A deep dive into India’s job market
High income inequality driven by a driven by a growing divergence between growth in productivity and wages is the biggest challenge, even as quality of work and social inequalities based on caste and gender have been coming down gradually in the Indian economy.
A monthly income of Rs 50000 or more puts a person in the top 1%
82 % of male and 92% of female workers in India earned less than Rs 10,000 a month in 2015, according to statistics given in the Labour Bureau Employment Unemployment Survey (LB-EUS) of 2015. The seventh central pay commission had stipulated a minimum wage of Rs 18,000 per month. “This suggests that a large majority of Indians are not being paid what may be termed a living wage, and it explains the intense hunger for government jobs”, the report says share of women workers in the lowest income bracket is 1.7 times that of male workers. A monthly income of just Rs 50,000 or more puts an Indian worker in the top 1% bracket. Being a regular/salaried worker significantly reduces the probability of being in the lower income bracket compared to self-employment or contract and casual work. These trends persist despite the fact that real wages grew across sectors between 2010 and 2015.
Class divide has increased, but social inequality is going down
A big reason for income inequality during this period is the growing mismatch between productivity and wage growth, especially that of workers, in the Indian economy. The report uses data from Annual Survey of Industry (ASI) statistics (organised manufacturing) to show that while wages for production workers have been almost stagnant, managers’ compensation started rising at a faster rate since 2000 onwards. Growth in labour productivity, which was always higher, experienced an even greater increase during this period. The inequality between managers’ and workers wages could be an underestimate because the data does not include non-wage income from stock options etc. for the former.
The report argues that increasing proportion of contract workers, who are paid a fraction of permanent worker wages, often for similar work, might have been a major contributor to low growth of wages in this sector. The report also highlights the fact that even in unorganised manufacturing the gap between productivity and wages has started rising since the middle of last decade.
While overall wage-productivity gap has increased, there is good news on the gender inequality front. The aggregate gender wage gap has decreased both in rural and urban areas for both casual and rural workers, the report shows. ASI data shows that ratio of weighted female to male wages in organised manufacturing consistently increased from around 0.35 in the beginning of last decade to more than 0.45 in 2013. This however saw a decline in 2014. According to data from the National Sample Survey Office (NSSO) survey women in urban regular wage market earned 80% of what men earned. This value was around 60% in urban casual wage markets and both regular and casual wage markets in rural areas.
Gender inequality in earnings manifests itself differently across employment and educational categories. It is the highest in employer and own account worker categories and the lowest among regular workers and casual agricultural workers. In terms of educational categories, gender inequality follows a U-shaped pattern, with inequality being the highest for intermediate levels of education.
One of the biggest proofs of caste-based discrimination in India’s labour market is the disproportional representation of various caste groups across low and high income professions in India. While Scheduled Caste (SC) and Scheduled Tribe (ST) groups have over-represented in low-income groups, the reverse holds for upper caste groups.
Controlling for gap in education leads to a significant narrowing down of caste-based inequality in earnings. Here also, the trend follows a U-shaped pattern with the gap being the highest at the level of intermediate education. While a certificate/diploma holder SC worker earns 69% of what an upper caste worker gets, the figure is 77% and 74% for graduate and post-graduate workers. This, the report argues, underlines the importance of reservations and other affirmative action policies in reducing caste inequality in the Indian labour market.
Both in case of women and deprived castes, own account/self employment leads to a bigger inequality than regular wage employment. This suggests that both social backwardness and patriarchy also create disadvantages outside labour markets.
Regular employment has increased, but by how much depends on definition
Many commentators have argued that statistics such as an increasing number of subscribers in provident fund and other social security schemes denotes an increase in the share of regular employment in the Indian economy. While the report agrees with the broad trend, it also underlines the importance of defining what a regular job means. It estimates the share of regular employment in manufacturing, construction and services on the basis of three definitions: formal 1 (simple regular work), formal 2 (regular work with provident fund or pension, gratuity, healthcare/maternity benefits, or paid leave) and formal 3(formal 2 with a written contract). In 2015, the share of formal 1 category jobs in non-agricultural employment was 60%. However, these numbers fall to 30% and 17% for formal 2 and formal 3 categories.
This statistic also finds a reflection in the relatively high share of unemployment among the young and educated workers. The report uses 2015 LB-EUS data to show that unemployment among graduate and post-graduate workers was more than seven times what it was among illiterate or barely literate workers.
Similarly, unemployment was the highest among 15-25 year olds in the country. The number of people with at least a graduate degree who are looking for a job is roughly equal to the entire population of the city of Bengaluru, the report says. The inability to find a job which matched their skills is the biggest reason for high unemployment among the educated workers.
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