Labour Codes to Bridge Profit-Wage Gap and Boost Employment in India
Chief Economic Advisor V Anantha Nageswaran has emphasized that the four new labour codes introduced in India are designed to ensure that the wages and benefits of workers grow in alignment with the rise in corporate profits. This development addresses a longstanding concern over the disparity between robust corporate returns and sluggish wage growth, particularly at the entry level of employment.
Balancing Worker Rights and Employer Demands
Nageswaran highlighted that the labour codes make it clear that there must be a balance between worker's rights and the demands of employers. He stated, "The important thing is that labour codes also make it very clear that there has to be a balance in terms of the worker's rights and what the employers have been asking about." This balance is crucial for fostering a harmonious industrial environment and promoting sustainable economic growth.
Addressing the Profit-Wage Gap
In response to questions about the 'profit-wage gap', Nageswaran noted that the labour codes will play a significant role in ensuring that wage growth and benefit growth are commensurate with profitability growth. He remarked, "Labour codes will also do its own bit to make sure that wage growth and the benefit growth is commensurate with profitability growth. That is an important development that has happened since we wrote the survey last year." This comes after last year's Economic Survey, where he pointed out that corporate profitability had soared to a 15-year peak in FY24, while wages and employment lagged behind.
Encouraging Data and Reversal of Trends
Nageswaran expressed optimism, stating that "data are encouraging" to suggest that the trend of lagging wages might have reversed now. This positive shift is expected to enhance worker welfare and contribute to broader economic stability.
Boosting Female Participation and Formalisation
The Economic Survey indicates that the new labour codes hold particular promise for boosting female participation in the labour force. This is a critical step towards enhancing employment opportunities and formalisation in the economy. The codes are seen as a catalyst for inclusive growth and productivity, especially amid India's demographic dividend.
Projected Economic Impact
The Survey projects significant benefits from the implementation of these labour codes:
- Reduction in the unemployment rate (UR) to 1.9-2.9%.
- Generation of nearly 77 lakh jobs.
- Increase in the disposable income of workers.
- Potential boost to consumption by approximately Rs 75,000 crore, thereby enhancing overall economic growth.
These measures are expected to create a more equitable economic landscape, where workers share in the prosperity generated by corporate successes.
