Covid Lockdown Impact: Estimating The Job Losses In India’s Informal Economy

International Labour Organization (ILO) estimated that globally more than 25 million jobs are at risk due to the spread of coronavirus (Covid-19).

It is estimated that four out of five people (81 per cent) in the global workforce of 3.3 billion are currently affected by full or partial workplace closure.

The US, UK, Canada and most of the European and Asian countries have begun to register huge job losses leading to significant rise in unemployment rate.

The ILO in its report “ILO Monitor 2nd edition: COVID-19 and the world of work”, describes Covid-19 as the “worst global crisis since the World War II”. The head of the International Monetary Fund (IMF) Kristalina Georgieva said the world faced the worst economic crisis since the Great Depression of the 1930s.

Sectors such as food and accommodations, retail and wholesale, business services, construction, and manufacturing have experienced drastic effect with falling production and losses in employment hours and number.

Combining 1.25 billion workers employed in these sectors, over one-third (37.5 per cent) of the global workers are at high risk.

There are high concerns for low-paid and low-skilled workers in low and middle income countries, where the industries and services have high proportion of such informal workers, who account for 61 per cent of the global workforce or 2 billion people and they lack any social protection.

This sudden loss of livelihood would be horrifying for them.

Most of the world’s informal workers are from developing countries, and majority of them would be worst affected by Covid-19.

In urban areas, the informal workers tend to work in sectors that are directly impacted by lockdown measures and carry a high risk of virus infection such as rag picking, street vending, food stalls, construction, transport and domestic help.

The current nationwide lockdown in India has severely impacted informal workers significantly and forced many of them to either stay in shelters or are forced to return to their native places.

About 419 million such informal workers are at the risk of losing their livelihood and falling into deeper poverty. The impact of the virus and lockdown on informal workers’ jobs and livelihood are being increasingly felt in India.

According to a report of Centre for Monitoring Indian Economy (CMIE), only a little over one-fourth (27.7 per cent) of the total working-age population (15-59 years) of 1,003 million, ie, 285 million people were working in the week after the lockdown (the corresponding last figure before lockdown being 404 million, over 40 per cent workforce participation).

This shows that within the two-week period, the number of workers reduced from 404 million to 285 million, which means that around 119 million workers have lost their jobs over the two-week period of lockdown.

If we assume half of those who have lost their jobs are main or single earning member of an average of five-member family (as per Census 2011), around one-third (60 million households or 300 million people) of India’s households, could be facing a severe livelihood crisis, and around 227 million households are in despair.

The CMIE report also shows a significant fall in jobs and simultaneous significant increase in unemployment rate in March 2020. The unemployment rate stands at 8.7 per cent in March 2020, which is way higher than government unemployment estimate at a 45-year high of 6.1 per cent in 2017-18.

This is the highest unemployment rate since September 2016. The unemployed people have also gone up from 32 million to 38 million during the same period.

The situation became further worse as we moved into the lockdown period in the last week of March, and the unemployment rate soared to 23.8 per cent.

Understandably, this indicates that the current nationwide lockdown has been the biggest job-destroyer ever in the history of the country.

These estimates only reveal the impact on jobs during the lockdown period, and should not be considered as permanent loss of livelihood. Many of them may be able to get back to employment after the lockdown would be over.

However, it is true that many of them would also not be able to get their jobs back, such as informal workers who were involved in casual or contractual work, and those who returned to their villages.

However, the CMIE survey has many caveats as it is based on telephonic interviews with a smaller sample and likely to have high probability of error in estimation.

So, the other estimates also need to be examined for comparison such as the national-level periodic labour force survey (PLFS) to understand the likely impact on informal workers during and after the lockdown period.

According to the PLFS, about 90 per cent (419 million) of the total workers are engaged in informal sector.

A total of 95 per cent and 80 per cent of the labourers are in the informal sector in the rural and urban areas respectively.

In magnitude, the informal workers in rural areas (298 million) comprise almost 2.5 times higher than urban areas (121 million).

This is primarily because of large number of informal workers are engaged in farm or agricultural activities (62 per cent) in rural areas than only 8 per cent in urban areas, which is likely to have less impact on their livelihood and employment by the lockdown than informal workers engaged in urban areas as 92 per cent engaged in non-farm sector.

The informal workers’ livelihood in urban areas is likely to be impacted more by the lockdown because of the halt in economic activities such as industrial and business activities.

In this article, we estimate the number of most vulnerable informal workers by three ways (I) the most affected sectors; (II) status of work and (III) vulnerable occupations, where they are engaged in urban areas.

In urban areas, about 93 million informal workers are involved in five sectors that are most affected, namely, manufacturing (28 million); trade, hotel and restaurant (32 million); construction (15 million); transport, storage and communications (11 million); and finance, business and real estate (7 million).

Out of total 93 million informal workers in these sectors, 50 per cent are self-employed, 20 per cent are casual workers on daily wages and 30 per cent are salaried or contract employees without any social safety net.

Of these, the casual workers are the most vulnerable due to the irregular nature of their work and daily-wage payment, which are highest in construction sector.

So, all these regular salaried or contractual employees, those who are currently not working, and skilled workers and petty shopkeepers, who may be sitting idle at home or return to their native places or staying in shelter homes may not be able to recover their jobs once the lockdown period is over.

Added precautions like social distancing, contact tracing, and strict health controls over entry at the workplace and market would also impact the employer-worker relationship, thereby proving to be a huge departure from the casual business as usual approach.

Further, the occupational analysis shows that about 40 million urban informal workers are engaged in 10 highly-vulnerable occupations, which includes small shop salespersons and demonstrators (13 million), labourers in construction, manufacturing and transport (12 million), domestic helpers, house-keeping and restaurant service workers, painters and building structure cleaners, stall and market salespersons, street vendors, and garbage collectors

the above discussion concludes that the worst affected informal workers are around 40 million, who are casual or daily wage workers involved in vulnerable occupations in urban areas, who may not get their employment or livelihood status for a longer period in the near future and are going to be trapped in deeper poverty.

While the CMIE survey results may have estimation errors, it is true that there are huge job losses where the worst affected are the informal workers, who are facing livelihood crisis.

In light of the data of migrant labourers, poor and destitute, as provided by the government, the governments, NGOs and even the Supreme Court stepped in to cater to their plight.

As a result, 26,000 shelters (for 1.5 million) and over 38,000 food camps were set up across the country in the initial weeks of the lockdown and which took care of around 10 million people together.

Besides, these informal workers, many people involved in organised sector (unregistered companies) who may be not jobless at present but could find themselves without a job after the lockdown period is over, if many enterprises refused to take them back.

Many self-employed persons like street vendors and other small entrepreneurs may not be left with the capital to restart their businesses and many may not return from their native places.

So, the government today has dual challenges to provide immediate assistance to: first, informal workers who have lost their jobs, and second, to those who are already unemployed and are looking for the jobs.

Apart from assisting informal workers, who are migrants, their families for whom s/he is the sole earner need to be considered, as they await the Pradhan Mantri Garib Kalyan Yojana 2.0 to be rolled out soon.

The time to demonstrate seriousness in attaining the ‘antyodaya’ through Deendayal Antyodaya Yojana-National Rural Livelihoods Mission and the Deendayal Antyodaya Yojana-National Urban Livelihoods Mission, is now. [Agencies]