Fair Play On Fair Pay
Employers can short-change staff in a labour-surplus market, but everyone pays a price medium-term
One of India’s highest paid CEOs takes the stage at a company celebration, and is greeted by chants of “We want hike.” This is unusual in Indian corporate culture, where job insecurity breeds quiet compliance. In fact, it is the corporate equivalent of last week’s Cockroach protest. Question is, why would staff embarrass management under the glare of cameras and risk repercussions? It can only happen when enough of them feel they’re not getting a fair deal. And that sentiment isn’t confined to one company. Income tax data shows that while India’s middle class has steadily grown over a decade, average earnings haven’t. Per a recent analysis, average pay in the ₹10L-₹50L band grew by just 3% between 2012 and 2022. That’s not growth because inflation in that decade ranged between 3.3% and 10% per year. Workers actually became poorer over time, and their ability to buy goods and services reduced.
It’s good for businesses in the short term if they can get away with paying staff lower real wages year after year. But eventually, lower purchasing power becomes a hurdle for the whole economy. It’s happening in China now, as TOI’s analysis showed on Wednesday. Per official data, Chinese economy grew by just 4.3% during April-June this year, despite exceptional growth in exports. Problem is Chinese customers aren’t spending enough. If retail sales grow by just 1%, even a 27% spurt in exports can’t cover up. And salary or wage stagnation is a big part of China’s problem. Falling property prices, and their negative wealth effect, are another. People are simply feeling poorer. Per a Reuters report, young migrants in cities are not only sharing rooms but also beds, because the future seems uncertain.
For India, consumer spending is even more important than it is for China. It made up over 60% of our GDP last year. So when real wages fall, workers feel poorer, and stinginess becomes a habit, the economy can’t rev hard. Low spending also takes away the incentive to invest and increase production. So, job creation slows. And you have more young people venting on social media. Of course, employers can’t pay more when business prospects look uncertain, as is happening now with AI. But it’s also true that businesses have been using AI as a ruse to slash their wage bill, while burdening staff with more work. It’s good for their bottom line, and their investors, but remember, everyone loses in the medium run.
Disclaimer
Views expressed above are the author’s own.
