Last week, Niti Aayog member Arvind Virmani said in an interview that while employment is increasing, real wages for regular salaried jobs have not kept up with inflation over the last seven years. Real wages refer to the income a worker earns that is adjusted for inflation. They reflect actual purchasing power.
An analysis of the earnings data for salaried workers, casual labourers, and self-employed persons from Periodic Labour Force Survey (PLFS) reports shows that when adjusted for inflation, wages for salaried workers in India have stagnated since 2019.
Real wages for salaried jobs
Real wages for salaried jobs were 1.7% lower in the 2024 June quarter (latest data available) compared to the pre-pandemic 2019 June quarter. Chart 1 shows the wages earned by salaried workers, adjusted for inflation. The workers’ real wages increased by 2% in June 2020 compared to the same quarter the previous year. But they dipped again by 6% in June 2021 and by 1% again in June 2022.
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Anamitra Roychowdhury, Assistant Professor at the Centre for Informal Sector and Labour Studies, says that stagnation in the growth of real wages for salaried workers is “concerning” because there is more supply of labour than demand. “The returns to higher education are declining. People are overqualified for the jobs they have. So while there is growth in employment numbers, well-paying jobs are not available. It is a question of the quality of employment,” he says.
Mr. Virmani cited the lack of skills as the main reason for wages not keeping up with inflation. He said skill development is needed at every level of education and for all kinds of jobs.
Rahul Menon, Associate Professor at the Jindal School of Government and Public Policy, cites “depressed demand” as a probable reason. “Companies are just not investing, and so would not have much of a demand for salaried employees,” he says.
Wages for casual labour
On the other hand, wages for casual labour have significantly increased in real terms. Chart 2 shows the wages for casual labour adjusted for inflation since 2019.
After dipping during the pandemic, wages for casual labour have since increased. Real wages for casual labour were 12.3% higher in the 2024 June quarter compared to the pre-pandemic 2019 June quarter. In rural India, they increased by over 12% and in urban areas, by 11.4% in the same period.
Professor Menon says, “Wages [for casual labour] may show an increase relative to other forms of work, but this is highly irregular and insecure work. An increase in wages for casual labour is not a net positive for the economy.”
Self-employed workers
After declining significantly during the pandemic years, wages (in real terms) have picked up in the quarters since March 2022 for self-employed workers as shown in Chart 3. However, the wages in the 2024 June quarter were still 1.5% lower than the figures of the 2019 June quarter. While wages for the self-employed in rural areas increased by 3.02%, they declined by 5.2% in urban areas during the same period.
Data from the PLFS show that the share of self-employed workers among all workers rose by 5% points to 58.4% in 2023-24 compared to 2019-20. In contrast, the share of those in casual labour and salaried employment among all workers dipped by 4 points and 1.2 points in the same period to 19.8% and 21.7%, respectively.
Moreover, among those who are self-employed, the share of those working as ‘helpers in household enterprises’ increased from 15.9% in 2019-20 to 19.4% in 2023-24. The share of those working as ‘own account workers’ rose by 1.4 points to 39% in 2023-24 compared to 2019-20.
Dr. Roychowdhury says the increase in the share of unpaid helpers in self-employment will reduce the average earnings in this category. “It is a sign of distress if the share of self-employed people is increasing in the labour force. It is one thing to be employed and another to be employed with low returns,” he explains.
Professor Menon explains that demonetisation and implementation of the Goods and Service Tax (GST) were significant ‘negative shocks’ to the economy which led to a rise in unemployment and “at the very least, ensured that wages did not grow as fast as it would have done if these policies were not implemented.”
Dr. Roychowdhury adds that wages have been stagnant since 2018 and the idea that economic growth is ‘robust’ is not entirely true because the government is implementing various policies to provide a boost to economic growth and domestic demand.
“In any economy, the largest demand component is consumption expenditure. This typically comes from the availability of income in the hands of the people. If there is stagnation in the wages of a large section of people, especially for those in the informal sector, there will not be a boost in consumption levels,” he says.
Dr. Roychowdhury believes that the government has more or less accepted this fact by announcing a change in the tax slabs in the recent Budget. “Private investment is not happening because they are not expecting the market to grow since wages are low,” he adds.
Professor Menon does not see any prospect of a “significant increase” in wages in the near future given the stagnation in private investment.
Source: Periodic Labour Force Survey Reports (PLFS) and CMIE. It also includes The Hindu’s calculations.
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Published – March 12, 2025 08:00 am IST