Covid-19 Crisis: India Braces For Change In Labour Market Dynamics

Covid-19 crisis may change India’s labour market as migrant workers go home and more people accept informal jobs, lower wages.

Migrant workers and their families sit atop a bus on the outskirts of Delhi during a lockdown imposed due to the coronavirus in Lalkuan, Uttarakhand, India, on Sunday, March 29, 2020.  Photographer: Anindito Mukherjee/Bloomberg
Migrant workers and their families sit atop a bus on the outskirts of Delhi during a lockdown imposed due to the coronavirus in Lalkuan, Uttarakhand, India, on Sunday, March 29, 2020. Photographer: Anindito Mukherjee/Bloomberg

The Covid-19 pandemic is likely to change India’s labour force dynamics as migrant workers return home and more people are forced to accept informal jobs and lower wages.

While some of the trends may be short term in nature, others may have a more longer lasting impact, caution academics who study labour market trends closely.

The government’s latest annual periodic labour force survey, released last week, provides a glimpse into labour force dynamics in 2018-19, much before the Covid-19 crisis hit. These existing trends can be used as a starting point to understand how the labour markets may change.

Hit To Urbanisation But By How Much?

For one, the pandemic will likely put a pause to the already stuttering pace of urbanisation in India.

According to the PLF survey, 30.4% of the population was urban in India in 2018-19, compared to 29.3% in 2017-18. This is considerably lower than the global average of 55.3% of urbanisation in 2018, according to the United Nations Department of Economic and Social Affairs. The urban proportion of the population was at 50.7% even for less developed regions in 2018, according to the UN. India falls well below that.

The Covid-19 crisis will likely lead to a further drop in the proportion of urban workers.

Development economist Amitabh Kundu, who is currently the chairperson of the national annual rural sanitation survey, draws on data from 2011 census, along with NSS reports and PLF surveys to try and assess the extent of reverse migration from urban to rural areas.

  • First, inter-state migrant population was estimated between 73- 78 million in 2020 by projecting average growth rates.
  • Using the labour force participation rates, the inter-state migrant workforce is estimated at about 23 million.
  • On the basis of employment status and social security cover, 14 million workers would have lost or were likely to lose jobs in the current pandemic, with about 10 million workers in a desperate need to return to their states.
  • A further 6 million short-duration migrants are estimated trapped in urban centres due to the sudden lockdown.
  • Information from state governments and civil society sources indicate that 14 million migrants have returned until end-May, with 4 more million likely to leave in early June.
Kundu’s estimates suggest a little over a tenth of the urban workforce has already migrated back in the exodus that is expected to continue in June, even as economic activity resumes.

How temporary this reverse migration will prove to be is an open question.

Radhicka Kapoor, senior fellow at ICRIER, said that it is still difficult to say if we will see a change in urban and rural share of worker population. She pointed to the fact that rural wages were declining well before the pandemic, and social welfare schemes such as MGNREGA only guarantee 100 days of employment. “This makes the present circumstances fairly complex as it is hard to determine how migration patterns will change and the permanence of these changes,” she said.

How quickly the migration reverses will also depend on whether home states are able to absorb returning workers.

Considering the percentage share of out-migrants statewise from the census in 2011 and the consequent growth rates of those states, Kundu said that it would be an achievement if the out-migrating states are able to absorb even a fourth of the returning migrant labour force permanently. As such, the remaining migrant force would go back in the next few months, particularly after the sowing in Kharif season.

Increase In Informal Workforce

The other concern in the aftermath of the Covid-19 crisis is whether the share of informal workforce could rise.

India’s self-employed labour force made up 52.1% of the total workforce, according to the latest PLFS survey. Including casual labour, the two segments make up over three-fourths of India’s workforce. While about half of those self-employed have access to social security, most of the casual labour force doesn’t.

For regular wage or salaried employees, according to the latest survey:

  • 69.5% had no written job contracts in 2018-19
  • 53.8% of regular wage/salaried employees were not eligible for paid leave
  • 51.9% were not eligible for any social security benefit
Taking into account distribution of occupation and access to social security benefits, Kundu estimated 14 million inter-state workers with a family size of two people on an average, with no social security.
Covid-19 Crisis: India Braces For Change In Labour Market Dynamics

The PLF surveys indicate that as much as 92% of India’s labour force was working in the informal sector before the pandemic, estimated Anoop Satpathy, fellow at the V. V. Giri National Labour Institute.

Even the formal sector comprises of formal jobs and informal jobs, where workers are employed in formal enterprises but without social security, explained Satpathy. “Now, there is a chance that informal jobs in the formal sector will join the informal sector,” he said “When people lose jobs, in the absence of similar jobs, they may forced to start their own business, driving up the share of self employed workers,” Satpathy said.

Most Indians can’t afford to remain unemployed, said Kapoor. “When people lose their jobs, they will be inclined to find some work. Informal employment and the size of the informal sector will increase,” she said. “Also, continuing uncertainty among firms would mean that they will not want to hire permanent workers.”

The informal sector is like a reservoir of surplus labour, where workers will be absorbed, but under-employment could rise further, Kapoor said.