Mumbai: Low pay and wage inequality persist in India despite 7% annual average gross domestic product (GDP) growth over the past two decades, according to a new report by the International Labour Organization, a United Nations agency.

While real wages almost doubled over 18 years between 1993-94 and 2011-12 and GDP grew four-fold, “the Indian labour market remains characterized by high levels of segmentation and informality”, inhibiting India’s path to achieving decent working conditions and inclusive growth, said the India Wage Report, which used government wage and employment data from the national Employment and Unemployment Survey (EUS) and National Sample Survey Office (NSSO) to analyse wage trends in India and reflect on policies for inclusive growth.

“We are surprised that wage policy has not made, up to now, a great impact on low-wage earners,” Xavier Estupiñan, wage specialist at the International Labour Organization and one of authors of the report, told IndiaSpend. “If you have a sound wage policy in place, this will benefit the part of the workforce who are casual workers, getting their income on a daily basis and have less job security.”

Up to 62% (121 million) of employed people in 2011-12 were casual workers, the last available data from the EUS show. Yet while employment in the organised sector has grown, many of these jobs are casual, informal and lack basic social security benefits.

Wide disparities across gender, states and casual/salaried workers show a pervasively unequal employment landscape across the country. Women still earn, on average, 34% less than men (though down from 48% in 1993-94), and the daily wage of rural regular workers is, on average, 49% less than their urban counterparts.

A divided India

Gender

“Labour markets in India are characterized by gender-based disparities,” the report said.

While women’s daily wages may have increased more rapidly than men’s between 1993-94 and 2011-12, female workers are still paid lower wages than men in each employment category, according to NSSO data.

The report attributed the narrowing in the wage gap (falling from 48% in 1993-94 to 45% in 2004-05 to 34% in 2011–12) to the implementation of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)--a government scheme that guarantees employment and minimum wages for rural workers. Enrolment in this scheme has pushed up wages for women and caused the gender wage gap to fall.

However, at 34%, the gap is higher than the global average, estimated to be 23% in 2015, the report pointed out.

The gender wage gap between men and women remains high even after higher education--a graduate woman is paid Rs 609, on average, across sectors while a man with a graduate or higher degree will earn Rs 805, according to the government’s ‘Men and Women in 2017’ study.

If India discarded religious beliefs that perpetuate gender inequalities and caste discrimination, it could more than double its per capita GDP growth of the last 60 years in half the time, as IndiaSpend reported on August 18, 2018.

Employment status and location

Regular workers in urban areas earn an average of Rs 449 per day, 49% more than their peers in rural areas who take home Rs 300.

Casual workers in rural areas earn the least at Rs 138; however, the gap between this group and regular workers is narrower than between those in urban centres (a Rs 33 difference, rather than Rs 149).

Dissecting the data through a gender lens revealed further disparity, with women again fairing the worst. Women earned less than men in every category, the report found, with regular urban male workers earning the highest daily wage (Rs 470) and casual rural female workers the lowest (Rs 104).

There appears to be a trend towards the casualisation of the workforce, the report stated. More casual and contractual jobs are being added to the organised sector but there has been a lack of substantial growth of regular jobs after 1991.

The debate over job creation is hampered by a lack of available data (though the government has set up a technical committee to improve matters, according to this June, 2018 NDTV report), but corporate data from the Centre for Monitoring Indian Economy (CMIE) Prowess IQ database show job growth is roughly at 2% per annum--down from a peak of 4-5% between 2006-11.

However, it is not yet clear whether this indicates an improvement or a decline in working conditions. While contracted workers may lack social protection and benefits, moving from the unorganised sector can cause wages to rise and underemployment decline, the report stated.

State-wise disparities

The gap between the highest and lowest average daily wages across states has increased since 1993-94.

Casual workers in the highest earning states earned 238% more than those in the lowest earning state in 2011-12, compared to 168% more in 1993-94, faring worse than regular workers over the same period (106% vs 54%, respectively).

More developed states with better economic indicators do not have higher average wages for regular workers than less developed states, the report said.

That Haryana tops the list for the highest average daily regular urban wage (Rs 783), followed by Assam (Rs 607), Jharkhand (Rs 543), and Jammu & Kashmir (Rs 495), shows there is little correlation between state per capita income and regular urban wages.

Punjab, Tamil Nadu, Gujarat and Karnataka--states with per capita income above Rs 100,000--all indicate lower average wage levels for regular urban workers.

Nominal Regular Urban Wages By State, 2011-12
State Average Daily Wage (In Rs) Per Capita Income (In Rs)
Haryana 783 1,48,485
Assam 607 54,618
Jharkhand 543 56,737
Jammu and Kashmir 495 62,857
Punjab 362 1,14,561
Tamil Nadu 388 1,30,197
Gujarat 320 1,24,678

Source: India Wage Report, International Labour Organization, and Press Information Bureau, Government Of India

For rural regular workers, the association between economic development and high average daily wage for a regular worker is also missing and is puzzling to the report authors. Jharkhand (Rs 485), Uttarakhand (Rs 463) and Jammu and Kashmir (Rs 431) are on top and Karnataka (Rs 300) last.

Why wage inequality persists despite the Minimum Wage Act

Though India was among the first developing countries to establish a Minimum Wages Act (1948), multiple issues restrict its ability to address poverty and inequality.

Its complex nature (there are an estimated 1,709 different minimum wage rates across the country) and the fact that its legal application is limited to workers in ‘scheduled’ occupations--jobs classified by the government as most vulnerable to low wages and exploitation such as mill workers and miners--mean that its impact is “ineffective”, the report said.

Minimum wage rates are set by state governments, and do not always reflect the cost of living. In 2013, agricultural labourers in Arunachal Pradesh were paid Rs 80 per day, Rs 126 in Orissa and Rs 269 in Karnataka, the report said.

Furthermore, only 66% of workers are covered by the Minimum Wage Act. The remaining 34% not in “scheduled occupations” remain outside the scope of the minimum-wage law.

A national minimum wage was introduced in 1991, but its application is not legally binding. In 2009, 15% of regular workers and 41% of casual workers earned less than this minimum daily wage, the report said.

Addressing wage inequality

Simplifying minimum wage structures, extending the legal scope to all wage workers and adding statutory backing are key steps to closing earning disparities, but legislation itself is not enough, the report warned.

Governments should facilitate a transformation from low-productivity to high-productivity sectors by focussing on skill accumulation and growing a supply of more educated workers. Increasing the proportion of higher-skilled workers may force an increase in the wages of lower skilled workers and thus reduce inequality, the report said.

Awareness-raising campaigns and labour inspections have both been shown, among others, to be effective ways of galvanising community action and using compliance to hold stakeholders to account.

The report uses the example of MGNREGS educating workers about minimum wage and their rights, allowing workers to share this knowledge amongst other groups who demand wage hikes. Similarly, the fact that MGNREGS wages are transferred electronically aids monitoring and compliance.

“While addressing wage policy is not the answer to everything, I’m a strong advocate of it because I understand what has been done in Brazil and also China to some extent,” Estupiñan said. “At this moment, when the economy is growing, there is the possibility for better inclusion”.

In Brazil, minimum wages are revised on a regular basis and GDP growth over the previous two years is taken into account, according to the report.

(Sanghera is a writer and researcher with IndiaSpend.)

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Tish Sanghera

    Tish is an independent journalist based in Mumbai. She primarily reports on issues relating to the economy, the environment and the society at large. Tish studied at King’s College, London and the Sorbonne.