Finding work is work in progress (COVID’s impact on jobs)

Relevance: Dealing with economic implications of COVID

Synopsis: Reversing the pandemic hit to the job market is only a first step. The real jobs challenge still lies ahead. A brief look at the impact of COVID on the job market and the future challenges.

Context

Economy is coming to pre-covid level by witnessing a swift recovery. The Nomura India Business Resumption Index, which tracks the pace of business resumption has risen  above its pre-pandemic level of 100 for the first time since the pandemic began last year. However, despite the sharp economic recovery, the job market challenges appear complex.

Impact of pandemic on jobs

• Uneven impact– High-skilled jobs in sectors such as IT and finance witnessed less impact due to shift to Work From Home (WFH) but WFH is not feasible in contact-intensive services such as hotels, restaurants, travel and tourism, which require physical proximity. Also, the low-skilled jobs in the manufacturing and construction sectors took an economic hit due to the pandemic.
• MSME’s impacted most– Small firms have been hit harder than big firms due to pandemic. MSME’s had no option but to cut wage costs to remain afloat.
• Increase in unemployment– According to the Centre for Monitoring Indian Economy (CMIE), unemployment rate stood at 8% in mid-August 2021, marginally higher than the 7.8% in February 2020
• Job losses– the pandemic has led to employment loss for 6.6mn workers. Around 10.9mn workers have dropped out of the labour force and are no longer actively seeking work.

Why recovery in jobs market is slow?

• Slow pace of vaccination– vaccinating a majority of the adult population is widely expected to take until end-2021, at the earliest. Until then, the economy remains vulnerable to pandemic shocks
• Hesitancy of firms– Firms will want to assess the durability of demand before starting on full-scale hiring
• Sectoral issues- job recovery will be faster for formal sector workers than for the informal sector. For informal sector workers, returning to pre-pandemic level of employment is likely to take much longer due to fear of contracting Covid-19
• Business closures– Many MSMEs, restaurants and small businesses have permanently closed, leaving no jobs behind for some.

Opportunities brought by pandemic

• The pandemic has accelerated the pre-existing trend towards digitization and e-commerce. Telemedicine, delivery and fintech are a few examples of sectors that have witnessed fast-paced growth during the pandemic
• Supply chain relocations as firms adopt a China plus one strategy have opened up newer opportunities for India to integrate into global value chains and create new manufacturing jobs.

Challenges

• Business travel will likely decrease in a post-pandemic world. Meetings, incentives, conferencing, exhibitions (MICE) type of tourism will likely decline
• Demand for commercial office space may be lower
• Automation may reduce employment intensity of manufacturing, hurting low-skilled workers
• More market concentration, as big firms becoming even bigger, while small firms are closing down, which could hurt job creation.

Measures

• Re-skilling and upskilling of the worker is need of the hour.
• Creating an enabling ecosystem for MSMEs to thrive by reducing compliance costs, funding costs.
• More jobs will need to be created in the infrastructure and construction sectors.
• An ecosystem for startups to gainfully employ India’s youth is needed.

Terms to know

• China plus one strategy