What happens to workers once they are out of jobs?

Jinoy Jose P | Updated on September 30, 2019 Published on September 30, 2019

With most of them not covered by a robust social security system, this reserve army of labour will penetrate into the margins of society and pose a serious demographic challenge

India is staring at a gargantuan unemployment crisis. Technically speaking, the crisis has not unravelled into its real form yet, but analysts, journalists and even policymakers seem to have got the pulse right about the impending spectre of joblessness. Scan news, you get the drift. Food giant Parle Products recently said around 10,000 workers might be laid off if the current conditions persist. Maruti Suzuki says over 3,000 temporary employees have lost their jobs. The company has stopped renewing contracts of such employees due to the continuing slowdown. Nissan may lay off over 1,700 employees in India. The auto sector crisis has cost 2.30 lakh jobs as the industry faces its worst fall in sales in 20 years.

The Indian Railways is reportedly planning to lay off around three lakh workers. IT major Cognizant is likely to fire a few hundred more employees to cut costs. Cisco, another IT major, has just laid off employees in India. The Northern India Textile Mills Association (NITMA), an association of textile mills in north India, has said three crore jobs in the sector are under threat. In banking, HSBC India has laid off about 200 of its employees. That number looks smaller, but the sector is facing a crisis of confidence and trust and more jobs are at stake.

Even OYO Hotels and Homes plans to lay off 150-200 people from sales teams across the country. In the gadget sector, handset maker Honor is scaling down its India operations and asking employees to resign across functions in a phased manner. Even among startups layoffs are on the rise: ShopClues, Rivigo and other startups cut workforce in 2019. Reports say at least five Indian startups have trimmed their workforce drastically this year. In July 2019, ShopClues laid off some 200 employees. Logistics ‘soonicorn’ (soon to be unicorn) Rivigo has let go of nearly 100 employees this year.

Bleak picture

Painting an even bleaker picture, just last week the Centre for Monitoring Indian Economy (CMIE) reported that some 1.1 crore Indians lost jobs in the last quarter of 2018. Most of them were in villages; over 91 lakh. CMIE says job loss was highest among the uneducated, mainly women (65 lakh) in rural areas. Another estimate shows a whopping 77 per cent of workers in India face uncertainty of employment by 2019, while the overall unemployment rate was 3.4-3.5 per cent during 2017-19.

This begs a big question: What will happen to all these workers, most of whom are blue-collar, once they are out of jobs? In many other geographies, especially in advanced countries such as the US, such crises won’t morph into a larger social crisis immediately because most workers still enjoy robust social security protection. More than 90 per cent American workers enjoy social security cover. In India, that share is below 8 per cent in the formal sector and no authentic data is available for informal workers. More than 90 per cent of India’s working population is in the informal sector, which is being hit hard by the ongoing economic slowdown and the general crisis in employment.

Policymakers must look into this immediately. Central policies such as PM Kisan Yojana mostly target farmers. And programmes such as MGNREGS, Right to Food, etc., are generally piecemeal in nature. So, in all likelihood, this reserve army of labour will penetrate into the margins of society and will pose a serious demographic challenge, especially considering that the NITI Aayog last month said the government is planning to scrap many social security programmes (it said obsolete ones, still we can imagine how that will play out) and the Centre is planning more cuts on social sector spending.

Published on September 30, 2019
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