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Economist Prasenjit Bose says India has a massive jobs and wages problem

Updated : September 13, 2018 08:18 AM IST

The biggest challenge facing the Narendra Modi government has to do with job creation.

Yesterday in the first of our special series in partnership with Hindustan Times on the job market, we focused on whether or not India can absorb the migration of workforce from agriculture.

CNBC-TV18 caught up with Manish Sabharwal, co-founder and executive chairman at TeamLease and Prasenjit Bose, economist and activist, to focus on the issue of low wages -- Is the workforce getting the wages they want or need?

Sabharwal said, "There are three fault lines in India's wages. There is a massive difference between gross wages and net wages. India is one of the only countries in the world with 48 percent difference between gross and net wages for provident funds. There is a difference between real wages and nominal wages. There was a kid in Gwalior who told me to give Rs 4,000 in Gwalior, Rs 9,000 in Gurgaon and Rs 18,000 in Mumbai. So, there is a difference between eating, residing and office going, which is the real wages and nominal wages problem, because of bad urbanisation."

"Then, there is massive difference between government wages and private wages. Government underpay at the top and overpays at the bottom, so it distorts the market. So, I think there is a wages problem. Anybody who wants a job can get a job, they just don't have the wages and they want or they need," Sabharwal added.

Bose said, "India has both a massive jobs problem and also a massive wages problem. There is an inherent problem anyway in applying the standards, which if you are talking about unemployment rate for instance, if you are talking about a five percent unemployment rate, does same standard. What five percent unemployment rate means in foreign economy like the U.S. or Europe or other countries of the OECD? It is not the same as India."

"In India, if someone is unemployed that means that person is on the verge of or perhaps that person is a destitute. He is just on the brink of survival. The main problem in India is that we have a workforce by latest estimate, it's almost about 49 crore. So, such a huge workforce, the main problem today which we have for a long time is informality. You are talking about a highly segmented workforce and a large portion of this workforce by various estimates, at least say 80 percent and by many estimates much more than that, which is outside the pale of formal employment. That is what differentiates a poor country, a underdeveloped country like India from developed, advanced countries like Europe, US or Japan. Therefore the kind of standards that apply for measuring employment and unemployment in those countries should not be applied here," Bose added.
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