Economic Growth and Wage Increase

A slow increase in wages poses significant challenges for economic growth and equity.

Annual Survey of Industries (2023-24)

• Profits per factory rose by 7%.
• Wages per worker increased by only 5.5%.
• Profits have consistently grown faster than wages in recent years.

Productivity and Sector Analysis

• The Economic Survey 2024-25 highlighted weak wage growth despite high corporate profitability, which hit a 15-year high in 2023-24.
• Labour productivity gains have slowed down, with a notable decrease in output per worker growth post-2013-14.
• Formal manufacturing's share in GDP has almost halved since 2010-11, affecting access to stable, high-quality jobs.

Global and Technological Context

The global trend shows a shift in balance toward capital over wages, likely exacerbated by rapid technological changes.

International Labour Organization's Outlook

• Warns that nearly 25% of workers might experience significant role transformations due to generative artificial intelligence.
• Young entrants face challenges like limited skill-building opportunities and stagnant wages, leading to potential intergenerational wealth gaps.

Labour Protection in India

Efforts to strengthen labour protection have faced challenges due to excessively stringent laws.

Impact of Stringent Labour Laws

• Encouraged firms to favor contract-based employment, reducing the number of formally employed workers.
• Increased contract labour usage significantly in the manufacturing sector since the early 2000s, impacting wages.
• Periodic Labour Force Surveys indicate only a small portion of India's workforce is formally employed.

Manufacturing Sector Trends

Capital-intensive manufacturing subsectors are experiencing stronger growth compared to labour-intensive sectors.

Goldman Sachs Report Insights

• Stronger growth in capital-intensive subsectors like machinery, chemicals, electronics, and pharmaceuticals.
• Labour-intensive sectors like textiles, footwear, and food & beverages have lagged in growth, affecting employment and wages.
• Stringent labour laws are cited as a reason for underperformance in labour-intensive industries.
• New Labour Codes are anticipated to improve the situation.

The overarching issue remains: without significant employment opportunities in low-skill, labour-intensive sectors offering decent wages, sustaining higher aggregate demand is challenging.