India’s big cities pay more: India’s million-plus cities pay workers more than smaller urban centres. A PLFS-based labour market report also finds a higher share of regular salaried employment and fewer young people outside employment, education or training. Yet unemployment and labour force participation in these cities are little different from the rest of urban India.
Large cities are improving the quality of work for those who find jobs. They are not bringing a substantially larger share of the population into employment.
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Million-plus cities offer better-paid work
The report covers 46 cities with populations above one million. Workers in these cities earn higher average wages. More than half the employed men hold regular salaried jobs, while nearly two-thirds of employed women are in regular wage employment. Self-employed women also earn more than their counterparts in smaller urban centres.
Large cities bring firms, universities, infrastructure and consumers into a concentrated market. This raises productivity and gives organised employers more room to pay higher wages. Workers also have greater access to specialised skills and formal employment.
But the advantages stop there. Labour force participation is almost the same as in the rest of urban India. Unemployment rates are also similar. Cities such as Surat, Ludhiana, Meerut, Faridabad, Navi Mumbai, Nagpur and Vijayawada may offer better jobs, but they do not absorb a much larger proportion of people seeking work.
Migration may explain part of this outcome. Large cities attract a steady supply of workers, keeping unemployment from falling even when employment expands. The data also points to a change in the type of work that metropolitan economies produce.
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Skilled services raise wages, not employment
Employment growth in large cities has shifted towards information technology, finance, healthcare, logistics and professional services. These sectors require skilled workers and generate more value per employee. They can pay higher salaries without employing people on the scale once associated with manufacturing.
The sectoral mix helps explain why some manufacturing centres report lower average earnings. Surat and Ludhiana have large textile and engineering industries, but their wages remain below those in service-led metropolitan economies.
Manufacturing has historically raised wages as workers moved out of agriculture. Much of Indian manufacturing, however, remains concentrated in garments, textiles and small engineering units. These firms face intense competition, narrow margins and limited productivity growth. Many compete on cost and have little room to raise wages.
Software companies, banks, hospitals and other knowledge-intensive employers generate more revenue per worker. Their employees earn more, but the number of workers required is smaller. A city can therefore become richer without making a large dent in unemployment.
Regular employment remains concentrated in big cities
Regular salaried work is more common in million-plus cities because organised firms, government institutions and large private employers are concentrated there. These jobs usually provide steadier incomes and some employment benefits.
Smaller cities rely more heavily on self-employment. Much of it consists of street vending, small shops, home-based production and informal services. Such work is often chosen because salaried jobs are unavailable. Earnings tend to be low and uncertain.
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The report also finds a smaller share of young people classified as not in employment, education or training in million-plus cities. Universities, vocational institutes and corporate recruitment networks give young people more routes from education into work.
India’s urban labour market is divided by productivity
Urban India does not function as one labour market. Employment conditions depend on the industries, firms and educational institutions present in each city.
The million-plus city data shows that urban size alone does not raise incomes. Wages depend on the kinds of businesses a city attracts and the productivity of the jobs they offer. India has large numbers of people in work, but much of that work produces little income.
Replicating traditional manufacturing clusters will not necessarily create richer cities. Manufacturing remains essential because India needs jobs on a large scale. But higher wages will require investment in electronics, advanced engineering, precision manufacturing and green technologies alongside labour-intensive industries.
Smaller cities also need the institutions that support better-paid services. Universities, hospitals, financial firms, digital infrastructure and business services remain concentrated in a limited number of metropolitan regions. Without a wider spread of such employers, the wage advantage of India’s largest cities will persist.