Recent data from the Periodic Labour Force Survey (PLFS) of 2022-23 revealed a strengthening of the labour market, with unemployment rates falling and labour force participation rates (LFPRs) rising. Rural women’s LFPRs — for those aged 15 and above — rose from 19.7% in 2018-19 to 41.5% in 2022-23, a significant jump for a cohort that had long been on the margins of the labour market. These results were taken as examples of a robust post-pandemic recovery for the Indian economy.
Yet there are notes of caution. Much of the new employment generated for women has been in self-employment. There has been a rise in the proportion of women working as unpaid family helpers, with the share of rural working women in this form of employment rising from 37.9% to 43% between 2018-19 and 2022-23. The share of women in regular wage work fell from 22% to 16%. Greater employment seemed to be coming at the cost of suitable working conditions, especially for women.
While concerns regarding the forms of work have been extensively discussed, the aspect of earnings must also be examined to better understand the condition of the Indian labour market. While wages and earnings have increased, inflation has been high as well. If inflation is higher than earnings growth, real earnings reduce, reducing purchasing power.
The status of earnings
Here we will examine the real earnings of the workforce between the quarters of April-June 2019 and April-June 2023, covering the period before the onset of the pandemic and the latest period for when data is available. The PLFS collects information on the earnings of regular wage workers, casual workers and the self-employed (regular wage workers have fixed work hours and are paid on a regular basis; casual workers are employed on a daily basis on the availability of work and receive daily wages). We look at the monthly wage earnings of regular wage workers, and the gross earnings of the previous month for the self-employed. For casual workers, average daily wages are converted to monthly figures. The average of the Consumer Price Index (CPI) across the months of April to June of 2019 and 2023 are taken to convert nominal figures into real terms. The earnings for urban and rural workers were deflated by the urban and rural CPI for those periods separately.
Between 2019 and 2023, only casual workers — both men and women, across both rural and urban sectors — saw a net increase in their average real monthly earnings. Women casual workers experienced a 13% increase across the entire period, while male casual workers enjoyed a 10.33% increase. The only other cohorts which saw an increase in real earnings in 2023 as compared to 2019 were women in regular wage work — a 4.27% increase — and male self-employed workers (6.9%). Significant inflation over this period ate away at the gains of workers, resulting in lesser real earnings for most workers in 2023 as compared to the pre-pandemic period.
There are significant differences between urban and rural sectors. Urban male self-employed workers saw a reduction in real earnings, while rural male self-employed workers saw real earnings increase by roughly 14.67% in 2023 compared to 2019. However, the figure for gross earnings of the self-employed do not include those who reported zero incomes, and hence these aggregate figures may not give a true picture of earnings for the entire population of the self-employed.
In the case of regular wage workers, urban women saw a reduction in earnings, with real incomes in 2023, 2.34% lesser than that in 2019. Rural women in regular wage employment earned the highest gains of all cohorts, their monthly real earnings 27.5% higher in the quarter of April-June 2023 as compared to April-June 2019. Yet this cohort makes up only 8% of the rural female workforce, and hence a smaller proportion of the aggregate workforce.
The impact of inflation
On the other hand, the biggest declines were seen in the one cohort that showed a significant rise in employment: rural women in self-employment. The share of the rural female workforce in paid forms of self-employment rose from 22% to 28% between 2018-19 and 2022-23, yet their average monthly real gross earnings reduced by 7.72%, the largest reduction for any cohort. Large numbers of rural women have entered low-paying, low-productive jobs, perhaps to supplement household incomes in the wake of the pandemic — this does not indicate robustness of recovery. Note that this excludes women engaged as helpers in household enterprises, who, by definition, do not earn any income, and who form the largest proportion of rural working women.
The moderation of inflation by 2023 saw a gradual rise in real incomes. Between 2022 to 2023, all cohorts — except, surprisingly, urban women casual workers — saw a rise in real earnings. Self-employed men enjoyed significant gains, with rural and urban men’s earnings rising by 9.27% and 8.9% respectively. Rural self-employed women saw real earnings gains of 2.14%, while their urban counterparts experienced a gain of 4.2%. Wage workers — both casual and regular — did not see extensive gains, with only rural women in regular wage employment experiencing a 35.5% growth in real earnings. Urban men and women in regular wage employment experienced gains of 1.42% and 2.66% respectively.
While it is too soon to tell whether these gains indicate the beginning of a sustained recovery, the fact that every cohort — barring rural casual women workers — saw an increase in real earnings marks a distinct break from earlier periods. However, there is another problem. Real GDP growth between 2022 to 2023 was measured at around 7.2%. Only three cohorts experienced earnings growth faster than this: urban and rural male self-employed, and rural women in regular wage employment (the latter forming a miniscule portion of the aggregate workforce). Wage workers as a whole have seen real earnings grow slower than output, indicating a reduction in the share of wages even though growth remains healthy. This serves as further evidence of the possibility of India experiencing a K-shaped recovery in the wake of the pandemic.
Rahul Menon is Associate Professor, Jindal School of Government and Public Policy, O.P. Jindal Global University