Rural Wage Growth Saw A Post-Lockdown Spurt But Data Doubts Persist

The first reading of post-lockdown data on rural wage growth shows a strong pick-up. Economists, however, remain cautious.

A woman carrying a jar walks through a village in Tikamgarh district, Madhya Pradesh, India, on Friday, Aug. 7, 2020.Photographer: Dhiraj Singh/Bloomberg
A woman carrying a jar walks through a village in Tikamgarh district, Madhya Pradesh, India, on Friday, Aug. 7, 2020.Photographer: Dhiraj Singh/Bloomberg

The pandemic led to a mass exodus of Indians back towards the hinterlands, forcing many to rely on agriculture and the government’s rural jobs scheme. The fear was that this would lead to an over-supply of workers in rural areas and counter any rise in wages because of a strong monsoon.

The first reading of post-lockdown data on rural wage growth counters that narrative, showing a strong pick-up in wages. Economists, however, remain cautious about the quality of the data and long-term trends.

Government data released for May shows that average rural wage growth stood at 4.1% for agricultural occupations and at 9.2% for non-agricultural occupations, based on the average wage rates for men, collated by BloombergQuint from the Labour Bureau. In comparison, average wage growth was at 3.5% in March 2020 for agricultural occupations and at 4.4% for non-agricultural occupations.

The Labour Bureau decided not to compile or release wage rates for April 2020 citing lack of adequate and consistent data amidst the nationwide lockdown. In May, the wage rate data was collected, “to the extent possible, through personal visits and also by using electronic means of communication”, according to the release by the bureau. Though there has been an improvement in the flow of data, it was not adequate to generate the robust data at the state level, which has hence, not been released, the release said.

Doubts Over Data

Arindam Das, joint director at the Foundation for Agrarian Studies, said that the spike may be ‘unrealistic’. Data collected in May was one-third of the usual sample size, he said. Also, the constraints imposed due to the lockdowns may have led to data being collected largely from areas close to where field officers reside, he said.

Himanshu, associate professor at the Centre for Economic Studies and Planning and the School of Social Sciences, at the Jawaharlal Nehru University, also said data may not be comparable to previous readings because of smaller sample size and should be studied over a longer period to determine the impact of reverse migration.

Cues From The Ground

Some parts of the data, however, may be reflective of what was happening on the ground during those months.

In May and June, labour is required for Kharif sowing, said Siraj Hussain, visiting senior fellow at Indian Council for Research on International Economic Relations. That may be the reason for a slight rise in agricultural wages, he said.

Ankita Pathak, an economist at Edelweiss, said it’s imperative to take into account MGNREGA wages, which act as the floor wage in the informal sector. From April 1, 2020, the national average wage under MGNREGA was increased to Rs 202 per person per day from Rs 182 before that. To add to it, rural Inflation has been upwards of 6%, which is essentially driving the nominal wages up, with real wage growth being minimal, Pathak said. Finally, government capital expenditure showed a 57% increase in May which could have led to some wage buoyancy in the rural construction sector, she added.

Occupations That Saw The Sharpest Pick-Up

The labour bureau lists average daily wage rates every month for 12 agricultural and 13 non-agricultural occupations. Of these, the bureau did not list average daily wage rates for deep-sea fishermen in May 2020.

Of the listed occupations, daily wage rates for beedi makers and for handicraft workers rose by over 20% each.

New guidelines to fight the pandemic came into effect in two parts in May, classifying zones on the basis of the caseloads and providing considerable relaxations to many districts with no or few cases. As such, rural areas saw better economic activity than urban areas because of fewer cases of infection.

Will It Last?

Pathak said that factors that may have helped prop up rural wage growth are now fading off. “We believe that the outlook for rural wages remains bleak, in the absence of a demand stimulating fresh fiscal expenditure and rising viral caseload in rural areas,” she said.

The impact of any increase in MGNREGA wages may also peter out. According to Das, wages under the scheme are at about two-thirds of the prevailing market rates. While they did have a bearing on pushing up average wage rates in 2011-12 when they were revised, the impact may be more muted now.

In a research note in July 2020, Pranjul Bhandari, chief India economist at HSBC said that notwithstanding a temporary uptick, rural wages may not rise sustainably. Increased MGNREGA outlays don’t seem enough, construction-led employment may remain weak, and rising rural indebtedness could hurt, she said. As such, labourers who returned to their rural homes are likely to come back to their urban jobs, she concluded.