In this episode, journalist and author Puja Mehra speaks with Rosa Abraham, economist and one of the authors of the State of Working India 2026 report, about the growing stress in India’s labour market, highlighted by recent worker protests in Noida. They discuss why even formal sector jobs are no longer guaranteeing wage growth, with real earnings stagnating—and in some cases declining—over the past decade.

Abraham explains how this is not a cyclical slowdown but a deeper structural issue, driven by weak productivity, misallocation of capital, and the absence of a strong small and mid-sized enterprise base (crucial sector that invests in workers). They also examine why higher education is failing to translate into better jobs, leaving many young graduates unemployed or underemployed.

Are current policies missing the bigger picture? What does this mean for India’s demographic dividend?

Tune in for a sharp look at why economic growth isn’t reaching workers—and the risks of ignoring it.

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TRANSCRIPT

NOTE: This transcript is done by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Puja Mehra: Rosa, thank you so much for coming to the show. It's lovely to be here, Puja. I'm a big fan of your book, so it's a pleasure to talk to you.

So kind of you. Thank you so much. I would like you to help us understand the recent protests by workers in Noida that we saw, workers who work in presumably formal jobs in factories that are run for very big companies.

I'm not going to name them, but very well-known consumer-facing brands, products that we use every day. I would imagine that these jobs are in the highest category of worker jobs, and yet workers are not satisfied about their wages. That's what they said in these protests.

You're the lead author of the State of Working India 2026 report, so you've studied some of these issues in detail. I was wondering if you can help us understand these protests in the context of your larger findings. Why is it that workers are not happy?

Rosa Abraham: So the State of Working India report this year, we focused on the theme of youth in the labour market. One of the things that we were trying to do is, over the last 40 years, what has entry-level jobs looked like, what has entry-level earnings looked like. But before I actually look at the question of the youth, I want to just kind of contextualise where we are in terms of the economy, and then it kind of speaks to some of the starting point of the question, which is the protest that we've been seeing in Noida in this month.

So if you look at the first quarter of 2017, what is average salary look like? That's around Rs 21,500 per month. That was in 2017.

Now, six years later, if you look at the last quarter of 2023, which is when what we had the last data for, this number had risen to Rs 22,000. This is government data, right? This is the PLFS survey?

Yes, this is from the official PLFS surveys. So it's nationally representative data, and this is salaried monthly earnings. So that's a Rs 1,000 increase over the course of six years.

And if you put this down in annual growth rate terms, that's about less than a percent, it's about 0.6% every year. And so that's where the numbers look like 0.6% average annual growth rate of salaried earnings in the last six years. So that's all men.

Now, if you look at graduates, particularly, and a lot of these manufacturing sector workers are typically graduates, because that's sometimes they often, you know, benchmark requirement. So the average graduate salary in 2011 was about Rs 30,000 monthly. And as of 2023, this number has actually fallen to Rs 28,000.

So that's what it looks like for graduates. And when you look at male graduates, young graduates, which was a specific theme of the report. So for a young graduate, you know, who finished his BTEC, finished some kinds of basic degree education, in 2011, they would have entered at an average salary of about Rs 20,000-21,000.

And that has actually fallen. So what the average young graduate is earning in 2023 is below what they are earning as of 2011. So on the one hand, you have this not just a stagnation of earnings, you have earnings actually falling.

And you overlay this with the fact that inflation has been steadily rising, even though it's not been at, you know, breakneck levels, it has been rising. So and all of these numbers I've given is inflation adjusted real salary, it's not nominal, right? So it is not kept pace in patient.

And you overlay the fact that we've had the LPG crisis further weighing on household incomes, family budgets as well. So it was fuel on a simmering fire, which has just exploded in the form of these protests. So minimum wages has not been revised for 10 years.

And it's clearly it's just the numbers are talking now and what's happening on the ground.

Puja Mehra: Rosa, what does it reflect when wages don't keep pace with inflation and cost of living? What does it reflect when workers have such little bargaining power? What is the underlying problem that we have to address to sort of improve worker conditions?

Rosa Abraham: Yeah, so I think there's a couple of things here. One is why are wages sober? Why is it that wages are not moving fast enough?

And as we all know, standard textbook results tell you that wages reflects worker productivity. So one kind of explanation is that productivity hasn't risen fast enough. And there's again, a number of reasons for this.

So one of the things that we looked at, at the report and is to see, well, what are the inputs in an economy, the inputs are labour and capital, right? And where do they go sectorally? Where are they allocated?

If you look at what has happened in the Indian context, and this is a known fact that the majority of our workers are in agriculture, about 43%. And that number has increased over the last six years, because we've seen what is called the structural reversal of workers returning to agriculture. So 43% of employment is being generated in agriculture.

Okay. Now, what about our capital stock? What about our investment?

Where do they go? And if you look at that, 60% of our capital stock is in the services sector. And 60% of net investments that happen in the economy are happening in the services sector, right?

So you have this huge misallocation of resources, employment is elsewhere, and the capital, other inputs are elsewhere. And that now reflects in productivity of workers. So that's one of the reasons why, you know, wages have not kept pace, because productivity hasn't risen fast enough.

Behind this, and there's a larger mechanism at play, it's that, you know, you have large firms and very small firms, and you have this missing middle, especially when you talk about the manufacturing sector in India, you don't have the small and medium sized firms, you don't have them growing, you don't have them hiring enough. And these are the crucial part of our economy, because this is the sector that invests in workers, they're the ones that hired a lot of workers with their labour intensive, that has not grown fast enough. So you also have this, what is called as a surplus labour, which then further keeps wages low.

And then you have the other kind of, you know, what is often called the regulatory cholesterol, and I'm not talking about labour laws here. This is the other kinds of infrastructural constraints that keep firms from growing. And this particularly hits the small and medium enterprises as well.

So together, all of this has created an environment where wages just have not kept pace. Leaving aside the other kinds of, you know, that they have just not implemented minimum wages at all, the five year updation of minimum wages has not happened. But that's a separate matter.

Even outside of that, the economic conditions has been such that wages have just not risen fast enough.

Puja Mehra: Should we talk a little bit about why has minimum wages not been revised?

Rosa Abraham: I think this is a question of implementation and will. Why do so many firms get away with not paying the minimum wages? Because over the last few years, we've seen the erosion of unionisation in factories and firms.

So workers are left with very little bargaining power. At the same time, you have the labour inspections also falling down. The number of inspectors have also steadily decreased over the last few years.

So on ground implementation has not happened because, again, there's just not enough labour voice in these decisions at all. So it is partly a political and partly an economic and social result.

Puja Mehra: And how severe is the youth unemployment problem? Are we reading the reports, the numbers are quite staggering.

Rosa Abraham: Yeah. So one of the things that's received a lot of attention is this number that, you know, the graduate unemployment rate is at 40 percent. And I do want to kind of temper this a little bit, but not to understate the problem, but just to say that, well, this is not really the problem that we should be really worried about.

So this one thing is that the unemployment rate at 40 percent is not a new phenomenon in India. If you go back to the last 40 years, 1983 is when we have the large unit level official labour force survey available. This number is around 35 percent youth.

So the young graduate unemployment rate. So it's been a structural feature of the Indian economy. It's been there for many, many years.

In fact, if you go back to old government reports dating 1960s, 1970s, they talk about the problem of graduate unemployment. So this is not new. But I think what is really worrying is two things.

One is the volume. The volume has changed. The size of the problem has hugely increased.

So in 1983, when you're talking about graduates, we're talking about 5 million individuals. In 2023, when you're talking about graduates, that's 63 million individuals that you're talking about. So the pie has increased.

So even if the incidence of unemployment has remained unchanged, the number, the volume has increased. So unemployed graduates has increased from about under a million in 1983 to about 11 million individuals, unemployed young graduates. So that's one kind of a problem that the pie itself has increased.

But the other thing is that one reason that I kind of feel like it's important to not focus too much on the unemployment rate is that, especially the graduate unemployment rate, is that often this is just a waiting phenomenon. It's young workers who have aspirations. They probably also have the ability to wait.

So 50% of our graduates come from the high income households. So they are individuals who can afford to just bide their time and wait for the right kinds of job. And they wait.

So then unemployment itself is not the problem. It's just that, OK, does the wait pay off? If you've spent, say, a year or under a year looking for that good job, when you ultimately match with a job, do you get the job that you want, that pays for your needs?

And that's where the flags come up. And that's the cause for worry. Because one of the things that we find in the report is that if you look at graduates who waited for a year, about half of them eventually find employment within a year, which is, it might seem very low, but it's actually not.

It's on par for the course when you look at other countries as well, this finding rate. But only about 7% of these graduates actually find salaried employment. And this number and this kind of finding, I will say, comes from the Centre for Monitoring Indian Economy's Consumer Pyramid Household Survey, because that's a panel data which allows us to track workers over at least for a year.

I mean, more than a year, actually. But we do this, okay, within a year, how many find employment? How many find salaried employment?

And that's, I think, is the party that even with a graduate education, you're not able to find that good job. And so that's what is really the severe and, you know, the actually the crisis that we have at hand.

Puja Mehra: So this is a crisis level problem. But it's important to resolve it before 2030, right? Because that's when the demographic bulge begins to change in the Indian population.

So what do you think, from the way as a country are looking at this problem right now? Are you seeing the signs that this problem will get resolved by 2030? Or what more do we need to do to sort of get to the bottom of this?

Rosa Abraham: So yeah, then 2030, that bulge and the dividend petering out is a number that, you know, it's using a particular definition of demographic dividend, other numbers will give you other years as well. But of course, it doesn't change the fact that the dividend itself is narrowing, we are towards the far end of getting this dividend. Now, so far, what have we done in terms of keeping this dividend?

Most of the policy has been what we call is supply side orientated, which is that let's try and support firms and businesses to kind of promote hiring. And this has been through facilitating credit schemes, it's been through the PLIs and the ELIs offering these kinds of wage subsidies for firms. And what has been happening, especially for say, the credit schemes is that you're finding that firms have been kind of sitting on their hands and not really responding to a lot of these incentives that the government has been giving out.

There was also the corporate tax decrease that was set in about three, four years budget, which also doesn't see a huge response in terms of investment and so on. So I think that it's about, well, maybe we need to look at this slightly differently and think of this as probably also a demand side problem, which is that when firms are not anticipating demand for their products, when firms feel like, okay, it's looking a bit dim, then they're not going to invest, they're not going to expand capacity. So you're going to have unutilized capacity batteries, you're going to find hiring not happening as well.

And I think that's where perhaps the onus is actually to stimulate demand specifically by the government. And there's multiple ways. The quick kind of way to think about this is one of the things that we find in the report, for instance, is that there is massive vacancies in schools, in educational institutions across the country, huge, huge vacancies, particularly in terms of the public schools, right?

And this is not just with the report and with education, but you're also seeing that there's huge capacity constraints in government services, whether it's at the central level, state or local body level. So it's, I think one is just about filling up these vacancies, which has these double effects. It A, creates employment, but then it also stimulates demand in those households, which can then boost other kinds of industries.

So multiplier effects, as they call it. So I think that's one kind of thing that, you know, a direct kind of intervention to kind of create jobs, but also then stimulate demand, which can help us kind of bring more of these young workers, youngsters into the labour market. The other thing is that, you know, we've kind of been looking at skills and that's a short term, but I think then it's also about your medium and long term measures.

We've also not had a very short sighted vision of education about skilling. One is of course, you know, the social hierarchies that we contend with, which in the caste system always gives skills and certain kinds of vocational education, manual jobs fall lower down in the hierarchy. And in the coming few years, especially with AI, you're going to find that, you know, that's where the jobs are going to be.

You need your plumbers, you need your electricians. Those are not the ones that are going to be easily displaced. But at the same time, there is a, this hierarchy, but there's also low pay associated partly because of this hierarchical kind of setup.

So I think then it's about rethinking education, rethinking how we value skills, which is, you know, a more of a medium and long term strategy. And the other thing are women. We've historically had very low employment rates for women.

And, you know, one way to think about this is that, well, on the bright side, the youth, the population is declining. And so the unemployment problem itself, the scale will naturally mechanically shrink because the demography itself is shrinking, right? So we could just sit around and do nothing and then the challenge will shrink on its own.

But then it's just that you're going to waste the huge potential that we've had. We've had 70% of, you know, working age women staying out. And if you value things like GDP, if you value per capita income, there's a need to bring these young workers in, especially young women.

And I think that's where now it's about how do we create the kind of industries and you come back to the small and medium enterprises, you come back to creating jobs in local economies. So one of the things that we found is that your vocational and training institutions do not seem to have any link with local manufacturing enterprises. This is simply just if we just, okay, where are vocational training institutions located?

Where are manufacturing firms located? They don't speak to each other at all, I mean, literally and otherwise. So how do we bring back this kind of linkages?

And that's really thinking through, you know, not these piecemeal approaches of PLI and ELI and wage subsidies for specific sectors, but thinking about the lifecycle of a worker from school, then the search process, so matching workers with the correct kind of jobs, and then matching skills with the correct kinds of jobs as well. And I think we've lost sight of that for a while now. We have this huge infrastructure of colleges, we have huge infrastructure of ITIs.

How do we bring back and weave these linkages back between these educational institutions and the enterprises, and some of the enterprises don't even exist yet? So I think it's about policy kind of refocusing that we already have this infrastructure built up, but how do we make the connections clearer?

Puja Mehra: Is it also a bit of a mindset problem for the policymaker, also for the potential hirers, these small and medium companies? Because I doubt if the very large firms are going to be hiring too much, given levels of automation, and small firms in any case don't have the ability to hire. So is it also a mindset problem where people and potential employees are not seen as a source of a factor of production?

In fact, you know, labour is always associated with labour problems. That's how all this contract work comes into play, and the whole discourse about the labour laws, etc. Really, is there a need to also change the mindset?

Rosa Abraham: Absolutely. You know, I keep thinking about, when you think about the IT boom time, and I'm based in Bangalore, and one of the things, and at that time I was actually working in Amazon, but one of the things that I keep thinking about is that there was a huge demand for data analysts. And we were not training educationally, our master's or degree programmes did not explicitly train for a data analyst role.

There was some training, but what happened at that time was GE, which was one of the major hirers, set up massive training centres across Bangalore. I mean, and they had this huge training capacity, a lot of people hired, and went through almost six, seven, eight months of intensive training. And that, for me, is the example that when there is a demand, when the firms see opportunity, then they will train, they will invest in workers.

And you could call it mindset, but then I think it's largely that they see opportunity. And when the opportunity is there, they are willing to invest in workers.

Puja Mehra: I think it's also the economics of it, because given corporate margins, especially in the IT sector, are low now, they've eroded, competition has increased from China, from Philippines, from Vietnam, probably the corporate sector does not have the bandwidth to invest. I mean, I don't think any company is going to set up the kind of campus that Infosys set up to cater to its own need. Therefore, the role for the public sector, perhaps, I don't know.

Rosa Abraham: Yeah, I mean, I think definitely there is a role for the public sector, one in terms of immediate hiring, and the other in terms of investing in these kinds of industries, which are small and medium. But public sector is typically not been something which is small and medium, it tends to be large behemoths, which is fine. But I don't think that alone can solve the problem.

I meant in terms of the skilling side. Yes, yes. I think one of the reasons that I brought it up is that I also just want to address this argument that, you know, our educational quality is poor, and we've done a bad job of training young workers, and hence you're seeing this crisis.

And I do think that perhaps quality has fallen. In fact, we don't have a good metric of higher education quality, like you have for us, sir, in the case of, you know, like us, sir, in the case of primary schooling, maybe the quality has fallen. But I do think that the level at which firms invest into workers have also doesn't exist anymore.

And like you said, because the incentive for firms to invest in these skills doesn't exist anymore. And that's where exactly that, you know, you have your public ITIs, how do we use these infrastructure for skilling up workers to help them to face this kind of challenges that AI and other kinds of sort of unforeseen things are throwing up. So definitely there is a role for public sector.

But I also think that we don't seem to hold private sector accountable at all, in terms of their responsibility for workers and something as basic as paying minimum wages. You have not increased minimum wages for 10 years.

Puja Mehra: It's almost exploitative, kind of like feudal, you know, reminds of the feudal times.

Rosa Abraham: Yeah. And so we've had a model that has been purely firm growth, which has been led by some kind of race to the bottom in terms of workers. And, you know, across states, there's this race to the bottom.

And I think that at some point, that's where you need to draw the line, you need to step in. And I mean, the public sector and the government needs to step in. And well, there is a benchmark to be drawn.

And that's why I think that there is also this idea that, well, private sector profits are really bad, margins are being eroded. But let's not forget that manager salaries have steadily increased over the last few years, executive salaries have steadily increased. So if it really is a question about profits eroding, then we should be seeing that with manager salaries.

Puja Mehra: So from what you're saying, and seeing this as many things need to be done, we of course need to invest in skills of the labour force itself. But we also need to make sure that the real firms that actually hire, create employment, which is the mid-sized firms, the barriers for the smaller firms to become mid-sized firms are removed. The regulatory cholesterol, as you said, it needs to be removed.

But also there has to be some corporate governance and some sort of corporate citizenship in making sure that the big companies, those they hire, they pay at least minimum wages and those are revised regularly as and when needed. So we need to think about this in a more holistic way, perhaps, than we have been so far, just looking at PLI or employment link incentives and all of that. But before we end, I also wanted to get a sense from you of what is the risk or the danger of not resolving this problem quickly?

Rosa Abraham: I mean, I think if we just be very clinical about it and think of it only as an economist, the danger is clearly this idea that we are wasting our demographic dividend. And most economies grow rich before they grow old. And this idea that we have workforce which should ideally be contributing to GDP.

And this works two ways. One is that they're contributing to GDP so that by the time they get old, they have resources. It could be their pension.

It could be that countries have developed so much that their health and other kinds of infrastructure have also developed. So government is able to invest in that infrastructure. So that by the time these young workers get old, they are able to manage on their own.

They have enough resources, enough savings and other kinds of social infrastructure to take care of them. So that's one kind of thing. And the other thing is also that when you're talking about the demographic dividend narrowing, you're also saying that in the future, every working age individual is going to be supporting more and more dependents, especially older dependents.

So which means that for that working age person, the resources that they need is also going to be larger because they have to support themselves and other people. Which is why from a purely economic sense, just in terms of making sure that welfare of your citizens is being attended to, there is a sense of urgency that we need to create employment. We need to create pathways in the labour market.

We need to have a job ladder in the labour market so that you don't see this kind of stagnation of earnings that we're seeing now. So that's the very economic kind of consequence of not using our demographic dividend. And we are seeing this now in Noida.

We're seeing this in other regions, which is the social and political unrest that this can result in. So one is, of course, that there is deep, deep dissatisfaction. You have 63 million young graduates.

A, their aspirations are higher. B, they're also one of the most connected generations we've ever had. And so that also kind of deepens that sense of dissatisfaction, the sense of failure.

Now, that can manifest in very, very harmful ways, which are not the most productive. And we're seeing that now. So even from a social and political sense, it's also important that there is a sort of urgency that this is not something that we can sit on anymore.

It's just going to simmer and simmer. And we're seeing these mini explosions here and there. And it can have much, much larger social consequences if we allow this to go on.

So it's not just the economic wasted money and wasted GDP. It's more than that. It has a lot more social and political consequences as well.

And it plays out in other kinds. This dissatisfaction plays out in other kinds of politics, blaming and other kinds of identity politics and so on. It's difficult to make a causal claim on any of these things as an economist.

But I think it's not unfair to say that these are related things. So I think that's the other reason why there's a sense of urgency to address it.

Puja Mehra: And like we discussed earlier, it needs a multi-pronged approach. There's no magic bullet and we can't oversimplify the problem.

Rosa Abraham: Absolutely. And I think that in the report, we take something called a life cycle approach, that college and then the transition from school to work. And what does that work eventually look like?

And I think in each of these life cycle stages, there is clear policy interventions that are needed. It's the linkages, it's matching workers, and then it's also making sure that there's the right kinds of employment and earnings growth as well.

Puja Mehra: Especially since you said, and the report says there's a chronic problem. We've seen something 35 to 40% youth unemployment since the 1980s. So it cannot be addressed overnight quite clearly, but now's the time to do it.

Rosa, thanks so much. Thank you.

Rosa Abraham: Thank you Puja, it was lovely talking to you.