7 ways to revive India's labour market and livelihoods in post-Covid world

It is important to plan how to deal with the economic fallout and rebuild a more inclusive economy in a post-Covid-19 world, and much of that hinges on how we revive labour markets and livelihoods

Crises highlight the chasms in a society. This crisis is deepening ours. For long, India has hidden behind the guise of diversity to conceal socially sanctioned discrimination on the basis of caste, religion, and gender. Discrimination that has manifested in deep socio-economic disparities that are now important determinants of how equipped people are to weather the current storm. The Covid-19 pandemic and the ensuing lockdown have not only cast a spotlight on how vulnerable such a large share of India’s population is, but also how much more vulnerable it is when compared with others.
 
How far can we push the threshold of inequality before it leads to discord and instability?
 
If this is a question best left unanswered, it is imperative that the government continue to institute, and expand, immediate relief measures for the disadvantaged. But equally important is the pressing need to start planning for how to deal with the economic fallout and rebuild a more inclusive economy in a post-Covid-19 world. Much of this hinges on how we revive labour markets and livelihoods.
 
The current picture is bleak. The travel ban and lockdown have induced a slump in nearly all sectors of the economy – from manufacturing (56.4 million jobs, according to the 2017-18 Periodic Labour Force Survey) and construction (54.3 million) to retail trade (37.3 million), hotels and restaurants (8.7 million), as well as agriculture (205.3 jobs). Not only does this affect workers directly employed in these sectors, but also the many vendors that are indirectly connected. Finding themselves suddenly out of work, unable to pay rent or to feed themselves, hundreds of thousands of migrants and daily-wage labourers made a desperate attempt to go back from cities to their hometowns; some finding themselves rounded up in vain by authorities to be placed in makeshift shelters.

 
The ensuing severe labour shortage is disrupting agriculture and supply chains. Bottlenecks in obtaining e-passes and police aggression towards those leaving their homes, truckers abandoning their loads, a lack of workers for production, loading and unloading of vehicles, are further crippling the economy.
 
Employers are struggling to make payroll, either because they cannot physically deliver the payments to their workers and they are not set up to make electronic transfers, or because the slump in business means they don’t have the funds. Many informal and formal micro and small businesses will inevitably fold. Most self-employed workers – many of them survivalist micro-entrepreneurs, hawkers and small vendors, domestic helps, or gig workers – have lost their incomes because they are locked in their homes and/or have seen demand dry up. Working remotely is not an option for the socio-economically disadvantaged relying on physical labour and the provision of location-based services for income.
 
The travel ban and lockdown may be temporary but their effects will be long-term. The loss of Rs 10,000 crore in taxes for every day of the lockdown comes at a time when the government’s historically small spending on health infrastructure has to rise to combat the pandemic, and emergency bailouts need to be financed.

 
So, how do we dig our way out of this crisis?
 
First, an economic crisis such as this transforms the fiscal calculus. The government must loosen its fiscal restraint to help the economy stabilise, recover, and grow.
 
Second, businesses need funding to tide over the crisis. Not only should there be a moratorium on loans, but the government also needs to ensure the provision of working capital at low interest rates to start-ups, and small and medium businesses. The effect on bank capitalisation needs to be factored in. Once the pandemic is under control, the government must foster investments in infrastructure – this is one of the fastest and most direct ways to create jobs.
 
Third, reducing the tax compliance burden is critical; especially for small businesses, this is a good time to simplify payments and expand the net, even if no additional revenue is expected at this time.
 
Fourth, governments can support businesses by providing wage subsidies directly to workers through digital payments. This will ensure that the workforce is recorded and registered, enabling the government to reach out to them, now and in the future. It will assist businesses to retain workers at a time of stressed cash flow.

 
Fifth, the government must enable universal access to social safety nets, including healthcare, maternity, disability and pension benefits for all workers. Crises like this one not only underscore the need for healthcare, but such benefits can also help smooth consumption during times of distress and demand shocks.
 
Sixth, the harmonisation of the labyrinth of labour laws into four codes has gone some ways in clearing out the regulatory logjams that have plagued us for many years, but the rules for the codes have yet to be defined. Investors value certainty greatly. Leaving our labour codes vague undermines one the objectives – a clear, consistent and implementable labour code is good for business and investment as well as for workers.
 
Finally, despite a deepening deficit, we cannot lose sight of the fact that our education and skill training systems are in desperate need of an overhaul. These will demand greater funds, but the first priority must be to improve access to good-quality education for children who are losing out right now. Children are not in school during the lockdown. While the middle- and upper-class have access to distance learning, those from disadvantaged households do not. So, this sets the children from disadvantaged backgrounds even further behind in their trajectories.
 
Sun-Tzu noted that “[I]n the midst of chaos, there is also opportunity”. Then for us, the opportunity to set India on a more inclusive path abounds.

---

The author is president and executive director of JustJobs Network, and a senior visiting fellow at Centre for Policy Research