Wednesday, August 22, 2007

All academics in India belong to the top 4 percent of the population


Arjun Sengupta, Chairman of the National Commission for Enterprises in the Unorganised Sector, writes about the staggering number and the sorry status of the aam aadmi in India:

... [The] total number of people in India belonging to the poor and vulnerable group having a daily per capita consumption of less than Rs 20 in 2004-05 was 836 million, constituting about 77 per cent of our population. By all means, they constitute our aam aadmi.

You really ought to read that column for an articulation of what our government can -- and should -- do for the aam aadmi.

* * *

I want to take Sengupta's column in a different direction. When you read his column, do keep an eye on the definitions of the six classes (income groups) of people. The middle income group is defined as one with a per capita consumption of around Rs. 37 per day; some 210 million people (19.3 percent) are in this group.

The high income group (which has 43 million people, forming 4 percent of the population) is defined as one with a consumption of over Rs.93 per day. Let's look at this definition: on an annual basis, the per capita consumption comes to about Rs.34,000, or equivalently, Rs. 136,000 for a family of four.

Thus, a monthly consumption of about Rs.12,000 for a family of four makes that family a part of the 'high income group', and puts it in the top four percent of the population. In the government sector, who are the people who earn Rs. 12,000 per month and above?

In India's elite institutions (IITs, IIMs, TIFR, IISc, IISERs, ...), a freshly recruited assistant professor (typical age: under 35, with a Ph.D. and some post-doc experience) starts at a basic salary of Rs. 12,000 per month; the gross salary, with house rent allowance in a metro city, would be between Rs. 20,000 and Rs. 25,000 per month.

If you take lecturers, who are just a step below Assistant Professors (typically about 25-30 years of age, with a masters and above), their salary of about Rs. 15,000 per month would also put them in the 'high income' category. Lecturers are the entry-level employees in all the colleges in India.

Thus, all academics with a regular job (by which I mean a job that pays UGC-approved salaries) belong to the top 4 percent of the population.

Can you think of a developed country where junior faculty members find themselves -- automatically -- in the top 5 percent of the population by income? How do academics fare in, say, China?

* * *

Here are my earlier posts about faculty salaries in India.

10 Comments:

  1. Pratik . said...

    A starting Assistant Professor in China can expect to earn approximately 300-350 USD.

  2. Vishnu said...

    If faculty salaries are high, why do people say that the pay you get is "pathetic"? I get to hear a lot of this as some of my friends (and me) near the end of PhDs.

  3. Vishnu said...

    Also, I've been hearing rumours of those salaries being increased to something really high, and so on.

  4. Vivek Kumar said...

    Abi,

    Thanks for the link.. very informative.

    I have just one doubt.. relates to terminology..

    is "consumption" equal to "salary"?

  5. zen babu said...

    Abi,

    836 * 20 * 365 = 6102800
    210 * 37 * 365 = 2836050
    43 * 93 * 365 = 1459635

    1089 * per capita consumption = 10398485
    = 9549 Rs / annum.

    This is definitely at 93-94 prices because as of 2006, India's per capita consumpion is about Rs 31075. (Calculated from the figures in http://en.wikipedia.org/wiki/Economy_of_india)

    So, if you wish to compare an aademic's salary with the general health of the country's economy, reduce ithe curent salary by a factor of 3.25 and then it becomes comparable to the stats mentioned in the article.

    So, lecturer's salary = Rs 4615
    asst professor's salary = Rs 7692

    The picture is slightly different now, isn't it?

    Vivek,

    avg income is calculated on the basis of GDP. P = C + I + G + X - M

    where P is the production, C is the consumption, I is the investment, G is the government expecditure, X is the exports and M is the imports. Fo India, I could not retrieve the Investment figures, but counting that as 0 (and so overstating consumption), the per capita consumption comes out to be Rs 31075 and the per capita income comes out to be Rs 33870 i.e an average Indian consumes 91.7% of his/her salary. This figure is likely to be lesser for higher income groups, but even if we work on these figures, the monthly expenditures come out to be

    lecturer : Rs 4232
    asst prof : Rs 7054

    their daily consumption figures, thus, assuming families of 4 (as abi did) are

    lecturer : Rs 35
    asst prof : Rs 58. (at 93-94 prices). This in my estimation will put the lecturer at the 90th percentile, and the asst prof at about the 95th percentile of India's income earners.

    In any case, Arjun sengupta's basic point is correct. I just wished to put the numbers into perspective. And I am optimistic because what this says is - even after accounting for population growth and inflation, the lot of India's public has improved almost across the spectrum. Some have benefited more and some have benefited less - but there has been some benefit to almost every aggregate income category.

  6. kuffir said...

    'You really ought to read that column for an articulation of what our government can -- and should -- do for the aam aadmi.'

    that's exactly the portion of the article which is mostly wrong.

  7. Tabula Rasa said...

    in my experience, business school salaries in hong kong are pegged to the US rates post-tax, dollar for dollar. yes, i know this is not representative of the average academic in china. however i don't think the major chinese b-schools will be that much lower -- i'll be surprised if they pay as low as the iims do. and to the best of my knowledge, the iims pay more than the average indian university (at least, they offer far greater opportunities to make money on the side). so i'm not sure where that leaves the discussion.

  8. Abi said...

    Pratik: Thanks for that data point on China.

    Vishnu: The academic salaries are perceived to be pathetic because the comparison group is not the rest of the country, but one's peer group (usually, those in sunrise industries).

    And yes, the next Pay Commission is going around collecting opinions from various people. I don't know how true these rumours are, but I have heard that academics in elite institutions have pitched for 3 to 5 times their current salaries!

    Vivek: The salaries (Rs. 15,000 for a lecturer) I quoted are all safely above the lower end of the high-income group's consumption (12,000 per month). I knew salaries are not the same as consumption, but I wasn't sure about the exact relationship. In any case, Ritwik has answered your question.

    Ritwik: Thanks for doing the hard math for the rest of us! I don't know about the base year for the prices: whether it is 1995 or 2005. I agree that it would make a big difference. One point though: Isn't India investing over 30 percent of its GDP? That would change things quite a bit, wouldn't it?

    TR: IIMs certainly offer ample opportunities for earning extra income through consultancy. Most elite tech schools also offer this route to the riches. I really don't know how many of them make use of these chances. These opportunities are far smaller for academics in science departments, though.

  9. zen babu said...

    Abi,

    I is defined as business investments in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households on new houses is also included in Investment. Unlike its general meaning, 'Investment' in GDP is meant very specifically as non-financial product purchases. Buying financial products is classed as 'saving' , as opposed to investment. The distinction is (in theory) clear: if money is converted into goods or services, it is investment; but, if you buy a bond or a share, this transfer payment is excluded from the GDP sum. Although such purchases would be called investments in normal speech, from the total-economy point of view, this is simply swapping of deeds, and not part of the real economy or the GDP formula. (From wikipedia)

    I'm not sure if the 30% figure you quote is the one used for calculation or the one we use in normal parlance. In any case, a high amount of I would mean that for a given GDP, the consumption is lower. This reduces the value that we computed as amount consumed by a lecturer/asst prof in India, and further weakens your contention that Indian academics are in the top 4% of our population by income/ consumption.

    Of course, Indian academics would still be better off in percentile terms as compared to their counterparts in the developed countries. A Harvard academic makes, on an average, about $90,000 p.a (http://vpf-web.harvard.edu/budget/factbook/current_facts/2007OnlineFactbook.pdf) compared to their national p.c.i of ~$40,000. An Indian lecturer makes Rs 15,000 per month, or Rs 180,000 per annum compared to our p.c.i of Rs ~30,000 p.a. Obviously, in relative terms Indian academics would be better off compared to their average countrymen. Though, tihs says more about the state of India's average income than about anything else.

  10. Vivek Kumar said...

    @Ritwik: Thanks a lot! The picture is much clearer now :)