Rural Wage Growth Slides After Post-Pandemic Surge
Workers labor on a construction site at a village in Khair district, Uttar Pradesh, India, on Wednesday, Sept. 2, 2020. Photographer: Anindito Mukherjee/Bloomberg

Rural Wage Growth Slides After Post-Pandemic Surge

Rural wages, which had seen an uncharacteristic spurt in the early months of the pandemic, have normalised since, shows data from the Labour Bureau.

Rural wage growth in nominal terms in November was at 6.05% compared to a year ago for agricultural wages. For non-agricultural wages it was at 4.69%, data collated by BloombergQuint shows. The data reflects the rural wage rate for men.

For agricultural occupations, rural wage growth had peaked in August 2020, rising by 7% annually, the highest since June 2017. For non-agricultural occupations, rural wage growth peaked in June 2020, rising 9.7%, highest in at least four years. This increase in rural wage growth defied conventional wisdom which suggested that large scale reverse migration from cities into rural areas would lead to an oversupply of labour and depress wages.

Incoming data since then suggests that wage growth did not sustain at high levels, although it remains above last year’s levels.

Adjusted for rural retail inflation, the real rural wage growth showed a contraction of 1.2% for agricultural occupations and a contraction of 2.5% for non-agricultural occupations in November. This is above pre-pandemic levels for agricultural occupations and below for non-agricultural occupations.

The intermittent spike in wages may have been because of a massive infusion of funds into the rural jobs guarantee scheme in June and in July last year. It was also when demand for work under MGNREGA was strong, exerting some pressure on private wages, said Himanshu, professor at Jawaharlal Nehru University. This has followed by an expected reversion to trend growth.

According to Madhura Swaminathan, professor at the Indian Statistical Institute, Bengaluru, the pandemic brought about two changes to rural wage rates. After the displacement by the pandemic, wages saw a spike to meet the immediate demand for work, especially in agricultural occupations because of the onset of the sowing season. Furthermore, the pandemic accelerated a shift to mechanical methods in agriculture, leading to moderately higher wages but only for a subset of labourers, she said. On an aggregate, some sections of labourers in some parts of the country saw a rise in wage rates.

To be sure, rural wage rates have declined in real terms post July across most occupations, said Arindam Das, director at the Foundation for Agrarian Studies. Despite a good year of production, many states saw no bargaining and no revision in wage rates, Das said.

Additionally, the data taken into account for the survey by the NSSO only includes daily wage rates. It does not account for piece rates- where an employee gets paid by the piece, a system prevalent in several north-Indian states, Das said.

Accounting for that, rural wage rates in Punjab and Haryana rose as both states saw a lower influx of labour from Bihar and Uttar Pradesh because of the pandemic. In Eastern India, with an excess of labour supply, daily wage rates, as well as piece rates, remained largely unchanged, Das said.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.