Politics

Who’s winning the ‘battle’ between wages and profits?

Who should get a higher share of the profit businesses generate — entrepreneurs or workers? This debate has gone on since the time of Karl Marx. Mahesh Vyas of Centre for Monitoring Indian Economy (CMIE) looked at 80-quarter (20-year) data of listed Indian companies to find a fair balance over time.

In the 20-year period workers benefited from steady income growth and entrepreneurs earned more as compensation for higher risk. Wage growth was slower at 4% but consistent. Profit growth was faster at 6.5% but volatile. So workers benefited from steady income growth and entrepreneurs earned more as compensation for higher risk.

* Lower share of wages, relative to western economies, could be due to surplus of labour in India
* This analysis looked at listed companies only; majority of businesses in India are not listed
* Small businesses usually make no distinction between wages and profits
Source: CMIE

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