Recent data from the Periodic Labour Force Survey (PLFS) marks rise in income inequality within India’s labour market from 2017-18 to 2023-24. The findings indicate that top earners are experiencing income growth at a much faster rate than those at the bottom of the income ladder. Addressing this disparity requires strategic interventions aimed at enhancing workforce productivity through skill development and infrastructure investment.
About Income Inequality
Income inequality refers to the uneven distribution of income among individuals in an economy. Unlike absolute poverty, which is measured against a fixed poverty line, income inequality is relative. It is crucial to understand that income is a flow variable, meaning it is measured over time. The PLFS records annual median individual income, allowing for a comprehensive analysis of income distribution.
Income Growth Trends
From 2017-18 to 2023-24, the annual median individual income in India rose from ₹1.02 lakh to ₹1.44 lakh. This growth represents a compound annual growth rate (CAGR) of 5.92%. However, this overall growth masks disparities among different income groups.
Top Income Groups
The income threshold for the top 1% of earners increased from ₹50,000 in 2017-18 to ₹75,000 in 2023-24, reflecting a CAGR of 6.99%. This indicates that high earners are benefiting disproportionately compared to their lower-income counterparts. Similarly, the top 10% saw their income threshold rise from ₹25,000 to ₹32,000, with a CAGR of 4.2%.
Bottom Income Groups
In contrast, the bottom 10% experienced a modest increase in income from ₹3,200 to ₹3,900, with a CAGR of only 3.35%. The bottom 50% saw their income threshold rise from ₹8,500 to ₹12,000, matching the overall median growth rate. However, this still lags behind the growth rates of the top income groups.
Shifts in Income Disparities
The analysis reveals a widening gap between the top earners and the median earners. In 2017-18, the income threshold for the top 1% was 5.89 times that of the bottom 50%. By 2023-24, this ratio increased to 6.25 times. The gap between the top 10% and the bottom 50% also reflects this trend, decreasing slightly from 2.94 to 2.67 times, indicating a small narrowing of the income gap.
Implications for Workforce Productivity
The growing income inequality raises concerns about equity and mobility within the labour market. To bridge this gap, India must focus on enhancing workforce productivity. This includes investing in skill enhancement and vocational training programmes. Such initiatives should prepare workers for emerging sectors like artificial intelligence, renewable energy, and green manufacturing.
Need for Infrastructure Investment
Robust investments in infrastructure are essential to create a conducive environment for skill development. Updated curricula and learning modules must align with market demands. Ensuring equitable access to technology and digital infrastructure will help integrate workers into the evolving labour market.
Conclusion
Addressing the rising income inequality in India’s labour market requires a comprehensive approach. By focusing on skill enhancement and infrastructure development, the country can work towards a more equitable distribution of income.
Questions for UPSC:
- Critically analyse the implications of rising income inequality on social cohesion in India.
- Estimate the role of vocational training in improving workforce productivity in emerging sectors.
- Point out the factors contributing to income disparity in the Indian labour market.
- What is the significance of the Periodic Labour Force Survey in understanding economic inequalities? Discuss its findings.
Answer Hints:
1. Critically analyse the implications of rising income inequality on social cohesion in India.
- Income inequality can lead to social fragmentation, where different income groups become isolated.
- It can exacerbate tensions and conflicts between socio-economic classes, undermining social trust.
- Growing disparities may result in decreased political participation and civic engagement among lower-income groups.
- Increased inequality can hinder access to quality education and healthcare, perpetuating cycles of poverty.
- Social mobility may decline, leading to a sense of hopelessness among disadvantaged communities.
2. Estimate the role of vocational training in improving workforce productivity in emerging sectors.
- Vocational training equips workers with specific skills relevant to high-demand sectors like AI and renewable energy.
- It enhances employability by aligning skills with market needs, reducing the skills gap.
- Training programs can encourage innovation and adaptability among the workforce, crucial for emerging industries.
- Improved productivity through skills training can lead to higher incomes and economic growth.
- Investment in vocational training supports lifelong learning, preparing workers for future job market changes.
3. Point out the factors contributing to income disparity in the Indian labour market.
- Educational disparities lead to unequal access to high-paying jobs, perpetuating income inequality.
- Gender inequality restricts women’s participation in the workforce and limits their earning potential.
- Regional economic disparities result in unequal opportunities based on geographical location.
- Institutional practices, such as discrimination and lack of support for marginalized groups, exacerbate inequalities.
- Technological advancements can widen the gap, as low-skilled workers struggle to compete in a digital economy.
4. What is the significance of the Periodic Labour Force Survey in understanding economic inequalities? Discuss its findings.
- The PLFS provides comprehensive data on income distribution, helping identify trends in inequality over time.
- It enables policymakers to assess the effectiveness of labor market interventions and social programs.
- Findings highlight disparities across various income groups, informing targeted economic strategies.
- The survey’s individual-level income data allows for detailed analysis of income dynamics and mobility.
- It emphasizes the need for skill development and infrastructure investment to address rising inequality.
