poverty is a major problem for the country and needs immediate redress. Recent figures show that millions have been lifted out of multidimensional poverty in the country, and have been granted access to health, education, bank accounts, and the like. Yet, depressed wage and income levels question whether increased access to public utilities is sufficient to address income poverty. Despite a strong rebound in growth after the pandemic, driven by government spending, private investment in India remains weak, which is hurting job creation. India needs to create more productive jobs for its workforce, which will increase earnings and well-being. It would also help generate demand and lead to a virtuous growth cycle.