52% Indian urban workers remain without job as earnings fall by 48% during coronavirus lockdown

A majority (52 per cent) of urban workers in India went at least a month or more without work, pay or any financial assistance during the lockdown necessitated by coronavirus pandemic according to a recent survey conducted by the London School of Economics (LSE).

The survey whose findings were made public on September 1, 2020 found that on an average, earnings fell by 48 per cent in April and May, compared to pre-pandemic months of January and February. The survey results also revealed that those hit hardest were individuals in informal work (with no employment contract), who were from marginalized socio-economic groups.  Shania Bhalotia, Research Assistant, Swati Dhingra, Associate Professor of Economics and Fjolla Kondirolli, a PhD Economics student at University of Sussex who presented the survey findings found that financial assistance from the government or employers was available to just a quarter of the workforce — with informal workers least likely to benefit.

The report City of Dreams no more? published today by the LSE’s Centre for Economic Performance (CEP), reveals the employment impact of one of the world’s most restrictive Covid-19 lockdowns. It says that the government of India announced a nationwide lockdown aimed at slowing down the spread of Covid-19 on the 24 March 2020 — bringing the lives of 1.3 billion people to a standstill, initially for 21 days. The lockdown was extended until 31 May with some relaxations in areas where the spread had been contained.

Drawing on a survey of 8,500 workers aged 18 to 40 carried out between May and July 2020, the report shows that 21.7 per cent of workers were made unemployed or had worked zero hours in the week before they were surveyed. Many workers had already been out of work and received no pay at all in April. Together, 52 per cent of urban workers went without work, pay or financial assistance in the three months following the start of the lockdown. The report covers all sectors but shows that those hit hardest were individuals in informal work (with no employment contract), who were from marginalized socio-economic groups.

The survey found that about 1.2 per cent of those surveyed were unemployed before lockdown — this increased to 15.5 per cent during lockdown. Of those unemployed, 90 per cent said coronavirus was a factor in their job loss. The labour incomes fell by 48 per cent between January-February and April-May 2020. During the three months of the survey — 80 per cent of informal workers had been out of work for more than a month, compared to less than 20 per cent of formally employed workers. Many developing economies have large informal sectors and growing urban youth populations, who lack basic social protections at work. The CEP surveyed 8,500 workers aged 18 to 40 in urban India to understand their experiences at work during Covid-19. The survey was conducted between May and July 2020.

Since the pandemic, workers in the top quarter of labour income have seen their share of total income rise by 16 per centage points. As earnings of the top quarter were relatively protected from the Covid hit, their share of total income grew from 64 per cent to 84 per cent. Government assistance for the lower-paid reduced the share of the top quarter slightly to 80 per cent. India already runs the world’s largest jobs programme, guaranteeing 100 days of work to rural households. Several states in India are now introducing urban jobs programmes, particularly for young workers.

The report shows urban workers, especially informal young workers, would value a guarantee of a 100 days of work.  The report authors — Shania Bhalotia, Swati Dhingra and Fjolla Kondirolli — say that a national commitment of resources for low-income informal workers everywhere in the country would help start to the recovery process.  Ms Bhalotia said: “Young workers, who are over-represented in informal employment, are particularly at risk of job losses, which can have life-long scarring impacts on their future prospects, mental health and community well-being.”

Dr Dhingra said: “Efforts to provide a social safety net to informal workers has been on the agenda of policymakers in developing economies for years. It may finally be time to revive old ideas, such as a universal job guarantee, to protect the livelihoods of many informal workers who are at risk of falling into urban poverty. Their aspirations of a prosperous life have already been shattered by the pandemic. Life in the city now looks more unequal and precarious. Policy action is needed to counteract these forces to ensure cities continue to provide opportunities for high growth and better jobs for everyone, not just those in secure privileged positions.”  Ms Kondirolli said: “Covid-19 exacerbated pre-existing inequities in urban India and those at the lower end of incomes suffered the most. Workers in the bottom half of pre-Covid labour income had bigger income losses than the top half. Informal workers, especially young informal workers from lower socioeconomic groups, faced the biggest job cuts.”

Key findings

Unemployment increased dramatically. 15.5 per cent of workers lost their jobs and 21.7 per cent worked zero hours during the survey months.

About 52 per cent of urban workers went without work or pay and received no financial assistance to tide over the crisis.

On average, earnings fell by 48 per cent in April and May, compared to pre-pandemic months of January and February. Financial assistance from the government or employers was available to less than a quarter of the workforce.

Covid-19 exacerbated pre-existing labour income inequality – those in the top quartile of pre-pandemic income saw their share in total income increase by 16 per centage points within three months.

Several states in India are debating an urban job guarantee to address the crisis. 70 per cent of urban workers have no guarantee of a minimum number of days of work in the year. Of them, 70 per cent would like to have a guarantee of 100 days of work, primarily to overcome the livelihood insecurity from Covid-19.

A national policy commitment is needed to prevent the current earning losses from pushing many of these workers into urban poverty and the threat of long-term unemployment.

Lack of social assistance

The pandemic has revealed the limits of India’s welfare systems, particularly in urban areas, which typically are not covered under many poverty alleviation programmes designed for rural development and where workers fall through the cracks of formal benefit schemes. The survey collected information on a number of benefits: Provident fund, Pension, Paid Sick Leave, Account with Employee’s Provident Fund Organization (EPFO), Account with Employee’s State Insurance Corporation (ESIC), or Central Government Health Scheme, provided by the government or employers to protect workers from livelihood insecurity. 73 per cent of workers have none of these benefits. Those employed informally and those belonging to lower socioeconomic groups are even less likely to have any job protections. Just 15 per cent of informally employed workers have some form of benefits, compared to 82 per cent of formal workers or 83 per cent of regular salaried workers.