ILO Wage Report Paints a Sorry Picture of Economic Inequalities in India

Real average daily wages improved between 1993-94 and 2011-12, but gains of growth have bypassed casual workers, women and rural areas.

Over the past two decades, India became one of the two fastest growing economies in the world, alongside China. The gross domestic product (GDP) has risen four folds since 1993. But has this growth been distributed to lower economic inequality? Has the increase in wages matched the pace of growth in productivity?

While real average wages nearly doubled between 1993-94 and 2011-12, the economic liberalisation policies in 1991 have produced a low wage economy with sharp inequalities shaped by gender and other social characteristics for most Indian workers, shows the India Wage Report, an International Labour Organization publication released on Monday which has analysed the most recent government data on wages.

In 2011-12, the most recent year for which the government of India has made wage data from a nationally representative survey available (the national Employment and Unemployment Survey set to take place in 2016-17 after five years was not undertaken, and has since been discontinued), more than half, 62% of wage earners in India were employed as casual workers, and got only 36% of the compensation received by regular or salaried workers.

Urban workers earned 2.2 times more than workers in rural areas. A regular or salaried worker in the organised sector earned 3.7 times more than a casual worker in the same sector, even if they did the same economic activity, shows the report.

The NDA government does not have a clear and sensitive strategy to introduce labour law reforms. Credit: Reuters

While real average wages nearly doubled between 1993-94 and 2011-12, the economic liberalisation policies in 1991 have produced a low wage economy with sharp inequalities shaped by gender and other social characteristics. Credit: Reuters

Because of gender-based disparities, women earned 22 to 39% less than men across different categories of location and status of employment. Overall, the gender wage gap reduced from 48% to 34% largely due to the implementation of the Mahatma Gandhi National Employment Guarantee Act, found the researchers. But India’s gender wage gap is quite high at 34% compared to the global average of 23% in 2015.

Women casual workers earned the lowest real average wages across all categories. Among casual women workers, Dalit and other backward class women earned slightly higher than those from the general and adivasi categories in both rural and urban areas. But even they earned only 22% of what urban regular workers earned on an average.

Overall, in the years of highest growth, the labour share, that is proportion of national income going to labour compensation as opposed to capital or landowners, declined from 38.5% in 1981 to 35.4% in 2013. Labour productivity, or the GDP per worker, increased, but the gains in labour productivity were not passed on to workers in the form of wage increases, finds the study.

‘Scheduled employment’ 

Dr Uma Rani, senior economist at ILO’s Geneva office and one of the authors of the study, said that though India was one of the first developing countries to develop a minimum wage policy, only 66% of India’s workers were covered by the minimum wage law in 2010 as they worked in what is covered in “scheduled employment” under the Minimum Wage Act, 1948. About 41% of casual workers earned less than even the Central government’s indicative national minimum wage of Rs 176 a day, and the denial of minimum wage were higher among women workers.

“Under the “scheduled employment” system, there are 1,709 different minimum wage rates across the country set often without consultation with social partners, and in many instances, neither employers nor workers know which rates apply to their economic activity,” said Dr Rani. She said India’s rates of union density, the percentage of members of trade unions across the total workforce, was only 10.7%. “Very few workers are in the organised sector and are members of formal workers’ associations. Therefore, a clear minimum wage for all economic activities, such as for domestic work, is very important in a situation workers are not able to bargain collectively,” she said.

Productivity growth

Xavier Estupinan, a wage specialist at the ILO’s Delhi office and a co-author of the wage report, said that though the analysis showed that casual workers’ wages nearly doubled, it was so because the base for the calculation was very low, and sharp economic inequalities persisted. He said to address this, the Central government could set a minimum wage wage not only on a need-based framework, as is currently done by calculating average costs of basic needs of low-paid workers for food, shelter etc at very minimal rates, but by factoring in the growth of productivity into wage increases.

Manish Gupta, joint secretary at the ministry of labour and employment, said the government has proposed the Wage Code Bill in 2017 which proposed to make a national minimum wage floor binding on all states. A national minimum wage floor was introduced in 1991, but it is currently not legally binding. This has led to states often competing to set wages lower in many instances.

“The new Code will expand the scope of minimum wage policy beyond only scheduled employment categories,” he said. “We have set up a committee at the V.V. Giri National Labour Institute to suggest a methodology to fix this minimum national wage floor on evidence-based criteria rather than broad thumb rules.”

Anumeha Yadav is an independent journalist and a consulting researcher with Azim Premji University.