A recent report in this newspaper refers to the perceived shortage of skilled blue collar workers in the construction sector in particular, ranging from plumbers, carpenters, masons and welders. Observers have attributed the present shortage to urban migration to the villages, accentuated by the heat of a bad summer. The other reason for shortage is migration, particularly to the Gulf countries, for better pay and dignity. What’s unsaid though is that labour users do not appear to pay skilled workers their due, amidst rising costs and aspirations.

The coexistence of high unemployment, low wages and ‘skills shortage’ is an intriguing triad. There could be three reasons for low wages. First, the productivity of labour is low due to the lack of skill development; the reserve army of labour on account of absence of jobs depresses wages; and substitution of capital for labour adds to the labour surplus. Given this backdrop, bidders for labour believe they can get skilled workers for subsistence wages. This is a mistake, since the labour market is heterogenous. Bidders do not recognise — and this is a sociological bias — the skills embedded in blue collar work, and are therefore not willing to pay for it.

There can be no argument against moving from a wage of subsistence to that of dignity. Fears of a wage-price spiral are exaggerated in a country where the rural monthly per capita consumption expenditure in real terms grew at a CAGR of 3.79 per cent between 2009-10 and 2022-23 (to ₹2,008), according to the Household Consumption Expenditure Survey. For urban India, the growth in real terms was just 3.1 per cent (₹3,510 in 2022-23). Policy solutions too must be explored to improve labour productivity through skilling, a big reason for low wages. The recently released Annual Survey of Unincorporated Enterprises tells us that gross value added per worker did not increase in real terms in 2022-23 (October-September) over the previous year. There has been a negative growth in per worker GVA in real terms over pre-Covid levels. To arrest this, skill development policies deserve a relook. An outlay of just ₹3,520 crore for the Ministry of Skills Development and Entrepreneurship in the Interim Budget possibly suggests that the reality on skilling does not match the rhetoric. While schemes for jobs and skills development under the Labour Ministry received over ₹12,500 crore, what happens on this count is not evident.

A challenge before the forthcoming Budget is to create incentives for quality employment and skilling. The first can be done by introducing production linked incentives in labour intensive sectors, and tweaking existing PLIs. According to a report by Citigroup, even with an average growth rate of 7 per cent over a year India can only generate 8-9 million jobs a year — whereas 12 million are getting added to the market annually. The capital intensity of growth needs a serious relook. Stubborn social attitudes that depress wages, and spur ‘shortage’ and migration should be challenged.