Companies make bumper profits in Q2 but perks enjoyed only by owners, not workers

Listed companies of India registered a sudden surge in profits amid the pandemic in Q2 FY21; however, the workers were not equally lucky to enjoy the perks. While the companies’ profits grew 21.9 per cent in the quarter ending-September 2020, wages grew by a mere 3.8 per cent, according to the Centre for Monitoring Indian Economy. Another comparison shows that while the growth in profits during this period was higher than in the top quartile of the distribution of profits growth over the past 60 quarters, it was lower than the bottom quartile of distribution for wages, CMIE added.

The low single-digit growth in wages in the last two quarters is very low by historical standards and is in stark contrast to the extraordinary profits earned by the companies. However, the trend also shows a classic tussle between owners of capital and owners of labour as in business and for corporate honchos, there is no relation between growth in profits and growth in wages, CMIE underlined. Usually, corporate managers would minimise their wage bill to maximise profits.

In the first quarter, the manufacturing companies saw a 9.1 per cent fall in wages, while sales shrank 42 per cent, and net profits fell by 62 per cent. However, in the second quarter, wage growth again fell by 1 per cent, when profits jumped 17.8 per cent, and sales fell 9.7 per cent. This also makes it evident that the companies do not distribute resources to labour in any proportion of profits.

Meanwhile, non-financial services, wages accounted for about 15 per cent of net sales till 2014, which surged to 27.6 per cent in Q1 this fiscal, and moderated to 24 per cent in Q2. It is believed that the rising share of wages in the total cost structure of manufacturing and services companies could bring it under the managers’ axe if demand does not pick-up. The lockdown has taught companies how to run business with fewer human resources, and these lessons are unlikely to be forgotten.