Do Firm Profits Adversely Impact Wage Growth and Employment Generation: Evidence from Firm-Level Data in India

With growth in the economy examining how much of the increase in net profit margins of firms translates into growth in wages and employment is useful for gaining insights on local income equalities. Using the firm data for the period 2011–2021, this study probes the trend of growth in wage cost and employment in firms belonging to different sectors in India. As the data collected vividly depicts inequality in wages and employment provided by firms in different sectors of the economy, a panel data analysis is done for different sectors of the Indian economy. The study finds evidence of inequality in the transfer of firm profits into wage and employment growth despite sectoral revenue and ownership status positively affecting wage growth as well as negative association of employment growth with private ownership. The findings of this study have policy implications for both firms and policymakers in both emerging economies as well as developed countries.