More for Less
28th 2006, C.P. Chandrasekhar and Jayati Ghosh
to data from the recently released NSS large survey,
between 1999-2000 and 2004-05, there was a revival of
aggregate employment growth to approximately the rates
achieved in the 1980s. In a previous paper, we had noted
that this employment growth was essentially in non-agriculture
in both rural and urban areas, and dominantly in self-employment
for male workers, as well as substantial increase in
regular work for women workers.
expansion would indeed be a sign of a positive and dynamic
process if it is also associated with rising real wages,
or at least not falling real wages. Therefore, in order
to appreciate the nature of this new employment, it
is important to examine the trends in real wages and
remuneration for self-employment over this period. In
this article we focus on this issue.
Chart 1 presents the average wages of workers by category,
in constant 1993-94 prices. All the wage data used here
refer to the wages received by workers in the age group
15-59 years. (In this chart as well as in the following
charts and tables in which real wages are presented,
the current price wage data have been deflated by the
CPIAL for rural workers and the CPI-IW for urban workers.)
It is evident that for most categories of regular workers,
the recent period has not been one of rising real wages.
While real wages have increased slightly for rural male
regular employees, the rate of increase has certainly
decelerated compared to the previous period.
all other categories of regular workers, real wages
in 2004-05 were actually lower than in 1999-2000. The
economy has therefore experienced a peculiar tendency
of falling real wages along with relatively less regular
employment for most workers.
behaviour of real wages of regular female workers in
rural areas deserves some comment. The sharp increase
in 1999-2000 may result from statistical error, since
it reflects a large and unlikely increase in wages
of only one category of such workers (those women workers
who had up to primary education only), as indicated
in Table 1 below. Therefore the changes in such wages
are unlikely to be as sharp as suggested by Chart 1.
As noted in the previous edition of MacroScan, regular
employment has been declining for male workers in particular,
and in any case accounts for a minority of the work
force in India. So it may be more relevant to see what
has happened to the wages of casual labourers. This
is presented in Chart 2.
evident from Chart 2, real wages of casual labour appear
to have increased slightly in rural areas, although
once again the rate of increased has slowed down compared
to the previous period. However, for both men and women
workers in urban areas, real wages for casual work on
average declined compared to 1999-2000. This is truly
remarkable for a country in which real GDP has been
growing at an average rate of 8 per cent over this period,
and where much of this growth has been concentrated
in urban areas.
was already evident from the first two charts that the
gender gap in wages tends to be quite large. There is
also evidence that it has been increasing over time.
Chart 3 show average female wages as a percentage of
male wages for regular and casual workers. A number
of features emerge from this. First, this ratio is relatively
low even by the standards of other developing countries,
although not as low as Southeast Asia.
Second, the gender gap in wages has increased for all
categories of workers urban and rural, regular and
casual - between 1999-2000 and 2004-05. (Once again
the particularly sharp changes for rural regular workers
may however reflect a data error for 1999-2000.) Third,
the gender wage gap tends to be much larger for casual
work than for regular work.
issue of the gender gap in regular work is particularly
interesting, because this type of female employment
has increased in the latest period. It now accounts
for around 36 per cent of all urban women workers, even
though it is still less than 4 per cent of all rural
women workers. Therefore it is worth examining the trends
in real wages of women in regular jobs.
Table 1 presents
this data. As noted above, there are likely to be problems
with the recorded information on average real wages
in 1999-2000, specifically of urban regular women workers
who are literate or have up to primary level education.
However, even if we ignore this particular number, the
trends revealed in Table 1 are startling. Over the first
half of this decade, real wages of regular women workers
declined for every category of education level, and
in both rural and urban areas!
Table 1 >>
rural areas the average decline in regular women workers
real wages over the first five years of this decade
was by 32 per cent, and in urban areas by 10 per cent.
Even if we ignore the outlier, the decline in real wages
in other categories was substantial. Illiterate women
workers in regular employment in rural areas faced average
wage cuts of 20 per cent, while those who had secondary
and higher secondary education faced average cuts of
nearly 30 per cent! It should be noted that more than
66 per cent of all rural women workers were illiterate,
and 37 per cent of urban women workers were illiterate.
In urban areas, illiterate women workers experienced
the sharpest declines in real wages, at more than 22
per cent. Graduate women had the lowest real wage decline
of around 5 per cent but the point is that even for
this category, real wages on average fell.
All this should be seen in conjunction with dramatically
increasing rates of open unemployment, especially for
women. While space does not allow for a detailed discussion
of this here, unemployment rates according to this latest
survey are now the highest ever recorded. Unemployment
measured by current daily status, which describes the
pattern on a typical day of the previous week, accounted
for 8 per cent of the male labour force in both urban
and rural India, and between 9 and 12 per cent of the
female labour force.
The real expansion in employment has come in the form
of self-employment, which now accounts for around half
of the work force in India. The increase has been sharpest
among rural women, where self-employment now accounts
for nearly two-thirds of all jobs. But it is also remarkable
for urban workers, both men and women, among whom the
self-employed constitute 45 and 48 per cent respectively,
of all usual status workers.
This makes the issue of remuneration in self-employment
a particularly important one. If working people are
moving away from paid jobs to more independent and more
remunerative forms of self-employment, then that is
certainly to be welcomed. But if they are forced to
take on any activity on their own in order to survive,
simply because a sufficient number of paid jobs is not
available, then that is another matter altogether.
This is especially the case for less educated workers
without access to capital or bank credit. Self-employment
for such workers often means that they are forced into
petty low productivity activities with low and uncertain
The latest NSS report confirms this, with some very
interesting information about whether those in self-employment
actually perceive their activities to be remunerative.
This information is presented in Table 2.
Table 2 >>
It turns out that just under half of all self-employed
workers do not find their work to be remunerative. This
is despite very low expectations of reasonable returns
more than 40 per cent of rural workers declared they
would have been satisfied with earning less than Rs.
1500 per month, while one-third of urban workers would
have found up to Rs. 2000 per month to be remunerative.
is to be expected, the material expectations of women
workers were far below those of men, yet despite this,
around half of self-employed women did not find their
activity to be remunerative. Even in the case of the
relatively most satisfied group of self-employed workers,
the urban males, around to-fifths did not find their
activity to be paying economically.
This suggests that a large part of the increase in self-employment
and therefore in employment as a whole is a distress-driven
phenomenon, led by the inability to find adequately
gainful paid employment. So the apparent increase in
aggregate employment growth may be more an outcome of
the search for survival strategies than a demand-led
expansion of productive income opportunities. Clearly,
employment generation must remain the central concern
of our policy makers.