COVID-19: HOW INDIA FARED DURING LOCKDOWN

Ten facts on India’s urban employment during the pandemic and lockdown

This post was originally published on March 30, 2021, in the Financial Express.

Possibly even more than a public health crisis, COVID-19 is an economic crisis manifested most severely in the labor market. In face of pandemic, structure of labor market typifies the extreme vulnerability of workers in India. With COVID-19 and lockdowns, there has indeed been significant discourse on employment, though often without relevant and representative data. The recently released quarterly bulletin report of Periodic Labor Force Survey (PLFS), April-June 2020 offers an opportunity to revisit employment questions related to COVID. Comparing year-on-year (y-o-y) 2020 with 2019, and quarter-on-quarter (q-o-q) within 2020, a truer picture of labor market effects emerges. This article highlights the 10 distinctive findings on COVID time urban labor market.

1. Casual labor and distress driven micro entrepreneurship dominated employment with 75% share. With less than 10% workers having social security or job contract an overwhelming number out of 380 million workers were critically exposed.
2. In a comparative sense, COVID 19 is probably the greatest labor market shock in short to medium run that India has ever witnessed. Unemployment rate (UR) pushed higher than episodes of demonetization and hiccups period of GST introduction (Figure 1). This is expected. COVID 19, a correlated shock affected all sectors with both demand and supply effects. The other two were comparatively sector/industry specific and adjustments there worked through repositioning the activity, timing or mode of payment, and some learning.
3. UR has been 8.3% for men, women 11.3 % in 2018-19 second quarter. It jumped to 20.8% for men and 21.2 % for women in 2020. Thus, it has been broadly equal with slightly smaller increase for women albeit with strikingly lower labor force participation (LFPR) at 21%. This contrasts somewhat with global experience on most recessions where male employment is comparatively affected (greater cyclical component-construction, transportation), while women are comparatively into stable jobs like services, government. During lockdown the places where women UR surpassed men are MP, West Bengal, Karnataka, Gujarat, and Jharkhand.
4. Variation in stringency of lockdowns (proxied by disease caseload (DC)) approximately explain differences in employment. The question is: Did the tail (UR) wag the dog (DC) or dog wag the tail? Comparing quarter (April-June) 2019 and 2020, in Maharashtra, Tamil Nadu, and New Delhi (high DC), urban UR increased fourfold for male and twofold for female. The sharp increases were also due to one-third workers being engaged in COVID vulnerable occupations (identified by ILO and in primary occupations).
5. Expectedly, effects varied between migrant donor and recipient states (usually high DC being industrial and urban clusters). These states also have highest employment of casual labor implying high shock exposure of labor. PLFS shows labor supply constriction outweighed demand contraction in high DC states.
6. Lockdown impacted daily wage earners and primary occupations like street vendors, taxi, and auto drivers disproportionately. Notably, even salaried jobs in comparatively formal employment were affected. By end of lockdown period, informal sector picked up comparatively quickly. Also, a shift towards self-employment occurred i.e. possibly distress driven (CMIE). The number of employee provident fund (EPF) accounts that closed between April-December 2020 increased by 6.5% relative to previous year.
7. Manufacturing was probably worst affected from labor supply shock, reflected in part by sharp reduction in industrial production in second quarter of 2020. Sector wise, worst employment effects were in mining, manufacturing, electricity, and consumer durables.
8. Beyond UR, long lockdowns also affected LFPR by sector. Only in Rajasthan and MP, workers shifted from service to manufacturing during Apr-Jun 2020 compared to Apr-Jun 2019. In Maharashtra, Jharkhand, Uttarakhand, Kerala, and Andhra Pradesh (AP), workers shifted from manufacturing to service sector during Apr-Jun 2020 compared to Apr-Jun 2019.
   

   Source: CMIE

9. Unemployment was worst affected (higher than 15 percentage points) in locations with comparatively high services’ employment share viz. Karnataka, Maharashtra, AP (combined 69% services’ employment share). Rajasthan, with high tourism dependence saw decrease in male employment in service sector. Other tourism state Uttarakhand saw a y-o-y increase (12% for males) in service sector possibly due to comparatively unaffected religious tourism. Jharkhand experienced one of the sharpest increases in UR with 40% workforce engaged in construction, retail trade, transport, and manufacturing industries.
10. Finally, some surge sectors protected employment- Induced surge sectors comprised essential services such as grocery, banks, ATMs, gas stations, and over-the-counter drugs.

Devesh Roy is a Senior Research Fellow with A4NH. The authors are with the International Food Policy Research Institute. Views are personal.