Mains Marathon

Approach:

• Introduce the paradox of rising employment and stagnant wages.
• Critically examine causes and consequences of stagnant real wages and suggest possible policy measures.
• Conclude with the need for balancing growth with income equity.

Introduction:

India is witnessing a rise in employment, with the Worker-Population Ratio reaching 43.7% in 2023–24. However, real wage growth remains subdued, eroding purchasing power and questioning the inclusiveness of growth. This disjunction poses serious implications for worker welfare and sustainable development.

Body:

Rising Employment but Subdued Real Wage Growth

• As per Periodic Labour Force Survey (2023–24), job creation has grown faster than population growth since 2017–18.
• However, real wages remain stagnant, especially for entry-level positions in sectors like information technology, limiting income gains for the average worker.
• The Economic Survey 2024–25 notes a 22.3% rise in corporate profits in FY24, while employment increased only by 1.5%, indicating a widening capital-labour gap.
• High inflation has eroded purchasing power, with nominal wage gains outpaced by price rise.
• A rise in India’s Female Labour Force Participation Rate (FLFPR) at 41.7% (PLFS 2023-24) has led to increased labour supply, pushing wages downward.
• Productivity stagnation, especially in low-skilled services and agriculture, limits scope for wage improvement.
• Capital-intensive growth models, with increasing automation, reduce the need for labour, thus limiting wage negotiation power.
• Weak implementation of wage-support schemes like MGNREGA due to payment delays and underfunding further aggravates wage distress in rural India.

Implications for Inclusive and Sustainable Growth

• Weak rural demand due to low disposable incomes adversely affects the consumption-led growth engine.
• Rising income inequality, where profit share to capital increases but labour share remains flat, hinders broad-based economic resilience.
• Underemployment and disguised unemployment increase, especially in agriculture and informal sectors.
• Social security gaps widen, as low-income workers struggle to access quality healthcare, nutrition, and education.

Policy Measures to Ensure Equitable and Sustainable Development

• Index rural and minimum wages to inflation through automatic and periodic revision mechanisms.
• Promote labour-intensive industries like textiles, tourism, agro-processing to absorb surplus workforce with decent pay.
• Expand skill development programmes targeting rural youth and women to shift them into higher-wage sectors.
• Strengthen wage-support and cash transfer schemes like MGNREGA and PM-KISAN to stabilize rural incomes.
• Introduce productivity-linked wage incentives in MSMEs to balance profitability and labour welfare.
• Ensure transparent labour data systems to track wage trends, inform policy, and monitor compliance with labour laws.

Conclusion:

While rising employment reflects economic resilience, stagnant real wages undermine worker welfare and equitable growth. India must align its development strategy with wage-enhancing, labour-absorbing, and inflation-adjusted policies to ensure inclusive and sustainable economic progress.