‘Jobs’ is arguably the most debated four letter word. While the Indian economy has grown at a steady pace of over seven percent a year, the same cannot be said about employment generation in the country.
That we need to create more jobs is something all political parties largely agree on, even though they bicker about the data surrounding it. Where we also all agree is the fact that in the next 6 years, millions of people (over 20 crores to be exact!) will be in ‘bad jobs’ or even without them, if this crisis is not addressed. A larger job crisis is arriving, and we aren’t ready for it.
This imminent crisis, however, masks a connected crisis that affects anyone who depends on a salary, but that conversation often gets lost in the dry statistics and heated political rhetoric around jobs: the wage crisis.
Or in other words, the fact that most of us, and actually millions more make peanuts – not enough to make ends meet.
Yes, you heard that right. Most of us are actually not paid in proportion to the work that we put in. What’s more, this is not a new problem, or one that has been created by a single government.
In our country, low monthly incomes are a norm – pervasive across all states, and as a consequence, wage inequality remains high. Wage growth actually significantly trails economic growth in the country, if you carefully look through economic data of the country over the course of the last two decades.
While India’s GDP grew by four times between 1993-94 to 2011-12, real wages only doubled, according to ILO’s Living Wage Report. The sluggish growth has also translated to a rise in inequality and widened the economic divide between rural and urban India. To put that in perspective, in 2011–12, the average wage in India was about ₹247 per day, and the average wage of casual workers was an estimated ₹143 per day.
What makes matters worse is that it is the young and the educated who are at the receiving end of this. According to the State of Working India Report 2019, nearly 50 lakh people have lost their jobs between 2016 to 2018, post demonetization.
“India’s unemployed are mostly the higher educated and the young. Among urban women, graduates are 10 percent of the working age population but 34 per cent of the unemployed. The age group 20-24 years is hugely over-represented among the unemployed. Among urban men, for example, this age group accounts for 13.5 per cent of the working age population but 60 percent of the unemployed,” the report says.
If you believe that only a few people at the top are getting huge paychecks, think again. Because data suggests that we aren’t creating too many high paying jobs either. And even though labour productivity has risen in India, growth in remuneration has remained slow.
On average, 82% of male and 92% of female workers currently earn less than ₹10,000 a month, highlighting India’s drastic income inequality.
So, what is the reason behind India’s job and wage challenge? It is actually an intricate equation that requires balancing talent, skilling, bargaining power and geographic diversity, says Goutam Das, in Jobonomics, a book that tries to make sense of India’s impending job crisis.
“Skilling, sometimes, multi-skilling at all levels is the most effective way to fight the wage crisis and the coming job crisis -the crucial prefix before talent can be matched with demand. If the skilling anomaly isn’t corrected, job seekers will end up in the bad job trap. Skills spawn productivity, and productivity brings with it higher pay,” he writes.
In India, however, there is a caveat to this. The theory of higher productivity leading to better salaries can get twisted here because at any given time, there are always more workers who are qualified for any given job. When there are fewer jobs and more people, salaries automatically become the casualty.
Add that to the fact that the bargaining power of workers in India generally tends to be low, and that collective bargaining power of labour market institutions has been on a decline and it gets worse.
Wage changes are also a result of changes in the way of production. Over the course of the last few years, production has become more capital intensive or less dependent on labour in nearly every manufacturing industry in the organised and unorganised sectors. This is true, if to a lesser extent, for agriculture and services as well.
While technical know-how and increased use of machinery is a change that needs to be welcomed since it translates to increased productivity, in labour surplus economies like India, the enhanced productivity does not automatically translate to higher wages for employees.
Going into the future too, economists think that this trend will continue in India, as company owners will likely pocket any gains or benefits arising because of increased employee productivity, instead of passing them onto employees.
Any guesses what’s going to be the first casualty of this unstated policy? Your Increment.