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Wage economics of rural India
Mon, 17 Oct Pre-Open

The Indian economy has grown at a blistering pace over the last decade. Better employment opportunities and rising incomes have raised the standard of living of an average Indian. But when it comes to assessing the growth in real wages (adjusted for inflation), a true measure to gauge an increase in income levels, the picture appears to be completely different. This is true especially for occupations like ploughing, sweeping, carpentry and masonry undertaken in rural India. Although the income levels in these areas have risen over the last decade due to better employment opportunities, so has inflation. In fact, inflation has surpassed the growth in income levels. In other words, real wage rate has either remained unchanged or has declined. So effectively, the rural Indian is worse off than before.

It is true that in any occupation, real wages increase when high level of skill is required coupled with shortage of labor. However, considering carpentry and masonry are skilled jobs, the decline in inflation adjusted wages for both these professions is puzzling.

Ironically, the real wage of unskilled laborers has witnessed the most impressive growth thanks to the efforts of National Rural Employment Guarantee Act (NREGA). Rolling out of NREGA on a nationwide basis has not only assured a job but has also increased labor wage rate across the country for unskilled applicants. It may be noted that unskilled labor typically works on a daily wage rate.

However, apart from this, the growth figures of other semi-skilled occupations have not been encouraging. Decline in real wage rates here indicate that the skill development is not given due importance. It also indicates that although the economy has grown at a rapid pace, the standard of living for a rural Indian has remained unchanged. However, as inflation has been on a higher side in the recent past, it does not give a true indication of growth in real wages.

It may be noted that rising income levels increase consumption and drive the economy. However, if increasing inflation eats away at the spending power, it has a minimal impact on raising the standard of living, especially for the rural sector. This brings in disparities which are not in the best interest of any economy.

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Feb 22, 2018 (Close)