Fault lines in economic landscape and the great labour shakeup

The three fault lines in global and national economic landscape

In context to the global macro-economic scenario, and positioning India in it, there are three fault lines. How each nation understands and responds to them using an intersectional lens will shape the course of the future economic trajectory.

To understand the first fault line, looking closely at the World Inequality Report 2021 data may help. The report highlights how the share of the bottom 50% of the world in total global wealth is 2% while the share of the top 10% is 76%.

The wealth of the top 10% globally, which constitutes the middle class in rich countries and the merely rich in poor countries, is growing slower than the world average, but the top 1% captured 38% of the global increment in wealth while the bottom 50% captured 2%. Those in the top 0.1% saw their share of wealth rising from 7% to 11% in just a year.

In context to India, the top 1% earned more than 21.7% of the country’s total national income in 2021 while the bottom 50% made 13.1% of the money. The authors argue that the ‘deregulation and economic liberalisation’ policies pursued since the 1980s in India resulted in one of the most extreme increases in income and wealth inequality.

Also Read | India witnessing 'great churn' in its labour force

In understanding the second and third fault lines, we need to dig deeper to study the global (national) labour market landscape — particularly from the last two years’ perspective.

In a recent paper measuring German workers’ beliefs about rents and outside employment options authored by economists Simon Jager, Christopher Roth, Nina Roussille and Benjamin Schoefer, they find that 13% of jobs would not be viable at current wages, concentrated in the low-wage segment of the German job market.

Most remain employed in undertaking low-wage work because of being ‘overpessimistic about outside (work) options’, and this belief tends to give ‘monopsony power’ (undue competitive advantage) to employers in context to low-paid workers.

The only scenario under which such low-paid workers are forced to change their ‘misinformed conceptions’ about external employment scenarios and look for, say, better wage opportunities (or a wage-premia), would be a big enough shock that forces a massive shakeup of the entire labour market.

Two years of Covid-19 — and its subsequent economic fallout — did just that. Most economists are now calling this ‘shakeup’ in the global labour market as a period of ‘The Great Resignation’.

In the US, more than four million workers quit their jobs in the month of September, shattering the record for resignations previously set the month before.

About 40% of the remaining employees are thinking of quitting too, according to a recent Microsoft report. In tech, more than 72% of US-based tech employees are thinking of quitting their job in the next 12 months.

So, what is going on here?

Under normal circumstances, an exodus of ‘job-quitters’ signals a labour market to be dealing with a great shortage of jobs (a demand-side problem). But, the last two years haven’t been remotely normal; subsequently, a long cycle of mass resignations isn’t restricted to the US alone but is part of a cause for global concern.

The ‘Work from Home’ (WFH) scenario (especially in tech, other service-based jobs) has changed the workers’ beliefs/expectations about their own job and the outside employment scenario. The ‘misinformation’, or ‘over-pessimistic’ attitude, which many low-paid workers earlier had, has been disruptively reoriented.

The India picture

In the Indian scenario, its abysmal labour market situation continues to gravitate towards a worse (pre-pandemic) state.

The Periodic Labour Force Survey (PLFS) data for January-March 2021, released last week, show that unemployment rates were close to pre-Covid levels of 2020. And, women, as argued earlier in 2020, bore the brunt of the pandemic in terms of the economic fallout.

Well-paying secured jobs in the macro-organised (secured) space have been shrinking for the educated workforce in India. This has obviously added to the ‘rising inequality concern’ amongst the middle (and lower-middle-income) classes too.

Even during/since the second wave of the pandemic in India, only a select number of sectors (like construction) have added to temporal cycles of job creation as most service sectors struggled. This highlights the third fault line, the issue of weak work contracts, as some ‘job-creating’ sectors, too, continue to make the conditions of workers more exploitative.

As per PLFS 2020 data, only less than 43% of all employment contracts in India’s organised workforce (employing less than 20% of the workforce) ensure provident funds/gratuity, healthcare and maternity benefits. The share of regular salaried workers, who have at least one social security benefit, i.e., ‘regular protected employment’, is 40% (as per 2019-20 data).

Indian workers — in the areas of health, education, utilities too — are increasingly finding refuge in temporal ‘ad hoc work contracts’ while those in the lower-paid work category (plus low-end-manufacturing space) continue being absorbed by a swelling vulnerable, ‘unorganised’ sector.

Those with capital and more privilege than informal workers are preferring to be ‘self-employed’ (under the sub-category of ‘Own Account Worker’), as reported by CMIE recently.

Narrowing down the diagnosis of some of these crises at hand, from the Indian side, the issue appears to go much beyond any analysis that sees it as part of a ‘supply-side problem’ alone.

Like Jager’s study, what’s needed is careful analytical scrutiny of the ‘demand-side’ problem in the labour market landscape through a deeper understanding of the psychology of worker expectations, which is centred around the changing composition of worker beliefs about rent (work-pay), housing, social security, care responsibilities, and outside (employment) options.

This can help in undertaking (fiscal) policy interventions for minimising not just income and wealth inequalities but also ‘access inequality’. More importantly, seeing these fault lines intersectionally from both the global and national economic landscape’s perspective is critical for immediate and effective public policy intervention.

(The writer is Director, Centre for New Economic Studies, O P Jindal Global University)

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