For years, the promise of white-collar work in India rested on steady job growth, rising salaries, and the belief that pay would, at the very least, keep pace with the cost of living. However, a new research study shows that this equation has started to break down.
A recent report by investment firm Marcellus highlights that salaries at India's top companies are no longer rising fast enough to match inflation. For employees at Nifty 50 firms, the country's largest listed companies, average incomes have not kept pace with the cost of living.
In fact, the data suggests that many white-collar workers are worse off today than they were a decade ago in terms of purchasing power.
How badly are Indian households affected?
This trend marks a shift from the earlier years of the 21st century, when pay growth at large corporates at least kept up with rising costs. Back then, employees could still save a small surplus beyond their household expenses. That cushion appears to have eroded since the financial year 2016 (FY16), leaving middle-class workers struggling to make ends meet as food and housing costs have continued to rise steadily.
Fewer Jobs, Even Weaker Salaries
The slowdown in wage growth is happening at a time when job creation itself has sharply weakened. The report notes that from 2010 to 2020, white-collar openings grew at double-digit rates, led by booming IT and services sectors.
However, since FY20, the pace has dropped to just about 3 per cent annually. IT and retail, once reliable sources of middle-class jobs, have been hit hardest.
The report notes that the country's population is growing at 1 per cent per annum. Parallel to this, more students continue to graduate from universities because of rising enrollment rates in university education.
And this is where the concern begins: more students graduating at a time when the country, post FY20, is seeing a stagnation in job availability.
The combination of fewer new jobs and weaker salary growth has fed directly into the broader consumption slowdown India has experienced since late 2023. The report notes that Household savings peaked during the pandemic when people spent less and have now fallen to their lowest in nearly five decades.
By early 2024, families had exhausted their "revenge spending" reserves, and demand for everything from cars to consumer durables began to soften.
What is hampering job growth?
Technology is at the heart of this shift. Companies, including India's largest IT employers, have openly acknowledged that artificial intelligence (AI) and automation are changing how work gets done.
TCS and HCL Tech, for instance, have both said they are looking to deliver more with fewer workers, even targeting revenue growth without proportional additions to their workforce. Globally, big firms, from Microsoft to Google, have trimmed headcounts while deploying AI tools at scale.
For employees, this means two conflicting trends: fewer jobs overall, but higher productivity expectations for those who remain. In theory, this could have meant bigger paychecks for those retaining their roles. But the data suggests otherwise, where productivity gains from technology are being captured largely at the corporate level, not passed on to staff in the form of real wage increases.
Salaries are falling behind the cost of living
The researcher ran an analysis of the average income earned by employees of the Nifty 50 companies (as of 31st March 2024) and how much their pay has increased in the last eight years (from FY16).
When compared with CPI inflation during this period, the study found that average incomes (of employees of Nifty50 companies) have not kept pace with the rising cost of living. This means that if an employee was dependent only on their salary increments (in the past 8 years) to earn and save for their future, their salaries in reality wouldn't be able to keep up with the cost of food.
The impact of this shift goes well beyond India's middle class. Each white-collar worker typically supports several other jobs, from drivers and cooks to shop assistants and hotel staff.
When wage growth stalls, the effects of this deceleration are visible through the wider economy in terms of weak hiring, falling consumption and slower earning growth for the employed across different industries.
The report also notes that despite interest rate cuts and liquidity support by the Reserve Bank of India, the demand has not rebounded as policyholders hoped they would. The concern lies in the fact that if real wages continue to lag, the growth engine of India, i.e., domestic consumption, will bear the strain.
What this could mean is: Even if the workers in India continue to clock more hours, adapt to new technologies or deliver higher output, their paychecks are not improving as they once did. The report notes that without stronger wage growth, the broader economy may find it harder to recover the momentum it had lost post-COVID years.
