A stronger-than-expected rebound in economic activities in recent months has raised hopes of a faster-than-previously-anticipated recovery. But if employment is the lodestar of policymaking, it is equally critical to evaluate whether the labour market is witnessing a similar rebound or not. While job creation typically tends to follow economic recovery, surely, by now, given that value added by almost all sectors is around 90 per cent of last year’s levels, the distress in the labour market should also be showing signs of easing.
In the absence of reliable and regularly available data on the labour market, it is difficult to gauge the scale of the distress and the extent to which it has receded. But piecing together information from various sources can help understand how the labour market, in particular, three segments — the formal and the informal urban labour force, and the rural labour force — have fared over the past several months.
One way to examine the state of the formal labour force is to look at EPF data. But rather than looking at monthly payroll data, monthly data on contributing employees and establishments provides a better understanding of the entire universe of formal sector workers. Data for January 2020 has been taken as the starting point simply because the disruption in economic activities, which began in the last week of March, is likely to have impacted the ability of employers to file their Electronic Challan cum Return (ECR) for February.
In January, the total number of contributing establishments and employees stood at 5.4 lakh and five crore respectively. However, in April — the first full month of the lockdown — the number of contributing firms and employees declined to 3.32 lakh and 3.84 crore respectively. In large part, this fall can be traced to difficulties faced by firms in filing their ECRs during this period. The rise in the number of contributing establishments in the months thereafter — in line with the easing of lockdown restrictions —attests to this possibility.
However, despite formal establishments returning to almost pre-COVID levels by September, the number of contributing employees was 23.26 lakh lower than in January. While anecdotal evidence suggests that some of these employees may have subsequently secured employment, though not formal in nature, these numbers suggest that the upper limit of formal job losses is likely to have been around 23.26 lakh or 4.6 per cent of the formal labour force. Data for October shows an even greater fall in contributing…
Read More: Optimism from economic rebound must be tempered by employment distress