Lost jobs may never come back; companies may have used Coronavirus lockdown as opportunity

By: |
January 4, 2021 2:32 PM

The cut in wages by companies whose operations were not shut by the lockdown was more likely opportunistic than out of business compulsions to survive the lockdown.

jobs, employment, lost jobs, companies' profits, cmieThe listed companies made their highest ever profits in the midst of a severe lockdown by cutting costs much more than what they suffered due to the fall in sales.

The coronavirus pandemic led companies to go for large scale layoffs and salary cuts; however, at many incidences, the move was more opportunistic. The cut in wages by companies whose operations were not shut by the lockdown was more likely opportunistic than out of business compulsions to survive the lockdown, according to the Centre for Monitoring Indian Economy. It is believed that the crisis of the lockdown is likely to have been used to shed excess labour and hence, the lost jobs are unlikely to come back or, much of the wage cuts will not be fully restored, it added.

India is a labour intensive market and thus it becomes difficult to get and retain good quality labour. Hence, the cut in wages, therefore, is more likely to be structural. The listed companies made their highest ever profits in the midst of a severe lockdown by cutting costs much more than what they suffered due to the fall in sales. The cost-cutting was essentially in raw material and other operating costs.

Also Read | India’s manufacturing sector activity strengthens in December: PMI

The net profit of listed companies had skyrocketed by 568.5 per cent, behind which, the extraordinarily low base of telecom companies in the previous year is believed to be one of the vital reasons, CMIE underlined. On the other hand, wages account for a relatively small proportion of the total expenses of companies in India. Its average share before the lockdown was 10 per cent with a range of 7.5-13 per cent in the past 15 years, CMIE said. Consequently, the small 3.4 per cent increase in the wage bill during the September 2020 quarter did not have a significant bearing on the overall growth in profits.

Meanwhile, the headcount is more likely to have been axed among the contractual labour. Out of the 4,234 companies in the sample, almost half of them cut their wage bill in the second quarter and almost 70 per cent of all listed companies recorded a fall in wages in real, inflation-adjusted terms.

Do you know What is Positive GDP growth seen in Q3, need to fight inflation: RB, Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Commerce minister exhorts Indian investors to support start-ups in BIMSTEC region
2Kerala budget focuses on infrastructure development, jobs
3Planning to install rooftop solar plant? Beware of fake claims! Govt says only DISCOMS are authorised