Higher wages, jobs formalisation key to boosting economy

The CEA V. Anantha Nageswaran, has done a good turn by his plain-speaking on the wage stagnation. Speaking at a business event on December 5, 2024, he warned against “creeping informalisation” and called low wages and contractual hiring in the corporate sector as “self-destructive” (depresses demand for the goods and services they produce). Both (“creeping informalisation” and “self-destructive” low wage growth and contractual hirings) have happened while corporate profit has grown by 4X in four years with the profit-to-GDP hitting a 15-year high.

Nageswaran first flagged the issue on August 5, 2024, when he emphasised the need for data on the post-Covid gig economy, as he suspected the workforce had turned “more informal rather than becoming more formal."

The implications are clear, the growth of informalisation and stagnation/fall in wages mean that inflation eats into the income of most Indians, weaking consumption demand, the main growth engine (which is subdued, falling from 58% of GDP in FY22-FY23 to 55.8% in FY24).

The CEA hasn’t yet provided any data but, telltale signs are available in plenty. A few latest evidence.

a) On November 27, 2024, India Ratings and Research reported that ‘real’ wage growth (across the economy, using PLFS data) was flat over the past five years, growing at 0.01%.

b) On November 27, 2024, an analysis of over 3,500 listed companies by a national daily showed that salaries and wages grew at a single-digit in Q2 of FY25 (7.7%) – against double-digit growth in Q2 of FY24 (14.2%). This happened in the most profitable sectors like IT services and BFSI (banking, financial services and insurance).

c) On October 30, 2024, the ASI data for 2022-23 showed, in the “registered manufacturing sector” (i) ‘real’ wage growth between 2018-19 and 2022-23 was negative at (-) 0.7% and (ii) contract workers jumped from 38% in 2018-19 and 2019-20 to 41% during 2021-22 and 2022-23. Contract workers are double whammy for economy—they don’t get the same wages and benefits as regular/permanent workers, and their productivity is also lower (ICRIER) than regular workers.

d) On October 10, 2024 came the annual PLFS report for 2023-24 showing (i) unpaid workers up at 19.4% – from 13.6% in 2017-18 (ii) “regular wage/salary” workers down at 21.7% –from a high of 23.8% in 2018-19 and 22.8% in 2017-18) (iii) share of agriculture up at 46.1% –from 42.5% 2018-19 and 44.1% in 2017-18) (iv) the share of manufacturing down to 11.4% – from 12.1% in 2017-18; and (v) share of workers “not eligible for any specific social security” among regular wage/salaried employees up at 53.4% – from 49.6% in 2017-18. In short, fall in quality jobs, wages, and social security cover—all reducing consumption demand.

e) On April 3, 2024 came the Public Enterprise Survey for 2022-23 showing, the number of “casual/daily rate workers & contract worker/employees” went up from 42.3% in FY22 to 43.4% in FY23. 

f) On October 18, 2024 a national daily reported that Indian youth are rushing to the UAE for delivery jobs (gig work) with the help of the Telangana government.

g) On October 10, 2024, the NABARD’s survey of 2021-22 showed a massive reverse migration to agriculture – agricultural households rising to 57% in rural India – up from 48% in its 2015-16 survey. Of the 29 states/UTs common to both lists, 18 states/UTs saw a rise in agricultural households – maximum in Tamil Nadu (44%), Haryana (24%), Maharashtra (23%) and Jharkhand (18%). 

How does India reverse these trends? 

The answers are known: Proactively create quality jobs, fill vacant sanctioned posts, ensure statutory minimum wages and social security cover – in government, private corporate and informal sectors. This would mean overhauling economic policies and making systemic changes, particularly to address what the CEA flagged.  

But here are a few easy steps to make a sound beginning. 

1. Statutory minimum wages for MGNREGS workers  

On December 5-6, 2024, hundreds of MGNREGS workers gathered at Jantar Mantar to demand fair wages (among others) – an annual ritual. Theirs is a centrally sponsored scheme in which the Centre pays the full wage (material component is shared 75:25 with states/UTs).

Until 2017, their wage was linked to the statutory minimum wages of states/UTs for agricultural labour. This changed and the Centre de-linked it following the Nagesh Singh committee’s report. Set up in 2016, this committee invalidated earlier practice on three spacious grounds: (a) wages for agricultural labour is “a time rate” while that for MGNREGS is “a piece rate” (b) difficult to align the two rates because of wide variations in the schedule of rates (SoRs) across states, and (c) no wage discrimination exists between male and female workers in MGNREGS, while that is so for agricultural workers (women paid less than men).

How many MGNREGS workers don’t get minimum wages? 

“Active” MGNREGS workers stand at 132.5 million, as on December 7, 2024. Average number MGNREGS workers in the past four fiscals of FY21-FY24 is 97.2 million. Their number during FY25 (up to December 7, 2024) is 65.9 million.

In FY25, average MGNREGS wage is ₹248.8 – less than ₹279 the wage for them fixed by the Centre for FY25 and also less than the Centre’s statutory minimum of ₹450-500 (unskilled agricultural workers) applicable from October 1, 2024.

The Centre violates its own laws to deny statutory minimum wages to workers hired under its own schemes (more details follow). It also violates the Supreme Court order of 1983 (Sanjit Roy vs Rajasthan government) which read: “The State cannot be permitted to take advantage of the helpless condition of the affected persons and extract labour or service from them on payment of less than the minimum wage”. The court called it “forced labour”. 

2. Pay wages, not ‘honourarium’ or ‘incentives’  

The Centre doesn’t recognise millions of workers hired under its own schemes (all long-term employment) as ‘employees’. So, it pays them “honorarium” and “incentives”, instead of statutory minimum wages – like under the PM POSHAN, NHM and NRLM etc.  

On November 25, 2024, it told the Lok Sabha that cook-cum-helpers (CCHs) under the PM POSHAN (earlier called mid-day meal scheme) are paid monthly “honorarium” of ₹1,000 – for 15 years since this amount was fixed in 2009. Many states do give additional honorarium – ranging from ₹500 to ₹11,000-11,500 (Kerala and Tamil Nadu) but not all do so (many north-eastern states and UTs like Delhi).  

The number of CCHs hired is not known but is likely to be substantially as they serve meals to students of Class I-VIII across the country. 

This scheme has another component – “Anganwadi services” for pre-school children. This one employed 2.4 million Anganwadi Workers (AWWs) and Anganwadi Helpers (AWHs) as on 31st December 2023. They get a maximum “honorarium” of ₹4,500 and ₹2,250, respectively, plus monthly performance incentive of ₹250-500. 

The AWWs and AWHs too routinely gather in New Delhi to demand fair wage (last on March 4, 2024). 

Then, there are about 2 million ASHA and ANM workers (as on Aug 14, 2024) – employed under the National Health Mission (NHM). They too routinely hold protests to demand fair wage (last in New Delhi in November 2024).  

They did yeoman service tracking and treating Covid-19 patients.  

Their monthly “incentive” is ₹2,000 per month”, plus “performance-based incentives” ranging from ₹1 to ₹500 (except for handling TB patients).

Similarly, the NRLM employs a large number of community resource persons (CRPs), livelihood resource persons (CMSA), community mobilisers, activists, trainers, book keepers etc. who are given “honorarium” ranging from ₹500-5,000 (fixed in 2017). Their number is also not known. 

3. Respect professionalism and make regular employment 

The Centre is incrementally hiring workers on contract and causal basis to save on wages, but their data is not available. The latest addition is four-year contractual “Agniveers”. It compromises national security by giving six-moth training and compulsorily retiring 75% of them.

4. Fill central government vacancies 

No official data exists about the total vacancies in sanctioned posts under central ministries, departments, schools, hospitals (including PHCs and CHCs), CPSUs, CAPFs and defence forces (Army, Navy and Air Force about which it refused information for the first time in the Rajya Sabha reply of August 5, 2024 citing national interest). The Congress said the total vacancies were 3 million in its 2024 manifesto. Filling these vacancies would give regular wages to those many.

5. Implement Wage and Social Security Codes 

The Code on Wages came in 2019 promising universal minimum wages and the Code on Social Security in 2020 promising universal social security cover (extending to unorganised sector, including gig workers). But both remain on paper.  

A whitepaper on gig economy, released on November 28, 2024, said gig workers are likely to rise to 90 million by 2030. The Fairwork India’s October 2024 report had found only two of 11 firms engaging gig work in India are giving “local minimum wage after costs” but none “local living wage after costs”. There is little to celebrate gig work or for Finance Minister Nirmala Sitharaman to romanticise the success of ‘quick commerce’ (“India’s businesses, particularly the start-ups, especially quick commerce, for instance, are truly a one-of-a-kind innovation that only India has.”).

The US and Europe recognise the pitfalls and have legislated measures to treat gig workers as ‘employees’ (not ‘partners’) with rights. It is time for India to do so. 

If the Centre operationalises these two codes, 442 million workers who don’t get regular wage/salary (78.3% of 565 million workers) would be benefitted. 

6. Use e-shram portal to deliver actual services  

The e-shram portal does nothing more than register migrant and unorganised workers.

On December 5, 2024, three different questions were asked in the Rajya Sabha about its utility but none of the answers listed benefits. All three answers repeated the same: 304.3 million unorganised workers have been registered and 12 central schemes have been linked.

Even the e-shram portal says nothing about actual benefits. If you think it has ensured PDS (fully centralised from January 1, 2023) to migrants, perish the thought. The Supreme Court lost its patience for the nth time on October 2024 for the Centre’s “one-nation-one-ration-card” to deliver and migrants are in panic rush to their villages to save their ration (PDS) cards as the Centre has ordered fresh e-KYC verification.