The estimated monthly wage loss caused by job cutbacks in the country in the first two lockdowns alone would amount to Rs 33,800 crore, according to a new study published as a working paper by the Indira Gandhi Institute of Development Research (IGIDR). The study also estimates that the first two lockdowns, which stretched from March 25 to April 14 and April 15 to May 3, would have resulted in 11.6 crores and 7.9 crore workers facing the risk of job loss.
Assuming these workers remained jobless for a continuous six months, the total expected wage loss would amount to Rs 2 lakh crore, or three times the budget allotted for the MGNREGA scheme in the 2020-2021 union budget, said the study. Titled ‘Impact of Covid-19 Pandemic on Labour Supply and Gross Value Added in India’, the study is based on the Periodic Labour Force Survey data for 2017-18. The wage loss estimates are based on 2017-18 prices.
The study found that most workers who were at risk of job loss in the first two lockdowns were from states with the highest number of Covid-19 infections. It said 40% of the workers at risk of job loss were from the top five states in terms of a number of Covid-19 cases. Also, 70% of workers at risk of job loss were from the top ten states.
“Given that these states will continue to follow strict social distancing measures till the epidemic curve is flattened, the labor supply disruptions would persist and more workers would be rendered jobless,” the study said. Published in June, the study is co-written by Mohit Sharma from Collaborative Research and Dissemination, Sargam Gupta of IGIDR, and Xavier Estupian and Bharti Birla of ILO.
Informal workers are the worst affected, says the study. Of the 11.6 crore workers at risk of losing jobs in Lockdown 1, as many as 10.4 crore workers were informally employed. Of these, 7.9 crore workers are informally employed in the unorganized sector and faced the highest risk of job loss.
Workers in urban parts have been more affected than rural, found the study. This is because restrictions were fewer, with the bulk of activities in rural parts classified as essential.
In Lockdown 1, 42% of the workers in the urban parts and 16% of the workers in the rural parts were at risk of job loss. In Lockdown 2, 34% of workers in urban parts and 8% of workers in rural parts were at risk of job loss, said the paper.
“The most impacted sectors in Lockdown 1 and 2 were wholesale trade, the hotel industry, transport, manufacturing and the entertainment sector, including malls and movie theatres,” senior researcher Mohit Sharma said.
While estimating the cost of Covid-19 on the economy, the study looks at the GVA, or gross value-added, which is a measure of the total value of goods and services produced in the economy without accounting for taxes and subsidies.
To examine GVA losses, the study considers Lockdown 1 to 4, which ran till May 31. During the period, it predicts a GVA loss of 3.35 lakh crore, at 2011-12 prices, owing to the labor supply shock. This will lead to around a 13% reduction in GVA compared to a no-COVID-19 scenario, said the study.
The GVA growth rate in April-June 2020 is expected to decline within a range of -4.6% to -8.8 % compared to 2019-20, forecast the study. It pointed out that as the pandemic persists, the job crisis will worsen.
“The paper estimates job losses in the immediate short-run due to labor supply shock. However, as the pandemic spreads, it will lead to a loss in income for those who have lost jobs. This will further reduce demand for goods and services in the economy and can fuel more job losses in the future,” Sargam Gupta said.