First, unlike Americans, opting out of the workforce is not an option for most Indians. The existence of the vast informal sector offers refuge to employees pushed out of wage employment. Second, this employment of last resort should not be taken to imply a robust recovery.
Director, National Data Innovation Centre, National Council of Applied Economic Research
Deputy director, National Data Innovation Centre, National Council of Applied Economic Research
Along with shuttering businesses, trains and schools, data collection has also paused. Nonetheless, diverse sources of data, while incomplete in themselves, allow us to develop a shadowy picture of the recovery. These data suggest that the Indian employment challenge is quite different from the one faced by the US. Voluntary withdrawal, especially for women in the US, does not characterise India’s employment scene. The Indian experience suggests a strong desire to resume work, even when jobs are elusive.
The National Data Innovation Centre (NDIC) at the National Council of Applied Economic Research ( NCAER ) has been collecting data on households in the Delhi NCR region. Several stylised observations, comparing the same individuals over time, and taking into account the seasonal nature of employment as well as education, place of residence and social background, are noteworthy.
One, the Delhi Metropolitan Area Survey (DMAS) indicates a sharp drop in seasonally adjusted employment immediately following the first lockdown in April-June 2020. The employment rate for men aged 21-59 fell from a pre-pandemic high of 88% to 63% in April-June 2020. Women’s employment rates declined from 33% to 23%. While these numbers only reflect the Delhi NCR region, the Periodic Labour Force Survey (PLFS) conducted nationwide has also shown a sharp decline in worker population ratio for men aged 15 and above from 67% to 57%, and for women from 19.6% to 15.5%. The DMAS data are based on a different questionnaire design than PLFS, so the absolute levels are not comparable. But both present a similar picture.
Two, once phased reopening began in June 2020, employment began to recover sharply. By Q4 2020, employment had almost returned to nearly pre-pandemic levels – 83% for men and 32% for women. Similar results are shown by Centre for Monitoring Indian Economy (CMIE) data that find employment rates were only about 4% lower in December 2020 than the prior year.
Stalled at U-Turn
Three, the second wave of Covid-19 in March 2021 did not lead to the sharp employment contraction visible during the first round of lockdowns. During April-June 2021, employment rates in the DMAS sample fell to 78% for men and 28% for women. This is only about half the drop experienced during the first lockdown in 2020. By September, most of this loss had been recouped, and male employment was 81%, while women were 33%. The CMIE data also show that after a drop in April-June 2021, by September 2021, the employment rate returned to Q1 2021 levels.
Other indications, however, suggest that this recovery is fragile. The DMAS data show that much of this recovery rests on self-employment in agriculture or petty business. Whether in salaried jobs or casual labour, wage employment has declined substantially – falling from 46% pre-Covid to 36% in July-September 2021 for men, and from 13% to 9% for women. Self-employment in agriculture or small business increased from 36% to 41% for men, and from 21% to 24% for women.
On average, incomes in informal self-employment have always been lower than those for individuals in salaried work. So, while self-employment has offered some support to workers losing wage work, this may not fully cushion against the income shock.
NCAER’s December 2020 NDIC’s Delhi NCR Coronavirus Telephone Survey 4 (DCVTS-4) found that 9% of the respondent households could no longer rely on their pre-pandemic primary source of income. These households seem the most vulnerable, with 29% reporting experiencing hunger, instead of 12% among households that could continue their pre-pandemic activities. Other data, including those from an Azim Premji University survey in Rajasthan and Karnataka in February 2020 and August-September 2020 showing a startling increase in households reporting zero income, confirm this concern.
Employment recovery is most sluggish in urban areas. Before the pandemic, the Delhi NCR study found 81% employment among urban men, which has dropped to 69% in July-September 2021, while rural male employment is at its pre-pandemic level. Similarly, work participation for men whose households belong to the top one-fifth of economic status before the pandemic has fully recovered from the employment loss they experienced during the initial lockdown. Those in the fourth quintile are close behind. The bottom three quintiles have yet to recoup their employment losses.
Unlocking is Key
These observations highlight two things. First, unlike Americans, opting out of the workforce is not an option for most Indians. The existence of the vast informal sector offers refuge to employees pushed out of wage employment. Second, this employment of last resort should not be taken to imply a robust recovery. Hence, restoring opportunities for salaried work and increasing wage employment in the construction and manufacturing sectors deserve particular attention.
The strong policy emphasis on expanding vaccination coverage may help offices, factories and schools reopen fully, bringing back salaried jobs. Also, if the announced infrastructure push is successful, particularly if it begins with labour-intensive urban infrastructure projects, that may enhance opportunities for urban casual labourers.
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