What is the issue?
- Various official reports points out that India faces wage disparities due to productivity issues.
- This can be resolved through job formalisation and financialization of Indian economy.
What is the status of employment in India?
- India has 63 million enterprises, of which 12 million do not have an office, nearly 12 million of them work from home.
- Only 7 million paid any indirect taxes before GST, only 1.2 million of the 63 million enterprises pay provident fund and ESI.
- Nearly 50% of India’s labour force, i.e. about 240million population is engaged in agriculture but it generates only 13% of the nation’s GDP.
- But in contrast information technology sector is only 0.7% of India’s labour force, and it generates 8% of the GDP.
What are the concerns with wages in India?
- India’s official unemployment rate of 4.9% which means in India everybody who wants a job has a job but they don’t have the wages they want or need.
- The data collection mechanism about the various workforce is poor in India and due to this the issue of wage disparity has not been precisely estimated.
- There is a 24-times difference in productivity between the top manufacturing companies and the ones at the bottom.
- Therefore, the companies at the bottom cannot pay the wage premium and can never be productive, since a large part productivity is linked to the supply side problem.
- It is rational to recognise that the wage premium for a degree has come down substantially in India.
What measures needs to be taken?
- Before GST, there were only 7 million enterprises registered for indirect tax, now there are 10.5 million, thus GSTN registration data can be used for the collection of administrative data.
- Scientific methods need to be initiated to mark the productivity targets and to monitor institutional structure in the human capital.
- To resolve the wage problems formalisation of the work force financialization of Indian economy.
- If Indian enterprises are formalized then productivity will increase and wages will grow up.
- Labour reforms need to be brought in for the job preservation as it is a form of job creation.
Source: Indian Express
