Interstate Wage Differentials in Organized Manufacturing Industries

Abstract

In post-reforms years, employment in organized manufacturing sector was much faster than pre-reform years. Growth momentum of employment has been larger than growth momentum of output. Further, since year 2000, real wages of the workers increased much faster, while per cent share of income wages in value added of industry output showed a decline. Declining wage share is a global phenomenon, not confined to a specific economy. The present paper points out that in all selected years (2006–2007, 2009–2010, 2013–2014 and 2017–2018), rise in labour productivity has increased wage disparity. It implies if wages and salaries of non-workers increase disproportionately due to rise in labour productivity in organized manufacturing factories, the wage disparity will rise. Increase in labour productivity increases average real wages during 2009–2010 and 2017–2018. Also, in 2009–2010 and 2017–2018, increase in capital labour ratio results in an increase in wage rate. Further, study also shows that average wage rate rises and wage disparity falls across the Indian states. © 2021, Indian Society of Labour Economics.