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.
