No full recovery till services sector is out of the woods; govt must go full-steam on reforms, welfare schemes
India’s labour markets continue to throw up depressing news, and the various sets of data tell us the unemployment situation doesn’t seem to be getting better. On the other hand, the large numbers of blue-collar workers being recruited by the e-commerce sector—7 million by one count—ahead of the festive season is cheering. Indeed, going by reports from HR agencies, the job market is certainly looking up for white collar workers, even if many of the opportunities are temporary. However, the weekly updates from CMIE are a grim reminder that there are millions looking for a means of livelihood. Unemployment, according to CMIE, rose to 8.3% in August, higher than the 7% reported in July, which is discomforting and could be partly explained by a surplus of farm-hands.
To be sure, the headline numbers don’t tell the whole story since, in a poor country like India, few can afford to remain unemployed and most workers in the unorganised sector do manage to find themselves some work. Nonetheless, there is no doubt a large number of jobs have been lost since the outbreak of the pandemic. The Periodic Labour Force Survey (PLFS) findings released last week showed that while urban unemployment was lower at 10.3% in the October-December 2020 period—down from 13.2% in the previous quarter—it was nonetheless higher than the 7.8% seen in the year-ago period. That is not surprising because the key services sector, a big generator of jobs, is yet to recover.
Indeed, many may not have lost their jobs, but incomes have fallen. We now learn that nearly six lakh wage-earners have opted out of the Atal Pension Yojana (APY) in the five months to August, about a fifth of the number of new entrants of 30 lakh. In the last few years, the number of those opting out, as a share of new entrants, has been going up; in FY21, this was 12.7% compared with 10.1% in FY20 and 6.4% in FY19.
Some 10 lakh workers moved out of APY in FY21, an indication of the troubles of low-wage earners. So, while it is true that larger numbers are enrolling for the APY, a good number are moving out. Perhaps the government should support the workers like it was doing in the initial stages of the scheme by subsidising 50% of the contribution; this was via a maximum annual contribution of Rs 1,000. It is important to have good pension schemes for the unorganised sector; as argued by Gautam Bhardwaj and Sanjay Jain, such a safety-net would have prevented the exodus of migrants post the outbreak of the pandemic.
The trade unions must also enable reform so that the manufacturing industry is encouraged to hire; per one study, hiring by the manufacturing sector has fallen to multi-year lows. The government’s efforts at reform—states and Centre—must be backed by labour; they should support options like fixed-term employment, which gives factories the flexibility to hire as and when needed. They should use their collective clout to get the government to contribute more to their pension schemes.
Moreover, they should make sure the pension andhealth insurance schemes are well-designed; the ESIC, for instance, could be vastly improved. Experts have pointed out that nearly three-fourths of wage-earners had opted for the minimum amount of Rs 1,000 as in March 2020 and that they need to be encouraged to opt for bigger amounts. The government must chip in with a meaningful contribution.