ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Should Real Wages of Workers Go Up in Indian Manufacturing?

This paper argues why it is important for real wages of workers in Indian manufacturing to go up. During 1998/99-2010/11, the growth in nominal wages appears to have been crowded out by a consistent increase in the consumer price index for industrial workers, rendering a scenario of temporally stagnant real wages in the manufacturing sector. There appears to be a discernible disparity between wage rates of directly employed and temporary workers. Moreover, trend growth rates of wages of supervisory and managerial staff, notwithstanding variation across industries, are significantly higher than that of workers, indicating that the stagnation of the real wage is presumably a stylised fact for workers but not for managerial and supervisory staff. The institution of minimum wage in India seems to be lackadaisical in enforcing a floor wage that compensates for a rise in prices, and providing a premium for the skill. The elasticity of real wages to average productivity of workers appears to be of a perceptibly lower magnitude.

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