This paper investigates a striking puzzle in recent rural India: individual real wages have shown weak or stagnant growth for large segments of the labour force, while house hold per-capita incomes have risen materially and, in many cases, faster among lower deciles. Using microdata from the Periodic Labor Force Survey(PLFS)2017 – 2023, wedocu mentthese contrasting patterns and reconcile them. First we undertake a simple decompo sition that separates (i) average real wage per earner, (ii) the number of earners per house hold, and (iii) household size. Our empirical analysis shows that demographic and labour supply adjustments — chiefly an increase in earners per household driven by rising labour force participation and expanded non-farm employment — accountforthebulkofobserved gains in household per-capita income even as individual real wages remain subdued. Dis tributional analysis reveals that percentage growth has been relatively progressive (lower deciles recording larger proportional gains), but absolute level gaps persist and, in many cases, widen. We further disaggregate decile income by occupational category and find that lower deciles have seen significant shifts from casual work to self-employed status. Since the latter category provides, on average, higher incomes, this can partially explain muchof the observed progressivity of household income growth.

Authors:

Arjun Jayadev, Avinash M Tripathi and M.K Shravan