How did employment improve during Covid?

The Periodic Labour Force Survey (PLFS) 2020-21 report, released on June 14, is very much in line with the NITI Aayog’s 2020-21 SDG Index which showed dramatic improvements in poverty, hunger, and income inequality amidst the devastating pandemic.

The PLFS of 2020-21 shows remarkable improvements in the key employment numbers during the pandemic. It covers the period of July 2020 and June 2021 – the period of unlocking and far more devastating second wave – and shows improvements from the corresponding period of 2019-20. The report showed that employment rate or worker population ratio (WPR) went up from 38.2% in to 39.8%, labour force participation rate (LFPR) rose from 40.1% to 41.6%, and unemployment rate (UR) fell from 4.8% to 4.2%.

In short, the pandemic didn’t have any adverse impact on employment numbers as the three key numbers say more people joined the workforce (higher WPR), more people got jobs (higher LFPR) and less number of people were unemployed (lower UR).

How did it happen during unprecedented health and economic crises which caused massive loss of lives and livelihoods and had forced millions of workers to walk back to their villages in distress as factories and other established shut down in urban centres? The unlocking began on June 1, 2020, and continued until December 2020 (sixth phase of unlocking started on November 1, 2020) as economic activities gradually picked up. But before everything returned normal, far more devastating second wave hit during March-May 2021. There was no central government announced lockdown but all states completely shut down all social and economic activities for months.

Even the previous PLFS, of 2019-20, which covered the national lockdown of March-May 2020, had shown the same trend over the previous year of 2018-19: Employment rate or WPR went up from 35.3% to 38.2%, LFPR went up from 37.5% to 40.1% and UR fell from 5.8% to 4.8%.

Taken together, the last two PLFS would mean that the pandemic had no impact on employment at all. That is what the NITI Aayog’s SDG India – Index & Dashboard 2020-21”, released last year, too had shown. The Aayog had prepared a benchmark in 2018 to measure the performance of states in achieving 17 Sustainable Development Goals (SDG).

The first SDG report, of 2019-20 (pre-pandemic), released in June 2020, showed that of the 28 states/UTs mapped, poverty went up in 22, hunger in 24 and income inequality in 25 states/UTs, compared to the benchmark set in the previous year. But when the second SDG report came in March 2021, there was a dramatic reversal in Indians’ fortune: Poverty fell in 25, hunger in 23 and income inequality in 13 of the very same 28 states/UTs.

The Aayog didn’t explain how this happened amidst the nationwide lockdown, massive overnight loss of lives, jobs and businesses, apart from high healthcare expenses that the pandemic entailed. The economy virtually collapsed with the GDP growth tanking to -6.6% in FY21. India was hit harder as the global output growth was -3.1% in the corresponding period of 2020 (India’s fiscal year begin with April but most developed economies follow January to December calendar). From being the fastest growing major economy in 2015, India became one of the slowest growing economies in the world that fiscal. The per capita GDP (income) fell by -7.6% and per capita PFCE (consumption) by -7% in FY21 – as per the latest National Accounts Statistics.

Taken together, the PLFS 2020-21 and SDG 2020-21 reports show that the pandemic never happened. And if it did, it didn’t impact employment, poverty, hunger and income inequality of Indians.

What the PLFS 2020-21 can’t hide

The PLFS 2020-21 report, however, couldn’t hide the long-term trends in employment.

For example, more workers migrated to informal, low-paying and low-income generating agriculture. The agriculture’s share in employment went up from 45.6% (of the total employment) in 2019-20 to 46.5% in 2020-21; that of high-productive and high-income manufacturing went down from 11.2% to 10.9% (the industry’s share falling from 12.1% to 11.8%. The services sector, which has a large segment of informal work, also fell from 30.7% to 29.6%.

This trend had been confirmed earlier by a 2021 study of the Ashoka University and Centre for Monitoring India Economy (CMIE) which mapped sectoral share of employment in five years between FY17 and FY21. It showed:

• The share of agriculture went up by 4%, taking its share in the economy from 36% to 40%.

• The share of services went up by 13%.

• The share of manufacturing halved – declining by 46% in five years.

• The job loss was mostly in labour-intensive sectors like textiles, construction material and the food processing industry.

This is trend of fall in quality of work was also seen in the trend in category of employment.

The PLFS 2020-21 shows the best category jobs, regular wage/salary jobs, fell from 22.9% of the total employment to 21.1%. Casual work, the least paying and most uncertain, too went down from 23.6% to 23.3%. There was a rise in self-employment, driven by massive job loss rather than rise in entrepreneurship, from 53.5% to 55.6%.

Further, unpaid workers in the self-employed category went up from 15.9% to 17.3%. A bulk of it, 36.6% were female workers – up from 35% in the previous PLFS of 2019-20. The spread of unpaid workers was seen in both rural and urban areas. Not just female unpaid workers, the number of male unpaid workers also went up from 8.5% to 9.2%.

All these impacted wages too.

‘Real’ wages (inflation indexed) of regular wage/salary workers and self-employed fell while those of casual workers went up. For regular wage/salaried category, ‘real’ wages dipped by -8.9% and that of self-employed by -4.9%. Casual workers’ wage (real) went up by 3.6%.

Other evidence contradicting PLFS of 2020-21

There are large bodies of studies, including one official statement of the Indian government, that the pandemic caused massive job loss. Here are some examples for demonstration purpose.

Minister of State for Labour and Employment Rameshar Teli told the Rajya Sabha in February 2022, that about 2.3 million workers had lost their jobs during the first wave the pandemic. This loss happened across 9 sectors and 66 other establishments.

The Azim Premji University’s State of Working 2021 paper had shown that India lost 100 million jobs in the calendar year of 2020, of which 15 million jobs were lost permanently. It also showed 50% rise in informal workers as workers moved from regular wage/salary category to informal self-employment (30%), casual (10%) or informal salaried (9%) work. It found that wages of workers had fallen by 17%.

The second wave caused further job loss. The CMIE survey showed 10.5 million jobs were lost – 9.5 million regular wage/salary jobs and 1 million entrepreneurs – and most of the jobless workers shifted to casual labour or self-employment. In all, 97% households’ income had declined.

This distress in employment has been reflected in a spike in demand for menial, low-paying – below the minimum wage of states – MGNREGS work. The official data shows the number of households availing MGNREGS work jumped from 54.8 million in FY20 (pre-pandemic) to 75.5 million in FY21. The number of individuals who worked under the scheme went up from 78.8 million in FY20 to 111.9 million in FY21.

That these are poorly paid jobs is evident from the fact that the “average” MGNREGS wage per day per person was ₹200.71 – up from ₹182.09 in FY20.

All this evidence points to the fact that when the future generation looks at the PLFS of 2019-20 and 2020-21 they would assume continuation of the earlier trends in all three key employment numbers – WPR, LFPR and UR – during the pandemic. The migration to low-paying jobs and fall in wages are also trends set before the pandemic hit. Surreal indeed.