Recent labour protests and unrest in Manesar, Noida, Faridabad, Panipat and other places clearly manifest the precarity of the Indian labour market and the helplessness of the labour administration. The kind of demands raised and grievances expressed by the protesters are very basic and fundamental. Revision of minimum wages, eight-hour working days, overtime pay, provision of drinking water, toilet facilities, safety provisions at work, etc. constituted the major rallying points of the protesting workers.In almost all cases, the employers involved are all big, formal sector enterprises. In the case of Panipat, Indian Oil is a profit-making Navaratna public sector undertaking. However, the majority of workers in these organisations are contract and casual workers, implying a growing informalisation of labour in India’s organised sectors, both public and private.From the late 1980s and particularly after 1991, the Indian labour force witnessed unprecedented informalisation through the ever-increasing use of contract and casual workers. Contractualisation is the increasing reliance on temporary, third-party or project-based contracts rather than hiring permanent employees. This practice aims to enhance operational flexibility and reduce labour costs, but often leads to job insecurity, wage disparities and a lack of benefits like social security. It is widely considered a form of worker exploitation that limits labour rights.Illustration: Pariplab Chakraborty.Total employment (both formal and informal) in organised enterprises has grown over time from 10.9% in 1999-2000 to 17.1% in 2023-24. But within the larger organised sector, formal jobs form only a small share. Many firms rely on temporary, outsourced or contract workers. The literature calls this “embedded informality”, where even registered and modern enterprises continue to depend on insecure labour arrangements.The share of contract workers in organised manufacturing surged from 12% in 1990-91 to 33.6% in 2013-14, while their wage share rose from 58.7% in 1999-2000 to 81.5% in 2013-14. The overall outcome, in India’s total workforce in the organised as well as unorganised enterprises, is that the share of informal workers within the workforce, is 90%.The question that can be asked here is: why this increase in contract/casual workers instead of regular workers? The basic answer is the pursuit of employers to minimise labour costs and, in the process, maximise profit.The cost of deploying contract workers is significantly lower (at least 30%) than that of regular workers. Contract workers end up working side-by-side with regular workers but usually don’t have access to social security entitlements like Employees’ Provident Fund, Employees’ State Insurance, etc. Employers save on their social security contribution. Further, contract workers are not entitled to receive bonuses, and they can be laid off easily vis-a-vis regular workers.To put it succinctly, having more contract labour leads to a fall in production costs and adds to profit.Indeed, corporate profits have gone on rising. Corporate profits have been used for a variety of purposes other than increasing private investment based on own revenues.First, corporates have de-leveraged over the past many years. In other words, they have reduced their debt exposure, thus reducing their interest outflow.Second, corporates have used their surpluses to buy other companies in their own sector, and hence, there is evidence that concentration of industries across sectors has taken place.Third, this growing corporate control across sectors has also been used to increase depth of ownership within newly acquired firms.Fourth, corporates have, instead of investing in India, increased FDI outflows to other countries.Finally, corporate surpluses have also been used to plough funds into the stock market, raising the domestic demand for stocks in the national stock exchanges. These processes are discussed at length in India Out of Work, written by one of the co-authors of this article, Santosh Mehrotra, and Jajati Parida.Following the massive protests by thousands of factory workers across Noida’s industrial belt in the last few weeks, the Uttar Pradesh government effectively hiked minimum wages across categories. Officials said the revised interim rates would come into effect from April 1 retroactively. This came after a high-level committee set up by the state labour department to resolve the deadlock between workers and industries held talks with stakeholders. This happened because of the massive protests but should have occurred in due course of time.Minimum wages have two parts. One is the basic part and the other is adjusted with the changes in the consumer price index (CPI). The second one is known as variable dearness allowance (VDA) and is adjusted twice in a year, namely in January and July, based on the movement in the CPI. It helps to keep pace with inflation and consequently protect real wages.However, the basic part of the minimum wage is hardly revised. It is supposed to be revised every five years with the changes in consumption patterns. For that, states are to carry out family consumption expenditure surveys at regular intervals to update the consumption basket.Most states have not carried out revisions to their basic minimum wages for a long time. As a result, in spite of VDA adjustments over time, minimum wages failed to protect the purchasing power of the working class.Minimum Wage Advisory Board has failed in revising basic minimum wagesIn a legal sense, this is the responsibility of the Minimum Wage Advisory Board (MWAB) constituted for the formulation of minimum wages in states. This is a tripartite board consisting of trade unions, employers’ representatives and state government representatives. It is quite obvious that the MWAB has failed in most states when it comes to revising basic minimum wages that protects the purchasing power of workers in a real sense.Two other factors are very important in the context of the recent labour protests.First, legal provisions (in the four labour codes as well as in the earlier 29 labour laws) with regard to working hours, working conditions, overtime provisions and the deployment of contract workers are not complied with at all. There have been gross violations of minimum labour standards enshrined in the Minimum Wages Act of 1948. This implies a real enforcement gap.Trade unions and scholars of labour laws keep pointing to regressive provisions in the new labour codes but the fact remains that even what is provided in the labour law framework is not complied with on a regular basis. The Indian labour force witnessed steady informalisation in the form of growing contractualisation in spite of the provisions against this in the Contract Workers Act of 1970. Enforcement laxity is too obvious a fact here.Second is the lack of trust in the collective bargaining machinery. Contract workers in particular did not approach the state labour machinery; rather, they preferred protesting on the streets when the going got tough. This might be because either the labour machinery did not address their concerns, or perhaps that contract workers lack unionisation.Either way, it implies a failure of the tripartite structure of the labour administration to deal with workers’ grievances on their basic labour rights. A more proactive labour administration should have anticipated such unrest and initiated pre-emptive measures.Overall, the recent labour protests across the NCR and in other places clearly brings forth the perils of an overwhelming informalisation of the labour force even in organised sectors and the absence of basic labour rights at workplaces. It implies a huge enforcement gap, a breakdown of the collective bargaining machinery and a lack of union mobilisation among contract workers. Mainstream trade unions have failed to represent the woes of informal labour in the formal sector.In mid-May 2026, the rules for each of the four Labour Codes were notified. However, unlike what was expected – that the minimum wage would also be revised upwards – that has not been done. So, the workers of India continue to face the following situation: given that non-farm jobs have not been increasing for a decade, it is only natural that real wages have not increased, either for casual wage or regular salary workers, nor have the self-employed seen their real earnings increase. Besides, as we have pointed out, contract workers’ share has been rising, both in the public and private sectors.As the Iran war rages on, India should expect stagflation to set in – recession combined with inflation. Under the circumstances, workers will need to organise to ensure that their rights are not further circumscribed, while profits climb.Santosh Mehrotra was a professor of economics at JNU and with the Planning Commission of India. Kingshuk Sarkar is professor of economics in the Goa Institute of Management, while also having served as a labour commissioner in West Bengal.This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.