‘Job & Income Losses Will Worsen; Only Large Companies Will Survive COVID Economic Shock’
Mumbai: India’s salaried jobs are seeing the impact of COVID-induced lockdowns play out more slowly, and it will be more difficult to get these jobs back, Mahesh Vyas, managing director of the Centre for Monitoring Indian Economy (CMIE), says.
The number of salaried people who have lost their jobs amid the COVID-19 pandemic has now surged to 18.9 million, and about 5 million jobs were lost in July alone, CMIE finds. On the other hand, the number of non-salaried, informal jobs has increased.
This shock to the Indian economy will lead to a market shift: Larger companies will gain market share, will rely less on labour, and the small and medium companies will wind up, Vyas says, explaining how job losses among the salaried could get worse.
About 15 million jobs have been added in the farm sector alone, where there is underemployment. “That is because the farm sector is like your residual camp,” Vyas says in this interview. “If you do not get anything anywhere, you go back home to your villages and you have some mud to shovel around, and you say you are employed in your farm.”
There have been more income losses than job losses, which will in turn affect the consumption power in the economy, Vyas adds.
What are the numbers telling you, as you look back over the last four months?
What happened in April was an immediate impact of a massive shock to the economy, which led to the employment of around 403 million people getting hit; and of those 403 million, 121 million lost their jobs.
It is easier for us to appreciate this after seeing the structure of employment in India. Most of the employment in India is in informal jobs--they are daily wage earners, agricultural labourers, small shopkeepers, small business people and farmers. There is a lot of mobility in these people: When there is a shock, they immediately lose their jobs. There could be a carpenter or a mason working at a construction site; once the lockdown came in, there was no masonry or carpentry to do. They lost their jobs immediately. After the lockdown was lifted, all those informal job holders got their jobs back. Those masons saw some construction begin again, and went back to work at the construction sites. Farmers have seen the rains to be very good, they are going and doing sowing work [and] farm activities; things are back to normal over there.
The salaried people do not lose jobs so immediately. People like you and me are working for, say, established companies and even if that company is in trouble, our job is retained for some time. Salaried people are getting hit with a lag. Companies are slowly shutting down, as they are slowly seeing the impact of the lockdown to be more severe than they anticipated. Mind you, the lockdown has been a lot more prolonged than anyone imagined in the beginning. So the impact played out slowly--slow poison creeping up over the organised sector--and salaried people are losing their jobs, and they will find it a lot more difficult to get them back.
So what we thought was resilience in the organised sector or corporate India was not. Is that what you are saying?
[There is] less resilience than we thought. It was surprising to see the corporate sector or salaried jobs not getting hit as much as [other sectors] did. I will not use the word “resilience”. Mind you, even they had lost 17 million jobs [in the first quarter of 2020-21]. It is not that they did not lose out. The corporate sector is seeing the impact playing out a little more slowly. So they did take a hit--[they lost] 17 million jobs, [which] has gone up to 19 million jobs right now, [and it] can get worse.
The only sector that did show “resilience” is the farming sector, which never lost jobs. And that is because the farm sector is like your residual camp: If you do not get anything anywhere, you go back home to your villages and you have some mud to shovel around, and you say you are employed in your farm. But I think the rest of us suffered.
Is there anything to say that the ability of the corporate sector to bounce back is less or more compared to the informal sector?
There is certainly going to be a market shift. When you have a shock of this kind, only the large companies are going to survive.
I think the corporate sector is going to have two kinds of reactions. The first thing is, small and medium companies will find it difficult to survive, they will shut down. And as they shut down, they will yield space to the larger companies. And the larger companies will see their market share increase. The second thing is that the large corporate sector which is going to gain market share is not necessarily going to absorb the labour. They will go into more automation because they are more capable of going into automation.
So the larger companies will gain market share, will rely less on labour, and the small and medium companies will wind up. This is the difficult story that will play itself out for salaried employees, going forward.
To that extent, some of this is irreversible. Is that correct?
That’s right. [In] some sectors, [and for] some companies, it is irreversible. It is very clear that small and medium companies are not going to survive this. So the entrepreneurs running small and medium companies are going to find some other jobs in the new layout that there is. They will have to find a different place to work on, and they can shut down some operations, start some new operations. But the net gain is going to be negative for them. That is clearly going to be a problem--resilience at the top and complete reworking out at the lower end of the spectrum.
If you look at the 19 million salaried persons who lost jobs versus others including in the farming sector who gained, it is logical that the consumption or purchasing power of the 19 million individuals is higher. Are you able to quantify that, and its impact on the economy?
That is a more debilitating story. It is very troublesome because even if you have retained your job, your incomes are down. Even in places where jobs have been retained, the wage increases will very likely either be very low or negligible, or there will be a small pay cut. Even if your income from your wages is stable, you would have lost somewhere else; some valuations have gone down. Your basic sentiment has gone down. So in terms of purchasing power, we are seeing a much bigger loss than the loss we are seeing in jobs. Job losses are less than income losses.
What would be the impact on the economy? For instance, we have seen figures saying there will likely be a 10% contraction in the GDP. But what is the loss in consumption or purchasing power in the economy because of this job loss? Is there a way to quantify that?
We can quantify this much better in the middle of September when we will get some additional data on income. The employment data come in with a small lag, but the income data come with a four-month lag. So, we will get data for April in September. In the first or second week of September, we will be able to talk about what is the most damaging impact in terms of income in the worst affected month. Right now, we only conjecture based on responses which ask a person whether the income had declined or not. And that decline is uniform, across the board.
How would you look at the purchasing power of the informal sector? Now that they have come back into the workforce and expanded, in a way, would their purchasing power be back to what it was pre-COVID, or is there uncertainty there as well?
Very unlikely. I do not think their purchasing power has increased or even remained where it was earlier. Mind you, people in the informal sector cannot afford to remain unemployed. A person who is on daily wage has to earn today to get his meals today evening. And if he does not get that, he has to borrow, or do something equivalent to that. So, these people are going back to work no matter whatever the wages that they’d be getting. They could be working for half the number of hours they were working earlier, and at half the wages. They could be taking a hit both in the number of hours worked and the wage rates. They have gone back to work because of compulsions of having to go back to work. I do not think they are going to contribute to greater purchasing power.
Earlier, I had asked you about the kind of support that the government could give, and you had hazarded a figure of Rs 10,000 a month for these 120 million families for two months. Is it too late to be doing something like that? If so, what should we be doing?
It is never too late. There is still pain around. Hand out these monies to these people--not just the 11 million left [without jobs] now, but to many more. Go back to the 121 million people who had lost their jobs, because they have all seen a big hit to their livelihood. Very likely, all of them are more indebted today than they will be able to service. So they will lose assets, and they can lose a lot more. To save the stress that is going to come out next--it could be mental stress, it could be asset losses, losses in education and health; there are many losses that we cannot even measure--I think it is important to step in and not let that happen.
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