Salaries Drop 1.7%, Lag Behind Inflation

Since 2019, the actual pay of employed individuals in India has remained stagnant, declining by 1.7% until June 2024. Earnings for workers rose by 12.3%. Despite a shift in the worker structure, self-employed people’s income fell by 1.5% since 2019.

The main concern regarding the actual pay of Indian workers is that there hasn’t been a raise since 2019. Instead, they were paid 1.7% less in June 2024 than they were in the June quarter of 2019. This indicates that, due to inflation, the salary’s actual worth has dropped. When prices have gone up but salaries have stayed the same or even gone down a little, this is known as inflation.

For instance, let’s say that in 2019, someone could purchase ten rotis for 100 rupees. He is currently receiving 98 rupees in 2024, but 10 rotis require 110 rupees because of inflation. His purchasing power has therefore declined. This is the state of those who work in regular employment, such as those who work in banks, offices, or factories permanently. These individuals receive a set monthly pay, but they are no longer able to purchase as many items with it as they once could.

This challenge began in 2019 when things were going smoothly before the arrival of COVID-19. However, the pay did not rise after that. The circumstances deteriorated to the point where their pay was even lower than it was in 2024. As a result, those who work are less content now as their lives are more difficult than they were in the past. Despite their hard effort, their incomes are becoming less valuable.

In what ways does the real pay trend of wage earners differ from that of employed individuals?

The actual wages of wage earners have climbed significantly, whereas the incomes of employed persons have either remained unchanged or slightly dropped. People who make and spend money daily, such as laborers, rickshaw pullers, farm workers, and building site workers, are known as wage earners. In comparison to the June quarter of 2019, their pay increased by 12.3% in June 2024. In other words, they will receive more than Rs 112 in 2024 if they receive Rs 100 in 2019. Both cities and the countryside saw this increase. In rural, salaries rose by almost 12%, while in cities, they rose by 11.4%. Wage earners are therefore now making more money than they were previously. For instance, a worker who formerly made Rs 200 per day is now making Rs 224.

This disparity is significant since employed people’s salaries are set and difficult to alter. However, earnings are always fluctuating based on the need for hard work and labor. Since there has been a greater demand for salaries in recent years, their pay has also increased. Their lives are still difficult, though, because they must make this money every day and there is no guarantee that they will find employment.

What is the true salary trend for independent contractors, and how does it relate to the evolving nature of the labor market?

People who own their stores, operate small enterprises, or work alongside their families are considered self-employed. During the pandemic, their actual income had drastically decreased. Markets froze, stores closed, and their labor ceased because of COVID-19. However, starting in March 2022, their incomes began to rise once more.

Nevertheless, their June 2024 pay was 1.5% lower than their June 2019 pay. In other words, they are still unable to make as much money as they used to. For instance, in 2024, a merchant who made Rs 500 in 2019 could only make Rs 492. Additionally, the number of independent contractors has grown. Their proportion of all workers rose by 5% from 2019–20 to 2023–24. In particular, there were a lot more unpaid assistants in the home.

These are people who work or assist their family in their shop without receiving pay. For instance, a person works for free in his mother’s vegetable store. This indicates that although people are taking on household chores in place of jobs or earnings, their income has not increased significantly.

What explanations are offered for why employed people’s incomes have stagnated?

There are numerous explanations for why employed people’s earnings have stagnated. First, the workers don’t have the skills they need, according to Arvind Veermani of ‘The Hindu’ newspaper. In other words, although people are studying, they are not acquiring the skills that businesses require. As a result, they are not paid more by the companies.

The second reason is that, according to Anamitra Roychowdhury in an interview with The Hindu, there are a lot of workers but not enough jobs. Additionally, the advantages of studying more are dwindling. In the past, individuals who studied a lot were paid well. Currently, those people work at low-paying employment. For instance, an engineer who was previously employed by a large corporation is currently employed by a tiny business. The third factor is that businesses aren’t making financial investments. Demand stays low and wages do not rise when businesses do not build new factories or machinery. When taken as a whole, these factors are halting employee pay.

Why don’t experts think that the rise in wages is entirely positive?

Although wages have gone up, experts believe this isn’t necessarily a good thing. The fact that wage labor is temporary is the cause. A worker receives Rs 300 today, but it’s uncertain if he will have a job tomorrow. This work is insecure and transient. For instance, a worker may receive Rs 250 one day but not be employed the following day. His life is hence unstable. Therefore, a pay raise does not imply that the nation’s economy has grown stronger or that workers’ lives have improved. This is only a minor alteration that does not fully capture the situation.

What impact does wage stagnation have on the economy and demand, particularly for big populations?

The nation’s economy suffers if wages do not rise, particularly for the vast majority of those employed in the unorganized sector. Demand rises when consumers spend money. However, they are unable to purchase when they lack funds. For instance, if a worker or salaried individual used to spend Rs 500 on clothing but his pay has ceased, he will no longer do so. Both the shopkeeper’s income and the amount of work done at the factory producing items will decline as a result. The concept of “strong” growth does not seem to be accurate if the salaries of a large number of people do not rise.

What prospects do experts see for salary increases in India?

A “big increase” in pay is not anticipated anytime soon. The lack of investment from private enterprises is the cause. There is little likelihood of a pay boost until the corporations bring in new plants or machinery. In other words, everything will stay the same for a while.

Read More: ELSS Fund: Save Taxes & Grow Wealth