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Human-centred Response Should Drive Recovery from COVID-19 Economic Impacts

In Business
June 12, 2020


Noted scholars and public personalities participated in a two-day virtual International conference on ‘Implications of the Covid-19 Crisis for Labour and Employment in India: Impact, Strategies, and Perspectives’ held on 8th and 9th June 2020 organized by Institute for Human Development (IHD), International Labour Organization (ILO) and Indian Society of Labour Economics (ISLE).

The Conference deliberated in 4 Web-panels the impact of Covid- 19 pandemic and lockdown on various aspects like, employment and unemployment, labour regulation, unorganised sector, migrant labour, labour in agriculture and industry etc. It also discussed the nature of government response which is needed to address the crisis drawing from international experiences from various parts of the world. Finally, the Conference provided perspectives on future of work and development agenda in the wake of the pandemic in near future.

Professor Alakh N. Sharma, Director, IHD said “The lessons from other countries suggest that active labour market policies including cash transfers and wage subsidy to small enterprises can be effective in mitigating the adverse impact of Covid 19 on livelihoods and employment of those worse affected in India”.

Dagmar Walter, Director, ILO Decent Work Team for South Asia and India, said, “The insights from the Conference will help in shaping response strategies on labour and employment posed by the pandemic. There is a need to prioritise work for all and fault-lines need to be addressed for better outcomes.”

The preliminary results of an online survey of 520 ISLE members conducted in the last week of May showed that loss of employment was considered as the most severe immediate impact of the COVID crisis while lower economic growth and rise in inequality were probable long-term impact. The immediate policy priorities suggested were protection of workers and families, short term employment creation and income transfers to affected workers. Short- term policy requirements were support to MSMEs, expansion of MGNREGA, job creation, cash transfers and social security and in the long-term, need for building a stronger public health system, universalisation of social security and policies for welfare and rights of migrants were emphasised.

Eminent economists and academicians like Gerry Rodgers, Sudipto Mundle, Ajit Ghose, Mahesh Vyas, Kamala Sankaran, K.P. Kannan, Sudha Narayanan, Jeemol Unni, R. Nagaraj, Ashwini Deshpande, Ravi Srivastava, Sangheon Lee, Ian Prates, K. S. Jomo, Marty Chen, Kunal Sen, Ian Prates, Dev Nathan, Uma Rani, Reema Nanavaty, Pratap Bhanu Mehta and Ashwani Saith shared their insights. The Conference deliberations and takeaways are given below.

Panel 1: Impact and Strategies: India’s Responses and Trajectories Overall, there has been about 25% decline in total GDP with the industrial sector (especially the MSMEs) highly disrupted and down by 54%. Without any stimulus the economy might have declined by 12.4% decline. Estimates of job loss showed that 80% jobs were affected in urban economy, most of which were self-employed, 54% jobs were affected in rural economy, most of which were casual employment. Using Consumer Pyramids Household Survey (CPHS) conducted by Centre for Monitoring India Economy (CMIE), it was noted that there has been some decline in the unemployment rate during the ‘Unlock’ phase in June.

In April-May, the unemployment rate hovered around 24%. Small traders, young population group of age 25-40 years, women and less educated people with only primary level of education suffered the most during the lockdown in terms of loss in employment. Labour regulations in favour of the workers and social security are important and there is a need to revisit the NCEUS (National Commission for Enterprises in the Unorganised Sector) recommendations in the wake of COVID-19.

Panel 2: Impact and Strategies: Sectors and Groups
Though many people believe that agriculture would lead us out of the economic seizure, the lockdown has resulted in fall in demand for agri-food products, disruption in supply chains, shortage in labour supply, and challenges in transportation. A survey of 370 farmers across 9 states in April 2020, conducted by IGIDR suggests loss of work among farming households and food insecurity. Due to marketing problems, households stored the produce at home, sold the produce at throwaway prices, and let the produce go waste instead of selling.

Overall, 23% farmer households either borrowed food or a skipped a meal in April. Reflecting on the gender and caste dimensions of the first job loss in India, it was observed that women and Dalits experienced greater job losses compared to men and other castes. Most of the jobs women retained were those on the frontline fighting the pandemic, which are poorly paid and risky. Using CMIE data, it was showed that the number of persons employed in India declined during the lockdown by 33% in urban India and 29% in rural India.

Focusing on the impact on migrant workers, it was contended that while the pandemic underscores the vulnerability of migrants all over the world, in India, it exposed the fault-lines in the labour market. It was estimated that there were about 52 million interstate migrants who were severely affected by the COVID-19 lockdown crisis. With an estimated 60% of circular migrants back in their home states, there will be an inevitable sector and area specific labour supply-demand mismatches as industry slowly revives.

In manufacturing and industrial sectors, urban construction and factory production are severely hit including manufactured consumer goods due to lockdown and supply dislocations. Small and self- employed enterprises are likely to be most affected, after wage earners. The policy package is about augmenting supply but there is also a demand contraction and while the problem is one of income and cash support, the policy is mostly about easing liquidity. Using the latest All India Manufacturers Association (AIMO) survey of MSMEs, it was pointed out that 32% MSME units were beyond recovery and 29% would take six months to recover. Policy response should dive down deep into micro context to reach and benefit concerned workers and enterprises in terms of Basic Income Provision.

Panel 3: International Experiences in Employment, Social Protection and Economic Strategy
At the global level, the economic impact of the great lockdown of 2020 due to the pandemic is greater than the global financial crisis of 2007-08 according to the IMF. It took 10 years to recover from the fall in unemployment from the global financial crisis of 2007-08 to the pre- crisis level and youth unemployment rate never recovered. Various countries have responded to the COVID-19 crisis through a variety of spending and revenue measures on one hand and loans, equity and guarantees on the other hand and India has primarily focused on the latter.

As a fallout of the COVID-19 crisis, the informal economy workers are at a greater risk and globally more than 60% of informal employment (as a percentage of total employment) has been severely impacted. The youth are facing double shocks due to loss of work and closure of technical and vocational education and training centres which will have a scarring impact throughout their life. ILO’s policy framework for job-rich inclusive recovery focuses on stimulating economy and employment, supporting enterprises, jobs and incomes, protecting workers and designing solutions through social dialogue.

There is a need for international coordination and global solidarity such that the developing countries are not left behind as observed in the last recession. COVID-19 is not a financially driven recession and there are supply side constraints as well as fall in aggregate demand due to loss in livelihoods and income resulting from lockdown. There is no single COVID-19 recession and its specific character and impact is varied across countries, sectors and workers. There is significant reduction in trade relations, fall in demand for manufactured goods for export production and fall in openness of global economy.

The lockdown has further exacerbated the pre-existing disadvantages, inequities, injustices and indignities faced by informal workers globally. It has brought to the fore the role of informal workers in provision of essential goods and services during the pandemic as demonstrated in the case of street vendors and waste pickers. There is a need to recognize the contribution of urban informal workers to city economies and societies by integrating them into urban plan and governance and extend social protection and safety nets. In the African Labour Market, there has been a collapse in export markets, tourism, fall in commodity prices which have affected tradable sectors under COVID-19.

According to McKinsey (2020), 9-18 million formal jobs may be lost and 100 million informal jobs vulnerable to income loss in Sub-Saharan Africa due to the pandemic. Policy responses to counter negative employment effects have focussed on formal self-employed and formal wage employed in this region, with relatively little provided to the informal sector workers. In Brazil, the government have adopted two main policies as relief under COVID-19 outbreak. First is an emergency basic income which is an income guarantee to informal workers, unemployed and poor families and reaches 25% of the Brazilian population and second is emergency benefit for preserving employment and income which is for formal workers in private sectors to avoid lay-offs.

Panel 4: Perspectives: Emerging Employment Scenario and the Future of Work in India
In the global production system, under pressure from falling markets under the pandemic, enterprises would carry out both mechanization and automation. As a result, the employment intensity of production, in both manufacturing and services, would go down. One of the emerging business model of India is being created using data across consumer markets giving rise to mega-oligopolies. There will be reorganization of production with an increase in regionalisation of global value chains. There are efforts to onshore or bring back parts of production against previous offshoring practices but with new technology and business models.

Digital Platform Business models have been affected under the pandemic with loss of income for taxi or ride hailing services and reduced demand for delivery services. On web-based platforms of professional work, labour demand has increased since there is a shift in which on-site workers are being substituted by online workers. This replacement of regular labour by platform labour across sectors will have repercussions for workers’ rights since there is lack of labour representation and redressal mechanisms in platform economy. Issues of gig workers would become more prominent in the post-lockdown situation and it should be accepted that they are also workers and require social security and protection.

Many sections of women workers in the unorganized sector had their micro businesses completely destroyed by the lockdown. At the same time, many of them had been innovative in forging new businesses through mobile phones and other communication channels. Decentralised local economy can strengthen local markets, skills and livelihood opportunities and build resilience against shocks and there is need to help micro and nano enterprises to scale up.

There have been initiatives of amending workers’ rights at the State level without the involvement of the concerned stakeholders. Worker’s issues need to be on the centre stage of political agendas. Strong social mobilization and concerted demands to support the issues faced by migrants should be raised with the governments.

Reviving growth requires a re-balancing of the Indian economy and there is no prospect for export to be the basis of economy growth. This has made it all the more necessary to focus on agriculture and the rural economy. The important questions are how to change the nature of growth to make it more labour absorptive rather than adopting capital intensive methods like robotics and automation and how to address issues of inequality so that it becomes compatible with democracy.

In conclusion, the President of ISLE, Professor Deepak Nayyar said that the “Speakers in the conference wove a mosaic in terms of analysis and profile on the basis of very little information of an unfolding situation which is unusual. They laid out a research agenda for us to pursue.”