Employment resilient in listed companies

by Mahesh Vyas

The nominal wage bill of listed companies grew by 8.5 per cent in 2019-20. This is at the lower end of the annual growth rates of wages recorded in the past four years. Nominal wages of listed companies had grown by between 9 and 12 per cent in the preceding four years. Growth in 2019-20 was not only lower than in the recent past but, it was also barely higher than the inflation rate recorded during the year. Therefore, much of the increase in the wage bill was offset by the 7.5 per cent consumer price inflation. The inflation adjusted wage bill of listed companies saw a meagre 0.95 per cent increase in 2019-20. This was the lowest annual growth in real wages in ten years.

The 8.5 per cent nominal increase in the wage bill of listed companies was the combined outcome of an increase in employment and a simultaneous increase in the nominal wage rate. The average wages per employee of listed companies was Rs.715,082 per annum. This was 5.6 per cent higher than it was a year ago. However, this increase in the wage rate was lower than the 7.5 per cent inflation in the year. As a result, the inflation adjusted wage rate declined for the first time in over ten years. It declined by 1.8 per cent.

Listed companies increased their headcount by 2.8 per cent in the year. These estimates are drawn from the audited annual financial statements of 2,623 listed companies for the financial year 2019-20 available in CMIE’s Prowess database. These companies employed 8.2 million people during the year.

The 2.8 per cent increase in employment by these listed companies is heartening. Overall employment had grown by only 0.6 per cent during the year according to CMIE’s Consumer Pyramids Household Survey. And, the count of salaried employees had declined by 2 per cent from 87.7 million in 2018-19 to 85.9 million in 2019-20. Listed companies did much better on providing additional jobs than the rest of the economy.

These companies provide better quality jobs and so it is particularly reassuring to see these jobs grow faster than the overall growth of jobs in India. In 2018-19, overall salaried jobs grew by 0.1 per cent according to CPHS but the listed Prowess companies saw a growth of 5.2 per cent in employment. Earlier, in 2017-18, while CPHS showed a 1.6 per cent increase in salaried jobs, Prowess showed a 2.6 per cent increase in jobs. This is an encouraging feature of the kind of jobs growing in India. Currently, jobs in listed Prowess companies account for less than ten per cent of all salaried jobs.

Quarterly financial statements of listed companies indicate a substantial deterioration of employment conditions during the first half of 2020-21.

In the first quarter of 2020-21 which ended in June 2020, their nominal wage bill recorded its lowest year-on-year growth of 2.2 per cent. Quarterly financial statements are usually available for around 4,500 companies per quarter. Results for the second quarter, ended September 2020 are still flowing in. As of November 8, data for 1,314 companies were available in the Prowess database. These indicate that the wage bill grew by 6.5 per cent during this quarter. Given that companies whose performance is relatively poor tend to delay releasing their financial statements, it is likely that the growth in wages seen thus far could deteriorate in the coming weeks as the sample size rises to more than 4,000. Nevertheless, it may be fair to assume an improvement in the growth in the wage bill compared to the 2.2 per cent growth recorded in the first quarter.

It is likely that the year-on-year growth in the wage bill of listed companies during the first half of 2020-21 could be between 3 and 4 per cent. This, of course, would be its worst record in decades. A 3-4 per cent increase in nominal wages implies a fall in real wages because inflation has been around 6.8 per cent during this period. It is possible that real wages fell by 3 per cent in the listed companies of India.

Employment data is not available systematically for all listed companies in their quarterly financial statements like they are available in their audited annual financial statements. As a result, we cannot comment with confidence on the employment trend in these companies during 2020-21. But, we may conjecture that even listed companies must have seen substantial job losses in the first half of 2020-21.

If part of the 3-4 per cent fall in real wages is the result of a fall in the wage rate (a fair assumption), then the fall in employment in listed companies is likely to be less than 3 per cent during the first half. This reflects remarkable resilience of jobs in the listed companies even during the lockdown. This is particularly encouraging because according to CPHS the fall in salaried jobs during the first half was of the order of 20 per cent. Apparently, the fall in salaried jobs happened mostly in unlisted companies and in the unorganised sector where 90 per cent of such jobs exist.