In a recent report issued by the International Labour Organisation (ILO), it became abundantly clear that India needs to work on improving its wage policies. This is vital in promoting the concept of inclusive growth, especially given the rampant low pay circumstances, gender wage gap, and informality that characterizes the Indian labour market.
Key Findings from the ILO Report
The report, which utilized data from the Employment and Unemployment Survey (EUS) conducted by the National Sample Survey Office (NSSO), highlighted both positive and negative aspects of the current wage scenario in India.
Positive Aspects: Increase in Average Daily Wages
According to the ILO report, between 1993-94 and 2011-12, real average daily wages almost doubled. There was a more rapid increase in rural areas than urban, with casual workers experiencing a faster growth than their regular counterparts. Women saw a larger increase in their average wages as compared to men, and the unorganized sector witnessed faster wage growth than the organized sector.
Negative Aspects: Wage Inequality and Gender Wage Gap
Despite the positive wage growth, there are still negatives to consider. Only a limited number of regular/salaried workers, predominantly in urban areas, and highly skilled professionals earn significantly higher average wages. Furthermore, wage inequality is still high, even though it appears to have stabilized or slightly declined since 2004-05. The gender wage gap, although decreased marginally from 1993–94 to 2011–12, remains alarmingly high by international standards. This wage gap exists among all types of workers; regular, casual, urban, and rural. Among all worker groups, casual rural female workers earn the lowest average daily wages (INR 104 per day).
Declining Labour Share
The report also draws attention to the declining labour share in India. Labour share refers to the portion of national income that goes into labour compensation, as opposed to capital or landowners. Since the average labour productivity (represented by GDP per worker) increased more rapidly than real average wages, India’s labour share has seen a decline.
The Influence of Labour Market Institutions
Wage levels and distribution are greatly influenced by labour market institutions, specifically the role of minimum wages and collective bargaining. Skills and productivity levels also play a significant part.
Recommendations from ILO
ILO recommends several complementary actions to holistically address how to achieve decent work and inclusive growth. These recommendations include fostering accumulation of skills to boost labour productivity, promoting equal pay for equal work, formalizing the informal economy, and strengthening social protection for workers.
