'The 5.3% growth in wages per employee is the lowest growth in nine years,' points out Mahesh Vyas.
The Indian corporate sector scaled some handsome growth rates in 2018-2019.
Preliminary results based on a sample of 7,739 companies for which the annual report and complete audited financial statements were available for the year show that sales grew by 16.4% and profits grew at more than twice that rate.
This is the best performance by the corporate sector in several years.
Results of listed companies (a little over five thousand) show that sales grew by 17% in 2018-2019.
This was the highest growth rate since 2011-2012.
Net profit grew by 42%, which is the best performance in 12 years, that is, since 2006-2007.
Compensation to employees grew by a slower 11.2%.
In what looks like an extraordinarily good year in 2018-2019, growth in compensation to labour was not correspondingly extraordinary.
Labour has been recipient of a stable year-on-year growth in compensation compared to growth in profits earned by enterprise.
In the past six years, wages have grown on an average, at 10% per annum within a narrow range of 9% to 12% per annum.
During the same six years, sales averaged a growth of 6% per annum in a wider range from -3% to +17%.
And, net profits grew at a rather modest average of less than 2%, but it bounced from -33% to +34%.
The lower growth in wages in 2018-2019 compared to sales and profits is therefore, nevertheless, comforting.
But, this comfort is easily flustered when we study the composition of the growth in wages in terms of growth in employment and growth in wage rates.
A much smaller set of companies provide data on employment.
For the year 2018-2019, while CMIE has processed 7,739 companies, data on employment was available in only 1,777 of these.
Interestingly, these 1,777 companies also show a 11% growth in the wage bill.
There is good reason to believe that this relatively small sample of companies reflects the situation in the larger database of the corporate sector.
Usually, a little over three thousand companies reveal information on employment in a year.
These are mostly listed companies.
In the 2017-2018 financial year, 3,213 companies provided such information.
These companies employed 7.6 million people.
The 1,777 companies of 2018-2019 account for only 55% of the sample of 2017-2018, but they employ 6.5 million people and so account for 82% of the employment.
Thus, these 1,777 companies are the bigger employers.
And, in the size-wise log-normal world of companies the sample is a good representation of the universe to derive inferences on aggregate growth.
What do these 1,777 companies tell us about employment and wages in the corporate world?
First, the 11% growth in wages in 2018-2019 was the result of a 5.2% increase in employment and a 5.3% increase in wages per employee -- the wage rate.
Second, the 5.2% growth in employment in 2018-2019 was the highest growth in eight years.
Third, the 5.3% growth in wages per employee is the lowest growth in nine years.
Thus, the faster growth in employment in 2018-2019 has come at the cost of a slower growth in the wage rate.
So far, in the preceding eight years, while employment growth has been anaemic, wages were growing at a relatively better clip.
In the eight years ending 2018-2019, employment grew at 1.8% per annum and the wage rate by 9.4% per annum, on an average.
They have combined to give a 11% per annum growth in total compensation to employees in these larger companies.
The fall in growth of the wage rate in 2018-2019 came at a particularly bad time.
This was the year of a rise in the inflation rate.
Consumer price inflation was 5.5% in 2018-2019.
Thus, the 5.3% rise in the wage rate translates into a 0.12% fall in the real (inflation-adjusted) wage rate in 2018-2019.
It is logical to expect wages to grow sufficiently to beat inflation.
But, in 2018-2019, the wage rate increase in India's best employers could not keep pace with inflation.
This is disquieting, if not ominous.
The average wage rate for the 6.5 million employees of the 1,777 companies in 2018-2019 was Rs 589,120.
It was Rs 559,365 per employee in 2017-2018.
The median wage rate moved up from Rs 489,352 to Rs 519,836.
Over the next few weeks, the sample of companies for which employment data is available for 2018-2019 will increase and stabilise at a little over three thousand.
The larger sample is expected to reduce the 5% plus growth in employment we see so far.
This is because companies that perform relatively poorly provide results later than the good performers.
But it is unlikely that these laggards will be able to raise the wage rate growth estimate which has fallen below inflation.
Mahesh Vyas is the MD & CEO of CMIE.