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?
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.
Highlights of the report:
Real average daily wages in India almost doubled in the first two decades after economic reforms, but low pay and wage inequality remain a serious challenge to inclusive growth.
Overall, in 2009-10, a third of all of the wage workers were paid less than the national minimum wage, which is merely indicative and not legally binding. That includes 41% of all casual workers and 15% of salaried workers.
In 2011-12, the average wage in India was about ₹247 rupees a day, almost double the 1993-94 figure of ₹128. However, average labor productivity (as measured by GDP per worker) increased more rapidly than real average wages. Thus, India’s labor share — or the proportion of national income which goes into labor compensation, as opposed to capital or landowners — has declined.
The rise in average wages was more rapid in rural areas, and for casual workers. However, these groups started at such a low base that a yawning wage gap still remains. Thus, the average wage of casual workers — who make up 62% of the earning population — was only ₹143 a day.
Daily wages in urban areas (₹384) also remain more than twice as high as those in rural areas (₹175). Regional disparities in average wages have actually increased over time, with wages rising more rapidly in high-wage States than in low-wage ones.
The gender wage gap decreased from 48% in 1993-94 to 34% in 2011-12 but still remains high by international standards. And of all worker groups, the average wages of casual rural female workers was the lowest, at just ₹104 a day.
As per the study, the minimum wage system in India is quite complex. The minimum wages are set by state governments for employees in ‘selected, scheduled’ employment and this has led to 1709 different rates across the country. As the coverage is not complete these rates are applicable for an estimated of 66 % of wage workers.
A national minimum wage floor was introduced in the 1990s which has progressively increased to Rs 176 per day in 2017 but this wage floor is not legally binding, in spite of a recurrent discussion since the 1970s.
The ILO report called for extending legal coverage to all workers in an employment relationship, ensuring full consultation with social partners on minimum wage systems, undertaking regular evidence-based adjustments, progressively consolidating and simplifying minimum wage structures, and taking stronger measures to ensure a more effective application of minimum wage law.
It also called for collection of statistical data on a timely and regular basis and recommended other complementary actions to comprehensively address how to achieve decent work and inclusive growth like fostering accumulation of skills to boost labour productivity and growth for sustainable enterprises, promoting equal pay for work of equal value, formalising the informal economy and strengthening social protection for workers.