The government wants to “nudge the private sector” as regards hiring and wages. The fact that wage growth has not kept pace with corporate profits annoys the policy czars. A Finance Ministry official told a news platform that “Wages is an area of concern. There are some people who are tasked with figuring it out. It is a private sector issue, but the first step is to figure out what is their incentive, what we can collectively do… The first step is to have a dialogue with them. Talking to them does not mean intervening. They are contributing to our growth in a big way. So, the need is to help them achieve scale so they can hire more.” The intentions may be fine, but mere good intentions don’t bring the desired results.

Another official quoted in the report made it clear that “not every issue can have a policy reaction.” This means that, in at least some quarters that matter, there is a realisation that the scope for government intervention into the matter is limited. But then our bureaucracy is extremely efficient and innovative when it comes to finding work for itself. Remember the anti-profiteering body that was established to ensure transfer of GST benefits to consumers? The officialdom perpetuated it beyond its intended life. It is worth asking: what exactly can the government achieve by “nudging” businesses on wages? Will captains of industry and owners of MSMEs suddenly become more generous towards employees merely because a few meetings are held or because policy makers express their concerns?

The answer in either case is a big ‘no.’ Employers do not raise wages; the market drives that. This happens when there are business opportunities; businesses are established, and the existing ones add capacity; this drives up demand for employees, thus raising wages. Hence, the most effective way the government can influence wage growth is indirectly-by focusing on economic reforms, reducing regulatory hurdles, improving infrastructure, and ensuring a stable, investor-friendly environment. India’s growth story in the last three decades has shown that when businesses are provided a conducive ecosystem, they invest, expand, and create jobs. Higher employment, in turn, generates talent competition, which naturally pushes wages upward. Attempting to micromanage wage outcomes without addressing the underlying business climate risks treating symptoms rather than causes.

Moreover, excessive government involvement in wage-related issues carries risks. If businesses sense that policy makers are inching toward intrusive regulation in the name of fairness or equity, it could dampen investor sentiment. This is particularly undesirable at a time when India is trying to position itself as a global manufacturing hub and attract capital in an uncertain world economy. The last thing entrepreneurs need is a mechanism that brings their operations within the remit of bureaucratic oversight.

This is not to dismiss the government’s concern altogether. The gap between rising profits and stagnant wages is real and, if left unaddressed, could contribute to inequality and even social unrest. But the solution does not lie in policy experiments or in creating new watchdog bodies. It lies in sustaining high levels of growth, ensuring skilling and reskilling opportunities for workers, and fostering competition among employers for talent. These dynamics are far more potent in lifting wages than official nudges. The policy makers must remember that the nudges have the potential to grow into interference.