Current Status of Earnings in India
Context:
- The labour market has strengthened, according to the Periodic Labour Force Survey (PLFS) of 2022–2023, as labour force participation rates (LFPRs) have increased and unemployment rates have decreased.
Main conclusions:
- For those over the age of 15, rural women’s LFPRs increased from 19.7% in 2018–19 to 41.5% in 2022–2023; this is a notable increase for a group that had previously been marginalised in the labour market. These outcomes were interpreted as illustrations of the Indian economy’s strong post-pandemic recovery. However, there are warnings.
- Self-employment has accounted for a large portion of the new jobs created for women. The percentage of women employed as unpaid family carers has increased; between 2018–19 and 2022–2023 the share of working women in rural areas in this role increased from 37.9% to 43%. Women’s participation in regular pay employment decreased from 22% to 16%.
- Appropriate working conditions appeared to be sacrificed in favour of more employment, particularly for women. Although issues about the types of labour have been discussed a lot, in order to fully comprehend the state of the Indian labour market, one must also look at the topic of earnings.
- Inflation has also been strong, despite increases in earnings and wages. Real profits decline when inflation outpaces earnings growth, which lowers purchasing power.
The state of income:
- Here, we’ll look at the workforce’s actual earnings during the April–June 2019 and April–June 2023 quarters, which spans the time before the pandemic started and the most recent period for which data are available. The PLFS gathers data on the wages of self-employed individuals, regular wage workers, and casual workers. Regular wage workers have set work hours and receive regular pay; casual workers are hired on a daily basis based on job availability and receive daily payments.
- We examine the gross monthly earnings of self-employed individuals as well as the monthly wage earnings of ordinary wage earners. Average daily pay for casual employees are converted to monthly amounts. To translate nominal values into real ones, the Consumer Price Index (CPI) average for the months of April through June in 2019 and 2023 is used.
- The urban and rural CPIs for those periods were used to deflate the wages of workers in those respective areas. Only casual workers, both male and female, in both the rural and urban sectors, saw a net rise in their average real monthly earnings between 2019 and 2023. Over the course of the period, female casual workers saw a 13% increase, while male casual workers had a 10.33% increase.
- The only other cohorts to see real wages growth in 2023 over 2019 were male self-employed workers (6.9%) and women in regular wage jobs (4.27%).
- Nevertheless, the gross earnings number for self-employed individuals does not encompass those who declared no income, so these total figures could not provide an accurate representation of earnings for the full self-employed community.
- Urban women who get regular wages experienced a decrease in their earnings; their actual incomes in 2023 were 2.34% less than those in 2019. Among all groups, rural women in regular wage work saw the biggest gains; in the quarter of April-June 2023, their monthly real wages were 27.5% higher than in the same period in 2019. However, this group only accounts for 8% of all rural female workers, which means that it represents a lesser share of the labour overall.
The consequences of inflation:
- Conversely, the largest decreases were observed in the one group of workers that demonstrated a notable increase in employment: rural women who worked for themselves. Between 2018 and 20223, the percentage of rural women working in paid self-employment increased from 22% to 28%; yet, their average monthly real gross earnings decreased by 7.72%, the highest decrease of any cohort.
- In the wake of the epidemic, many rural women took on low-paying, low-productive jobs, maybe to supplement household finances; nevertheless, this does not suggest that the recovery is strong. It should be noted that this does not include women who work as domestic helpers, who make up the majority of working women in rural areas and who by definition do not receive compensation.
- Only rural women employed on a regular basis saw a 35.5% increase in real earnings; wage workers, both regular and casual, did not see significant rises.
- Gains were recorded by urban men and women in regular pay employment of 1.42% and 2.66%, respectively. Conclusion: Although it is too soon to say if these improvements signal the start of a long-term recovery, the fact that real earnings increased for every cohort except for rural casual women workers signifies a significant divergence from previous times. But there’s more than one issue.
Way Forward:
- Real earnings growth for wage workers as a group has lagged behind output growth, suggesting a decline in the share of wages notwithstanding robust growth. This provides additional proof that India might recover in a K-shaped pattern following the pandemic.
