The recovery story treads on thin ice


The government has predicted that the economy would recover in the second half of the current fiscal year. Real GDP contracted by 15.7 percent in the first half compared to the previous year’s first half. Government expects the second half to almost not shrink anymore in a similar comparison. But, employment statistics available till the third quarter do not support such optimism.

In the first quarter when the economy tanked by 23.9 percent, employment contracted by 18.4 percent both in year-on-year comparisons. In similar comparisons, in the second quarter, the economy contracted by 7.7 percent and employment by 2.6 percent. Now, we know that in the third quarter, employment shrank even more, by 2.8 percent.

Economic recovery either stopped in the third quarter or it stopped showing up in recovery in employment. Month-on-month expansion of employment, which was very high in the initial recovery months of May and June slowed down in July, August and September and then has been declining in each of the three months of the third quarter. Employment in December 2020 was 4.2 percent lower than it was in December 2019. Employment has stagnated well before its complete recovery.

By the end of December 2020, employment was 14.7 million short of what it was in 2019-20. But, this decline is only half the story. The composition of this shortfall is as worrisome as the shortfall itself.

Urban India accounted for 32 percent of total employment in 2019-20 but it accounted for 34 percent of the total loss of employment in 2020-21 till December 2020. Arguably, urban India provides better jobs and its greater share in the loss does not bode very well for the recovery process.

Women account for a mere 11 percent in total employment. But, they accounted for 52 percent of the job losses. Much of India’s growth acceleration depends upon the increased participation of women in India’s workforce. But, they continue to bear a disproportionately high proportion of the cost of economic shocks. They suffered a disproportionately large loss of employment during demonetisation and now, they have borne a similarly disproportionately high share in job losses because of the lockdown.

Next, job losses were concentrated among the younger workers. All age groups below the age of 40 suffered a fall in employment till December 2020 this year while all age groups above 40 years of age have seen a small gain in employment.

Although India’s working-age population pyramid bulges at the lower end of the age distribution, its workforce does not bulge similarly. Fourteen percent of the working-age population is between 15 and 19 years of age but only one percent of the workforce is in this age bracket. This is understandable assuming that most of them are still studying. But, while twenty percent of the working-age population is in their twenties, they account for a lower 19 percent of the employed persons. Worse still, these twenty-somethings account for 80 percent of the job losses as of December 2020.

Folks in their thirties account for 17 percent of the working-age population. They account for a higher 23 percent of the total workforce. Apparently, youngsters in their twenties failing to get jobs in proportion to their share in the working-age population is a phenomenon of the last ten years. Because the current cohort of the 30-something was 20-something a decade ago and their share in employment must have been higher than their shares in the population then. This is not true of the 20-somethings of 2019-20. Nevertheless, the lockdown has dealt a tough blow to even those in their 30s. They accounted for less than a quarter of the total employed in 2019-20, but they accounted for 48  percent of jobs lost as of December 2020.

There were job gains in senior age groups those over 40 years of age. Evidently, India’s workforce aged in 2020-21 during the lockdown. The share of those over 40 years of age, which was 56 percent in 2019-20 increased to 60 percent by December 2020. The share of the relatively young has correspondingly shrunk. This aging of the workforce again does not bode well for a stronger recovery in the second half of 2020-21 or in the future.

Graduates and post-graduates had a 13 percent share in total employment in 2019-20. Their share in the loss of jobs was 65 percent. Of the 14.7 million jobs lost, 9.5 million were those of graduates and post-graduates.

Finally, salaried employees who accounted for 21 percent of total employment in 2019-20, accounted for 71 percent of the total job losses.

Nearly fifteen million less people were employed in December 2020, nine months after the lockdown hit people’s livelihood compared to those that were employed before the lockdown in 2019-20. Those who lost jobs were concentrated in urban regions, among women, among the relatively younger workers, the graduates and postgraduates, and the salaried employees. It is easy to assume that by  December 2020, India’s workforce had not only declined quantitatively but also deteriorated qualitatively. Given this crater India has dug itself into on the employment front, the party rejoicing a quick V-shaped recovery is dancing on thin ice.



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