The wage bill in India in private sector, commercial companies has been rising fast - by about 35% in 2006-07 compared to about 3.5% for the public sector. What about productivity? Can these wages be paid for?
Well, firstly, much of the wage rise is due to increased numbers in work (especially in the software industry); some due to higher wages.... but again this is due to a general upskilling of the workforce ... and higher level skills command higher wages.
When one compares output levels to these wage levels, there is good news. To produce one rupee worth of output, the average firm in India now spends eight paise on wages against 12 paise in 2005-06.
Higher labour productivity has provided a win-win-win situation.... more output for companies, higher wages for the workforce, more jobs for the population.
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