Coronavirus Lockdown 4.0: Dependence on local labour spiking unemployment during lockdown

The states that are heavily dependent on the local workforce have seen a steep jump in unemployment during the lockdown period.

Tamil Nadu, a state that is highly dependent on local workers and is the second biggest contributing state to the Indian economy, is currently reeling under the highest unemployment rate in the country -- 49.8% in April.

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Similarly, states like Bihar (46.6%), Haryana (43.2%) and Jharkhand (47.1%) have hit way harder than the national unemployment rate of 23.5%.

On the contrary, Maharashtra, which contributes 16% to India's GDP is worst hit because of the coronavirus pandemic. The state witnessed the unemployment rate stand below the national rate -- at 20.9%.

The migrant workforce, who have been primarily focusing on returning to their home states, are not considered as part of the unemployed population. On the other hand, the local workforce, which is staying put, is actively searching for jobs, hence adding up to the employment rate. This is why you see way higher unemployment rate in Tamil Nadu than in Maharashtra, according to labor market analysts.

Experts and entrepreneurs attribute the massive increase in unemployment in the state to shut down of industries due to COVID-19 lockdown. Already, the slowdown had hit the MSMEs and automobile sector so badly that some units have shut or companies are resorting to lay-offs, resulting in unemployment.

Prof. M Vijayabaskar of Madras Institute of Development Studies told DH that Tamil Nadu is one state along with Kerala which does not depend on agriculture for job generation and this could be the reason for the sharp increase in the unemployment rate.

“Tamil Nadu’s dependence on agriculture for job generation is one of the lowest and the state has been successful in transforming itself into an industrial hub. The industrialized state could not handle a shock like a complete lockdown and that could be the reason for such a massive increase in the percentage,” Vijayabaskar said.

From textiles to automobiles to knitwear to fireworks to engineering industries – the engines that fuel Tamil Nadu’s vibrant economy is in crisis and are slowly limping back to normalcy. Vijayabaskar added that most industries that provide employment opportunities to people like the automobile, medical tourism, tourism, and construction sectors have been badly hit due to COVID-19.

“All the problem is not due to COVID-19 alone, there were problems in sectors like the automobile for the past few months due to slowdown. Even MSMEs were badly hit due to the slowdown and that is also a reason for unemployment,” he added.

K E Raghunathan, former president of All India Manufacturers’ Organisation (AIMO), told DH that it would take at least a month to know whether this phenomenon is temporary or permanent. He also said about 30% to 40% of MSMEs are expected to shrink their employment opportunities by 40% in the second quarter of this year.

“We need to know whether this is permanent unemployment or just a temporary or short-term layoff. That can be ascertained only when factories open up,” he added.