'Millions Have Been Forced Into Self-Employment'
Latest data indicate a structural shift away from organised sector jobs towards more insecure self-employment or unorganised sector jobs, Mahesh Vyas of the Centre for Monitoring Indian Economy (CMIE) tells us in this interview
Mumbai: "We have an ageing population. If we have shrinking employment in urban places, if the better educated graduates or postgraduates are the ones who are losing jobs, how can we recover the economy from the downslide that we have gone through?" says Mahesh Vyas, the managing director of the Centre for Monitoring Indian Economy (CMIE).
Nine months after the COVID-19 lockdown, India still has 15 million missing jobs when compared to the pre-COVID 19 period, data from CMIE show, with more young people and women losing jobs than older people and men, respectively. Women, for instance, are 11% of the employed workforce but they made up 52% of the jobs lost.
Is this a structural shift in the economy or is it still an after-effect of COVID-19's economic impact? IndiaSpend interviewed Vyas to find out.
What were the overall employment numbers in India, where have we come to now and why is this particular number--15 million--significant?
When the lockdown first began, the economy was effectively shut down, there was an understandably large increase in job losses. And that meant that people who actually had employment lost that employment, although it was informal in nature. So forget about people having confirmed jobs or permanent jobs who lost jobs, but all the people, or almost all the people, who had informal jobs in the unorganised sector were out of a job because of the lockdown. These people are mostly paid on a daily wage-basis, they were paid on the basis of the number of hours worked or piecemeal basis and all of them lost their jobs and lost their livelihood.
But, as the economy opened up, these people started getting their jobs again, it looked like a fantastic recovery as well. But gradually we saw losses in the more permanent jobs, salaried jobs, losses in that category increased and then sustained. And that was worrisome. Although the jobs came back, the quality of jobs that came back was not as good. This was the story in May, June and July and slowly, we saw that the recovery process in terms of employment was petering out. But what we see at the end of nine months, which is a fairly long period after the severe lockdown, on a base of about 405 million jobs, we have a deficit of 15 million jobs. It is not a small number. It is nearly a fairly large chunk that still does not have jobs even after nine months. Forgot about the population growing and the need for us to grow more jobs. This is one part of the story.
But we see that job losses, no matter which way you cut it, is of a distressing kind. Like it is the urbanites who are losing jobs more than rural jobs, women who are losing jobs more than men losing jobs. It is graduates and post graduates who are losing jobs more than others who are losing jobs. Youngsters losing jobs and not the older people. The composition of this loss of jobs is worrisome. If we have an ageing population, if we have shrinking employment in urban places, if the better educated graduates or postgraduates are the ones who are losing jobs, how can we recover the economy from the downslide that we have gone through? So that, I think, is the biggest worry. We can say that the employment is back but the nature of that employment recovery is such that it raises questions and that is the point I want to make regarding the recovery process and the sustainability of the recovery process.
You said that about 405 million is the stock. At 15 million, we are saying that 5% of jobs are still missing. In a broad sense, while it is important and significant for those who lost jobs, in the larger scheme of things, given the fact that we have had such a huge economic shock, would not that number still be a small one?
I would say that we need to recover those jobs and we require to grow them. Mind you, the population is continuously growing, we are not seeing a slowing down on that in a significant way. People are still coming into the labour force. We have to recover at least the jobs lost, which is equal to saying that the GDP [gross domestic product] has come back to where it was. Nine months after the story, if you add incomes having come down, and there being 4%-5% loss of jobs, the impact is very large. I think this is a big deal because there is too much talk currently of a recovery--like electricity generation is back to pre-COVID levels, India's exports and imports are back to pre-COVID levels. Our wheat production is going to be record this year, the Kharif crop was good, the Rabi crop is good, the GST collections are good--all this makes this look like we are back to where we were supposed to be. I am trying to just say that it is not exactly true. This recovery process is on thin ice. It is not a small thing when I say that 4% of the jobs are deficit compared to where they were in 2019-20.
Could there be a value that we could ascribe to this? To this 4% versus the other 96%?
That would require us to know what the wage rate is. We are still working on that and it will take some time. Maybe a month or six weeks or so before we can tell you what is the value in terms of incomes being lost.
The incomes lost would definitely be higher because these are urban jobs and many of the jobs lost are salaried jobs as opposed to non-salaried?
Oh yes. All the jobs which are being lost are higher value jobs and therefore the money impact of these job losses is higher than the employment loss. And that is besides the fact that the wage rate has fallen. We know that the wage rates have fallen.
Let us say that COVID-19 has affected many industries and some of those industries may structurally shift in composition particularly when it comes to labour and so on. Do you think that could be happening in employment too? If employment were to come back, it would really be newer sectors or different areas. Is this something we are hoping will be a kind of return to normalcy?
There is research done by academics using the CMIE data, which does indicate that there is a structural shift. I do not think that the structural shift is by design but it is per force. A person who had a salaried job, when she lost that job she took up employment as a self-employed person. Now, is this a structural shift? When this happens in a large way, I call it a structural shift. There are many such movements of labour from the formal organised sector to informal and unorganised sectors. This is not a very happy structural shift. I do not think that we will call this a very good thing to happen. It is not like people who were earlier working in the airlines are now working in the food industry. Surely, that is also happening and that is a perfectly fine thing to happen. If airlines are not going to work for sometime and food is going to work much better, like many shops that were selling clothes are selling food, that is ok. That is a structural adjustment. But a bigger structural adjustment that is distressing is people moving away from salaried jobs per force into unorganised jobs or into self-employment.
Women make-up 11% of the total employment but 52% of total jobs losses. Why is this number high? Considering that we are already seeing a decline of women in the workforce, what would be the longer term or medium term socioeconomic impact?
The impact is very simple. It is a lost opportunity. Men in India are working to reasonably good capacity in the sense that their participation in the labour force is close to 73-74% and you do not easily go beyond that. And I am talking of all ages above 15, so obviously some people will be retired and not working. So, I think 73-74% of the men working is like, tops. You cannot increase the labour force beyond that.
So where is India's potential sitting? It is sitting in the very low labour participation rate of women, which is close to 10-11%. Now, if this falls, we are losing huge growth opportunities. But what we have seen is, whether it is demonetisation, GST, or now the lockdown, the hit is taken in a big way by women. What we have seen is that the women who left the labour force post-demonetisation did not come back. And it took more than three years at least, for women to start coming back into the labour force. That was the new cohort entering the labour force. So we saw three waves of 2019, with women in the age group of 20-24 coming into the labour force at increasing rates. And then came the lockdown and all of them have gone out. So we are suffering a lot as women move out and that has a big impact on India's growth potential.
There has been some research and insights on why women are moving out of the workforce, but why are they moving out more from the workforce when we experience economic, or in this case, economic plus health shocks?
I do not have an answer why they are. I observe that they are moving out and they are the first ones to move out. I think conditions become too adverse for them. Working conditions become a lot more adverse and they prefer to move out in these times. So for example, a woman, we know, usually does more than one job if she is working. She is doing a job as an employee, as a woman or man does, and then [she] takes care of the home. In times such as COVID, if she falls ill because of the pandemic, she loses two jobs, that of taking care of the kids and others, and the job outside. The man does not lose two job. It is pure economic decision-making, rational decision-making by the woman that my time is a lot more costlier and it is better to take care of the hearth while the man can go out to work.
Let me come to the other segment that is young people. So young people seem to have lost more jobs amongst these 15 million. The only silver lining is that older people seem to have gained jobs. Is this a sign of experience coming back into the workforce or something else?
I do not think so. I think this is more a reflection of a lack of jobs for people who do not have experience or are working in more vulnerable places. In the last 8-10 years, we have seen fixed-term employment or contractual labour increasing a lot more. And people who are working in these conditions are working on more vulnerable jobs. And their relative lack of experience, or less experience and demanding jobs...those jobs are seeing a hit. Whereas people who are of an older age have a better network, that if they lose their job as a carpenter today, they know where to go and find a job as a mason because their network effects are much better. They are much more established. A 40-year-old person working as a mason will quickly get a job of some other kind and is willing to work at a lower wage rate because he has to ensure that his family continues to get food on the table. Whereas the 25-30 year-old something is still willing to say that I will wait for a better job to come in. So multiple things are at play over here as we see jobs come in for the [people aged] more than 40 years compared to [those] less than 40 years. Next story is there are less jobs and people who are more desperate, who are above 40 and have a lot more at stake to bring money home are the ones who are getting the jobs.
If you look at the nine months that have passed and look at the bounce back that we have seen, what does it tell you in a larger sense? I know that we still have 15 million jobs to fill and still have to take care of the new workforce that will come in because of the population that is growing. But is this proved that there is a certain level of resilience that is good and are you able to discern anything beyond how things could move or behave in the next 6 months to a year?
Resilience yes. Quality of jobs questionable. So resilience comes by compulsion. A family cannot just afford to stay without food. They have dug into the savings. Not the top 2 -3% of the income pyramid, who have actually added to their savings, because they do not have avenues to spend, but the rest of the pyramid has been digging into their savings. As they do that, they have to get back to work for whatever they can get. So if you call that resilience, sure enough. The economy has come back to shape in terms of many of those industrial activities starting up again but [companies are] paying low wages.
I think India is getting more informal and is losing on good quality jobs. So the jobs that you got, say 10-15 years ago...you could hope to get a good bank job, you could hope to get a good job in the financial markets at large, or in an IT company--those kinds of jobs are not growing. So the quality of jobs is deteriorating and the quantity of jobs is not growing. In this scenario, we have got some resilience.
The other aspect of this question is what does it portend for the economy going forward in the next six months to a year?
It is difficult to predict on this basis what will happen in the next six months or a year. It is too short a period. I think I will still stretch myself to say that the economy's growth rate is unlikely to rebound the way the government's projection for this year is turning out to be, which assumes that the economy in the second half will be as good as it was a year ago. I do not think that is going to happen. I think we will still be in the negative zone in the remaining two quarters as well.
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