Impact of COVID-19 on employment in urban areas

 

COVID-19 has decimated livelihoods in urban India and created a new underclass of workers who are being pushed into poverty.

Developing economies across the world have large informal sectors, where workers lack even basic social protections like sick pay. India is no exception. Regular wage/salaried employees make up less than half of the urban workforce, and the rest are in a hinterland of casual work, temporary contracts and self-employment. Even among regular employees, only 27 percent have a written employment contract while a little over half have access to some benefits (provident funds, sick pay, health insurance) through the government or their employer. The latter make up the flagship schemes for COVID-19 relief to workers in urban areas which, at the outset, provides limited reach due to large proportions of uncovered workers. Many workers are expected to be covered by these schemes. Yet old and new forms of informality persist, leaving many without basic social protections.

 
Like many developing economies, India has a young workforce: 62 percent are aged under 40 and most of them are in informal employment. India recorded its first case of coronavirus in late January 2020. Since then, the number of confirmed cases has increased rapidly. The government of India announced a nationwide lockdown. The lives of 1.3 billion people came to a standstill for 21 days. Businesses, factories, schools and transport were closed and almost everyone was asked to stay at home.

While the initial phase of the lockdown applied everywhere, a more targeted approach was taken later so that some level of normal activity could resume. Most urban centers, especially big cities were classified as red zones during most of the lockdown. This had a large and immediate impact on employment. Millions of workers in urban centers saw their work come to a halt abruptly and many workers who had migrated to these areas were stranded without any source of income.

 

A briefing shows that the pandemic has had a dramatic impact on livelihoods in urban areas. Many people had already not been working since the start of the lockdown and had received zero pay in April without any financial assistance. 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. As a result, those in the top quartile of pre-COVID income went on from getting a 64 percent share of total income to a much higher 84 percent within three months.

Growing urbanization and an even faster-growing young workforce had already been posing massive challenges for the Indian labour market. The pandemic has left the “lockdown generation” with lower employment rates and a legacy of entrenched inequality. National and state governments recognize the livelihood crisis, but for the most part, their recovery packages fall far short of outlays to overcome it. In urban areas, the survey shows that 31 percent of individuals have a guaranteed number of days of work. Among those who do not, an overwhelming 70 percent reported needing a guarantee of a minimum 100 days of work. The youngest workers were much more likely to want a job guarantee, primarily for the livelihood security that they provide in these hard times.

A few states in India are introducing state-level job guarantees for their urban residents, but workers in large parts of the country would fall outside the purview of these state programmes. A national level commitment to overcome the livelihood crisis is therefore essential to prevent urban workers from falling into poverty and for countervailing the sharp and sudden rise in inequality.