Covid19 has indeed created a havoc in the world economy. Several major economies worldwide have declared nation-wide lock-downs bringing the trade and economic growth to a stand-still. The countries which once boasted strong economic growth and business dominance worldwide are now scrambling to stay afloat this global massacre. Social Distancing, Lock-down, Containment Zones, Self-Isolation, Herd Immunity are the new Buzz words!
Several “Next Gen” companies like Uber, WeWork, Oyo, Zomato, Swiggy, AirBnb, Etc. who were once making headlines showing double digit growth and billion-dollar valuations are now handling pink slips or furloughs to their “once most cherished” employees.
The situation in India is no different. A constant threat to the Indian Employees working in Formal sectors due to Covid19 definitely persists. However, India faces one more unique problem. Mass level Job Losses of Employees working in “Informal” sectors!
(Picture Credits: Reuters)
What is an Informal Sector?
An informal sector refers to those workers who are self-employed, or who work for those who are self-employed. People who earn a living through self-employment in most cases are not on payrolls, and thus are not taxed. They either earn daily wages or earn strict performance-based one-time compensations. Many informal workers do their businesses in unprotected and unsecured places. Some examples of such Informal sector professions are: Small shop sales persons, construction laborers, domestic helps, painters, street vendors, etc.
In the population of 130 crore Indians, Only 60 crore people go to work (i.e. are employed). Of this, about 53 crore are employed in the informal sector and only 7 crore in the formal sector. That means about 88% of Indian workforce currently is employed in Informal sector! That’s Shocking, right? No wonder this sector is the backbone of Indian Economy.
Unfortunately, due to Covid19, this sector has become vulnerable which is set to cause a huge impact on Indian economy if not heeded upon soon. A Report from Periodic Labour Force Survey (PLFS) during 2017-2018 indicated that in urban areas about 9 Crore 30 Lakh informal workers are involved in five sectors that are most severely affected due to Covid19, namely:
Distribution of Informal Labor in Urban Areas
A further analysis indicates that as many as 50 per cent of these informal workers are engaged in self-employment, 20 per cent are casual workers on daily wages, and 30 per cent are salaried or contract workers without any social safety net (without any written contract on employment). Due to the lock down, all economic activities (with exception of essential and emergency services) related to physical labor at workplaces have stopped. Therefore, about 93 million urban informal workers in these five sectors have been hit.
Factually, this is the largest informal sector worker group next only to agriculture and allied activities, and constitutes the size of population greater than most of the countries in the world, eg. UK, Australia, Japan!
The plight of such workers during this era of Covid19 is unfathomable. The data reveals that these casual or daily wage workers involved in top ten vulnerable occupations in urban areas may not get their employment or livelihood status for an extended period and are threatened with getting trapped in deeper poverty.
No wonder we see thousands for migrants waiting near bus depots, train stations waiting to go back to their native villages after foreseeing this grim situation which lies ahead of them. Migrants’ exodus back to the villages is nothing but a knee-jerk reaction to the un-employment situation in urban areas. They prefer to go back to their villages where-in they can start fresh, go back to basics, start farming (staple occupation) and live at almost half the expense of what they incur living in cities (despite of living in claustrophobic rooms).
What are Authorities doing about it?
What are the authorities and government bodies doing to curtail this problem? How is government planning to efficiently utilize the informal sector post-Covid19 era in reviving the economy? Some states have already started announcing Labor reforms after consulting with Industry Associations. The industry bodies urged the ministry to suspend the labor laws for the next two to three years except for provisions like minimum wages, bonus and statutory dues.
According to them, this will help the industry come out of the crisis induced by the lockdown to combat Covid-19 pandemic. The goal behind this is to revive the industrial activities and thus help in attracting foreign investment now that India is again in focus of Foreign investors. However, trade unions have expressed displeasure over several state governments making amendments to various labor laws through ordinances. Their opinions are that this action leads to sacrificing the labor rights at the altar of capitalism.
How will this initiative of state governments pan-out? Will it help revive our economy? Or will it just add to the agony of these poor worker class? Only time will tell!