The human tragedy of migrants continues but the rising crescendo of intellectual outrage surprises us. What did you anticipate? India’s labour market has behaved exactly as expected in a crisis, given its peacetime pre-existing conditions. Every doctor will tell you that the time for treating pre-existing conditions is not the emergency room but the decades before you need triage. Covid-19 is not a passing shower but climate change; it will force the structural reforms that will explode the creation of productive and better paid jobs.
Migrants will come back
While Covid makes short-term modelling impossible, will migrants be like PG Woodhouse’s cat who sat on a hot stove never to sit on a cold one again? Or will migrants recognise the wisdom of Urdu poetry, “Majboori hai saab, muskurana padta hai”? We’d like to challenge the noisy notion that migrants won’t come back based on five mitigating factors.
First is materiality. There are about 7 crore inter-state migrants of whom 4 crore are in the labour force. Quasi-official estimates suggest that about 1 million of them have headed home; maybe another 1 million are waiting for transport or sitting on the fence with a decision. 0.2 crore, or 37 per cent of Norway’s population, is a small sliver of our labour force of 50 crore.
Second is a small frictional wage premium: a temporary mismatch between demand and supply that distorts wages. The confusing lockdown lifting is creating small pockets of wage premiums of 10-20 per cent for workers willing to join sales, customer services and logistics immediately.
The third is employer capacity utilisation. The reopening of corporate India is more like a gentle sunrise rather than a bulb that switches on; employer capacity utilisation polled from 25 per cent last week to 50 per cent this week.
Fourth is that most inter-state migrants ran away from economic wastelands; their remittances were an important source of income, self-esteem and respect. Necessity will drive them in search of work once again.
Fifth, when the lockdown lifts, panic will subside. The homing instinct is human, but was being amplified by the inability to head home. As transport links get restored, some of the panic or urge to head home will calm down. There will be many constraints to a full economic recovery, but labour availability will not be one of them.
The reforms opportunity
The current migrant pain need not be needless; we can change the pre-existing conditions that force our migrant workers into low-productivity and poorly-remunerated work. Formal employers have been more resilient in the lockdown because their higher productivity gives them access to debt and equity.
Of India’s 6.3 crore enterprises, 1.2 crore don’t have an office, 1.2 crore work from home, only 10 lakh pay for social security and only 19,500 have a paid-up capital of more than Rs 10 crore.
Urbanisation is important because productive jobs tend to cluster. New York has the same GDP as Russia with only 6 per cent of the people and 0.00005 per cent of the land. India mispriced land early in its development because we only have 52 cities with more than a million people (China has 375) and 6 lakh villages (2 lakh have less than 200 people).
Financialisation helps enterprises be more productive. Research suggests that a 100 per cent credit-to-GDP ratio for countries is sustainable. Our 50 per cent credit-to-GDP ratio is not only low but credit to small enterprises is particularly uneven.
Industrialisation is key because agriculture remains highly unproductive with 43.2 per cent share of total employment but contributes only 14.6 per cent to the GDP. Research suggests that non-farm jobs tend to be more productive, of better quality and pay better.
Finally, our investments in social security and human capital. We need to streamline and update our labour code to have clear, enforceable laws. It’s not about having more or less labour laws, but effective ones. Our social security reforms need to be revamped to help the vulnerable.
The human capital generated by schools, universities and vocational training is key to a 21st century economy. Yet of the 2.65 crore kids who take the Class X exam every year, 1.05 crore fail. We only have five lakh apprentices, and just 7 of our 950 universities were licensed for online learning till last week.
It is shameful that India’s labour market shock absorbers since 1947 have been unorganised enterprises and farm employment. In 1958, Nobel Laureate Arthur Lewis wrote in Economic and Political Weekly that the main remedy for farmer’s ills must always be fewer farmers. China’s prosperity–and 35 minimum wage increases–over the last two decades has been driven by a massive farm-to-factory transition. The shameful supply of vulnerable migrants will continue until India reduces her agricultural employment from 43 per cent to 5 per cent. This doesn’t need outrage but calls for reforms in the following areas: labour, city, civil service, compliance, banking, and social security.
Manish Sabharwal and Sabina Dewan. The writers are co-founders of Teamlease Services and Just Jobs Network. Views are personal.