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India's fragile formal sector: 18.9 million white collar job loss 'difficult' to retrieve

By Balwant Singh Mehta, Arjun Kumar. Dated: 9/26/2020 12:42:40 AM

The novel coronavirus pandemic and recession has destroyed the jobs of millions of people across the world at staggering levels. Due to lockdown and social-distancing, many self-employed, casual workers and regular workers were unable to work, and many has to lose their jobs and source of livelihoods.
Understandably, this has aggravated the already grim employment situation due to worldwide economic slowdown, particularly in developing regions such as South Asia, for both white and blue collared jobs.
As per the latest report by International Labour Organization (ILO), nearly 400 million full-time jobs were estimated to be lost in the year 2020 by second quarter (April-June). South Asia, significantly accounted for 110 million of the total 235 million full-time jobs lost during the second quarter of 2020.
There were 21 million full-time job losses in first quarter and 110 million in the Q2 of 2020. Since the quarter one of 2020, it is estimated that job losses increased by over 400 per cent in both South Asia and Africa.
Another report also highlighted greatest reduction in working hours having occurred in Latin America (20 per cent) and South Asia (18 per cent) in the 2020 second quarter. The job lost was highest in informal sector, casual and temporary nature of jobs in services and industrial sectors, owing to severe lockdowns. South Asian region have highest share (75%) of informal workforce, especially in India, which constitutes 81% employment in informal sector.
Job losses during lockdown
The employment or livelihood of most of the people was affected during the lockdown and pandemic in India, especially those engaged in informal sector. Although there have not been any official estimates, however, several surveys conducted in India highlight about the miserly of people who have lost their jobs.
An important finding from several survey studies during the lockdown, mostly telephonic in nature,shows that on an average 6 out of 10 workers had lost their jobs or livelihood sources, 7 out of 10 casual labourers had lost their jobs, while 6 out of 10 self-employed respondents could not pursue their economic activities and 4 out of 10 regular workers had lost their jobs. Interestingly, these surveys findings also highlighted that over 8 out of 10respondents who worked as casual labour and self-employment in informal sector said “we would get back to work once the lockdown would be over”.
Various Estimates
As many as 41 lakh youths in the country lost jobs due to the COVID-19 pandemic while construction and farm sector workers account for the majority of job losses, according to a joints report by the International Labour Organization (ILO) and the Asian Development Bank (ADB).
While the Government has not released any data pertaining to job losses during the lockdown, it acknowledges the quantum of migrants, around 1.5 crores, who returned to their homes. Also, the estimates suggested by Government indicates that around 8-10 crores workers were affected due to lockdown, mostly in informal sector of non-agriculture nature.
Based upon the data analysis of the Periodic Labour Force Survey (PLFS) to understand the likely impact on informal workers in urban areas during and after the lockdown period, we estimated that about 93 million informal workers are involved in five sectors that are most affected, namely, manufacturing ; trade, hotel and restaurant; construction; transport, storage and communications; and finance, business and real estate. Out of total 93 million informal workers in these sectors, 50% are self-employed, 20% are casual workers on daily wages and 30% are salaried or contract employee without any social safety net.
Job losses as India unlocks
Similar to the independent surveys findings, the Centre for Monitoring Indian Economy (CMIE), an independent think tank estimates also revealed that 21 million people have rejoined their employment or jobs after the government have started to Unlock. The reversal of job loss – if not incomes – has been achieved and the employment rate is moving towards pre-lockdown levels. Almost two-thirds of the jobs added (14.4 million) were of self-employed (small traders) and wage labourers.
The CMIE reports also mentioned about 6.8 million daily wage earners lost their jobs since April, 2020, and 15 million people took to farming during this period either as self-employed or casual labour. This reveals that the loss of jobs in self-employment and casual labour category is a temporary or short-term phenomenon, which is not true in case of full-time salaried jobs.
The salaried people (includes both permanent and temporary) who have lost their jobs may not get back to employment in the near future. Particularly, the white-collar jobs, once lost, are far more difficult to retrieve.
Job losses of white-collar regular salaried
The CMIE report about 18.9 million salaried people lost their jobs, declined by a whopping 22 per cent during the lockdown. Salaried jobs were estimated at 86.1 million in 2019-20, which fell to 67.2 million by July 2020. Salaried jobs are preferred forms of employment for most people as these jobs offer better terms of employment and also better wages.
The biggest loss of jobs among salaried employees was of ‘white-collar professional employees’, which include 5.9 million workers between May-August, 2020. The white-collar workers include engineers, including software engineers, physicians, teachers, accountants, analysts and the type, who are professionally qualified and were employed in some private or government organization. The lockdown did not impact white-collar clerical employees.
Salaried jobs are threatened as we move towards the New Normal of Covid-19 protocols: Work from home, virtual economy, digitization, automation at work processes
These include largely desk work employees ranging from secretaries and office clerks to BPO/KPO workers and data-entry operators. They possibly shifted to the work-from-home mode, said CMIE. Since the lockdown was announced, several companies across sectors have taken to job cuts, along with salary reductions and leave without pay.
This exposed the fragility of India’s formal sector, which is always considered the ideal job in labour market, moreover, highlighting the support it requires for resilience. These ballooning numbers of job losses for formal white-collar workers, having higher value addition, are depicting a worrisome picture of Indian job market with rising unemployment and huge future uncertainty amidst the pandemic and recession.
There is considerable research that indicates that job losses can result in permanent economic damage if workers stay unemployed for too long. This is the key concern of policy makers and other stakeholders today.
Towards resilience for formal jobs
The Covid-19 pandemic and recession, undoubtedly, has put major strain on national economies and employment scenario. In India, apart from the agriculture sector which has positive growth rate, both manufacturing and services sector are under stress, having serious implications for informal and casual workers, small and medium enterprises as well as big businesses.
As India unlocks, there are recoveries recorded for casual workers and self-employed with obvious limitations of economic activities. The regular/salaried workers (permanent and temporary jobs) job losses and revised terms of job and salaries owing to the performance of businesses and enterprises, has revealed the fragile state of affairs and is a serious concern for the Indian economy.
Many countries across the world such as USA and UK, are providing various support to the businesses and salaried workers to protect the job losses, such as contribution to salaries, unemployment allowances, loans, etc., often surpassing the debt limits, during the ongoing pandemic and recession.
As we move towards the New Normal of Covid-19 protocols, work from home, virtual economy, digitization and automation at work processes, the white-collar jobs are threatened. In fact, the Coronavirus has, indeed, proved to be the disastrous for them, as we deal with the pandemic and economic crisis.
In India, the government has suggested the businesses to keep the jobs intact without any potential and significant support. As India unlocks in the economic recession, the formal jobs (both permanent and temporary) in government and private sector are facing various churns from layoffs, delay payment, reduced payments, and so on.
Clearly, the government needs to act now and focus on the regeneration of the economic activities as well as stimulating the aggregate demands giving due consideration to those who have lost their white-collar jobs and vulnerable businesses to minimize the losses. The road towards #AtmaNirbharBharat and New India should ensure resilience in the formal economy, immediate support, and harnessing our data and digital capabilities for significant impact in the lives of people.
*Balwant Singh Mehta is Research Director at Impact and Policy Research Institute (IMPRI), New Delhi, and Senior Fellow at Institute for Human Development, Delhi; Arjun Kumar is Director, IMPRI, and China-India Visiting Scholar Fellow, Ashoka University