Wages account for 1/3rd of country's total income: Report

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SME Times News Bureau | 27 Jun, 2019
A recent study shows that one-third of the income generated in the economy came from wages, and the the balance from capital.

The report by India Ratings and Research said that a reorganisation of the GVA (Gross Value Added) data of the Central Statistical Office gave an insight into the manner in which the income generated in the production process is being distributed across the two key factors of production, labour and capital.

"Return on labour (12 per cent CAGR) grew faster than return on capital (10.9 per cent CAGR) during FY12-FY17. However, of the total income generated in the economy, only one-third accrued to labour, while the balance went to capital," the report said.

It further said that distribution is not uniform across the sectors. In case of agriculture, owners of labour received 15.3 per cent of the income and the remaining 84.7 per cent went to the owners of the capital, it added.

While wages in agriculture accounted for only 8.4 per cent of the total wages in the economy, agriculture contributed 18.2 per cent to the total income generated in the economy.

"Interestingly, though the wage component in agriculture GVA grew faster than the capital component during FY12-FY17, the income of agriculture labourers continued to be quite low," said the India Ratings report.

The Census of India 2011 pegs the total number of agricultural labourers at 144.3 million (14.43 crore).

The wage component of agriculture averaged 2.78 per cent of the aggregate GVA during FY2012-2017.

"This translates into annual average wages of Rs 21,060 per agricultural labourer per annum (assuming the number of agricultural wage earners remains the same). This is even lower than the official poverty line. Cultivators are relatively better off than agricultural labourers, with an average annual income of Rupees 141,500 during FY12-FY17," said the report.

It observed that at a disaggregated level, divergence in returns to labour and capital is the most pronounced in the case of the public sector. During FY 2012-FY2017, wages grew at 11.7 per cent, but the return on capital grew by only 5.4 per cent.

This broadly reaffirms the view that the compensation offered to public sector employees is not in sync with its operating surplus or profitability, it noted.