India’s ‘middle’ class – if one can call those between the 95th and 99th percentile by that name – is back at the centre of all after-dinner debates. It is deeply disgruntled, if not downright angry.
To understand why, allow me to rewind to the year 2000.
Back then, I was two years into my first regular job. I had been a late entrant to the job market, having spent a few years in academia dabbling in research. So, when I began working, I got a bit of a ‘seniority bump’ in my starting salary. That is probably the reason, my ‘cost-to-company’ was about Rs 40,000 per month at the turn of the millennium. In today’s prices, that is roughly Rs 1.7 lakh.
Mind you, I was just a journalist, who had no revenue or profit targets to meet. My friends who were in proper corporate jobs, with proper corporate deliverables, were getting paid almost twice as much as I was.
This was just the beginning. Things exploded after the stock market boom of 2004-05, peaking in 2007-08.
As money poured into the capital markets, companies raised funds to pay top dollar to attract the best available talent. By the end of this bubble period, it was common for white-collar professionals in senior management positions to earn Rs 30-50 lakh per year. Those at the top had already crossed crore-plus packages.
Then came the Global Financial Crisis. And the world economy came to a grinding halt. Stock markets crashed and easy money dried up.
How Did Corporates React to the Global Crisis?
CEOs and senior managers were tasked with cutting costs, tightening belts, and pruning headcounts. Middle managers, with bloated salaries, were let off. Fresh entrants were offered much lower salaries. Workloads intensified because no one could complain in a bad job market.
By 2010, most companies were able to show lower costs on their P&L statements. And at the end of the process, top management could give themselves big bonuses for a job well done.
This was the beginning of the great divergence in white-collar pay. You can see that in top IT companies, for instance, the salaries of CEOs have risen by 1,450 percent between 2012-22, while that of freshers has risen by a measly 40 percent. And if you adjust this for inflation, the average entry salary in India’s IT sector is down by 25 percent in real purchasing power terms.
If you think the start-up space has escaped this stagnation, you are mistaken. Cash salaries are stuck where they were in 2014-15. Old employees in some startups have made money by cashing in their ESOPs (employee stock ownership) when their companies went public in the past couple of years. But for most employees, real incomes have gone down in the past decade.
The picture is similar in banks and other financial sector companies. Fifteen years ago, a mid-rung employee would have been paid Rs 40-50 lakh per year. Today, that would have risen to Rs 60-70 lakh, including fluctuating bonuses. In real, inflation-adjusted terms, their income has dropped by 40 percent.
Media salaries are even worse. Top anchors and editors still earn almost as much as their corporate sector counterparts, but those in senior newsroom positions have seen their real incomes halve in the past decade. Entry-level media professionals are being offered salaries that are similar to what they would have got 20 years ago!
What about self-employed professionals like doctors, lawyers, architects, chartered accountants, and others? The data here is fuzzy, but anecdotal evidence tells us that earnings have been largely stagnant for most of these professions. One example is the consultation charges you pay to your regular GP. What more than doubled in the 2000s, has probably risen by 50 percent in the past 10 years. Similarly, your CA’s fees would have barely risen.
Lawyers are, perhaps, an exception here. Their fees have continued to rise. Those who have spent a couple of decades in the profession and are now arguing in higher courts have seen their incomes grow dramatically, and their wealth expand. That is probably why the only parts of South Delhi where property prices have risen sharply in the past three years, are the few residential areas where lawyers like to buy homes!
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India’s ‘Middle’ Class Has Faced This Stagnation for Nearly Two Decades Now
Now, think about how this has affected the everyday family lives of India’s upper middle-classes. Homes where the principal earning member is in their late 40s or early 50s have got used to very high living standards, which their income can no longer sustain. So, they are eating into their savings and other assets – probably selling some gold or redeeming mutual fund investments. Some are selling their ancestral property and living off the cash they get out of it.
Some of these families have young people who are joining the workforce right now. They would have expected to leave their parental homes and set up their own place, perhaps with their significant other. But the salaries they are being offered can only work as a generous version of pocket money. It can pay for a new bike, good clothes, the latest phone, and regular evenings out with friends. But it is not enough to start your own home with the same lifestyle that your parents gave you.
Today, young people cannot afford to get married and have kids. They cannot hope to own homes, because they cannot dare to commit to EMIs. They have reconciled to earning less than their parents did. They still spend on luxuries and premium products, but not on the same sustained scale that their parents could.
India’s ‘middle’ class has faced this stagnation for nearly two decades now, ever since the global recession of 2008-09. It initially reacted by throwing out the UPA in 2014, in the hope that Narendra Modi would bring back the ‘acche din’ that they experienced in the early 2000s. This simply hasn’t happened.
Demonetisation, GST, and COVID. They have all come, gone, or settled down into their grooves. Nothing has improved for India’s professional classes. If anything, inflation has started to affect them more than it had ever done in the past decade or so. Tax slabs might have changed, but they haven’t moved at the same rate as prices. At the same time, an increasing number of items are now under GST, including essential middle-class expenses like medical insurance.
Middle-class families today do not see any signs of hope. They are caught between stagnant incomes and continuously rising prices. Their stoicism has given way to despair. This despair is now threatening to boil over into deep rage.
(The author was Senior Managing Editor, NDTV India & NDTV Profit. He now runs the independent YouTube channel ‘Desi Democracy’. He tweets @Aunindyo2023. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)
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