Opinion

How easing lockdown rules will impact workers and companies

KR Shyam Sundar | Updated on: Apr 21, 2020
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Labour markets are up for short- to long-term changes as new rules will ramp up overhead costs, bring in wage fluctuations and hamper optimal use of workforce

The Centre is easing Covid lockdown restrictions in a phased manner. One set of relaxations kicked in on April 14 and another followed from April 20 onwards, subject to conditions. The government has opened up economic activities based on two key economic assumptions. First, it thinks the spread and risk of Covid-19 are primarily limited to urban centres and rural or mountainous areas are less affected. The activities that got the government nod for a restart — such as farming and non-farming activities, manufacture and construction works — are, hence, in these areas.

Next, the Centre seems to believe essential, critical and perishable economic activities (such as farming) and their support activities cannot remain closed for long, while non-perishable and substitutable activities such as education, entertainment, sports and religious affairs, which will defeat the very purpose of a lockdown extension, can remain closed till the second part of the lockdown expires, or later.

The government order requires all establishments to strictly observe the conditions in the National Directive for Covid-19 Management (NDCM) and the Standard Operating Procedure for Social Distancing for Offices, Workplace, Factories and Establishments (SOPSD).

The NDCM includes social distancing, arrangements for temperature screening, the supply of sanitisers, one-hour gap between work shifts and staggering lunch breaks, sanitization of workspaces between shifts, frequent cleaning of common areas and intensive communication of hygiene, etc.

The SOPSD further requires multiple health security-related and allied arrangements. These include disinfecting common facilities, dormitory facilities for workers, personal transport for workers reporting from outside, medical insurance for all workers, among others. The government assumes the entities will display responsible self-governance as manual scrutiny is nearly impossible.

Labour market implications

This situation will offer opportunities for a cluster of workers engaged in certain economic activities. These include loading and unloading of cargo, construction projects, back offices in the financial and banking sectors, private security services and facilities maintenance services in office and residential complexes, courier, e-commerce services, hospitality sector for limited purposes, brick-kilns, etc. Contract, casual or temp workers stand to benefit here.

This will help migrant and daily-wage workers. But there is a catch. Migrant workers in urban spaces may not gain immediately as more work opportunities will arise in rural areas owing to near-universal clearance of economic activities in those geographies. In urban areas, job demand will be very limited at the outset. This could lead to an exodus of migrant labour from cities to villages.

Firms will have to weigh the costs and benefits of providing dorms for workers inside their premises vis-à-vis offering private transport. Dorms come with allied costs: food, resting and other facilities. Private transport could involve money and logistical costs, such as clearances from authorities, which may be several. Either way, costs will be higher.

The government order says employers must provide medical insurance to workers reporting for work. This will involve group insurance costs. Still, it may not provide relief given the ambiguity around the insurance coverage of pandemics such as Covid-19. There are also issues such as compliance with the compulsory minimum hospitalisation requirement or possible exclusion of Covid-19 during the waiting period by insurance policies. Then, insurance regulators will have to issue macro directives to rectify the possible non-coverage clauses; else, this is a dead investment for companies.

More importantly, employers will have to either circulate a pool of regular workers in proportion — say 3:1 — to honour social distancing principles, which means all the workers may not get employment. The regulars who won’t get work may be sent for peripheral jobs (like gardening) if the employers have to offer them their existing wages. This will affect the jobs contract workers.

Further, employers will demand from workers multi-skilling and multitasking (say machine setting, operating, cleaning, maintaining, transporting the raw material, all done possibly by one worker) to reduce labour cost and also for adhering to social distancing norms. Those who get employment may earn more than those who could not be employed due to genuine reasons like social distancing.

There is a possibility that some firms may prefer to employ contract or trainees to regular workers to reduce labour costs, which may lead to labour unrest — though this will benefit migrant workers.

What needs to be done

These issues can be solved by taking a few crucial measures. One, company managements must consult trade unions in all such decisions. The social dialogue will pre-empt issues concerning employment, income rationing, workload determination and such.

Two, non-employable workers could be provided full income with the condition that when full work resumes, they will work overtime without pay to compensate for these wages.

Three, assuming that this is a short-run arrangement, a wage-salary fund could be created at the firm level and progressive income cuts could be taken by employees/workers, which will leave more disposable wage funds to ensure income protection for low-income earning workers, irrespective of their actual employment.

Four, for workers who are outside these permissible economic activities, especially migrant workers, the government must provide direct cash benefit equivalent to the prevalent minimum wages. This is important to avoid social unrest.

The writer is a professor at XLRI, Jamshedpur. The views are personal

Published on April 21, 2020

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