How corona epidemic will affect the informal laborers market?

By - Amit Kumar (Research Scholar at BML Munjal University)

Since the outbreak of coronavirus, few questions, particularly in regard to the Indian economy kept bouncing in my head.

Is the exodus of the informal laborers from the Industrial region temporary?

Do our politicians of various states, empathetic enough to sense the pain of their daily wage workers?

How this forced migration of Informal laborer will impact India’s informal Job Market?

On average, minimum wages in Delhi are around 15K~16K /Month, that too with no job security. Then, it would be reasonable to assume that a worker might be able to save at most 3~5 K/Month (taking into account the high cost of living in metropolitan).

If the state governments provide financial assistance of 3~5 k to migrant informal labor in the form of various schemes. In the post-COVID-19 world, this might lead to the scarcity of labor in the market for a short period.

How?

Since various state governments announced some support in the form of food/DBT (Direct Benefit Transfer). When Daily wage earner will return to his work in industries. He might not have a significant incentive to live in the industrial region, due to an increase in the price of essential goods, in the post-pandemic world. This increase in price can be expected to sustain until industries further see their inventories accumulation.

Informal laborers who were forced to leave India’s Metropolitans with deep anguish. I don’t think they are easily going to come back in the near future (6~8 months) to their workplaces. This will create a temporary shortage of workers and may pushes wages to rise.

It is a known fact that India’s manufacturing industries' revenues comprise their blood and sweat. Therefore the profitability of the manufacturing sector is going to hit in the near future.

Informal laborers and Manufacturing

What if these laborers don’t return to cities from their natives in the long term? I know this might seem dystopian. But if this happens, then Manufacturing industries can consider shifting their manufacturing location to labor abundant places for eg BIMARU states. But, doing this will involve a huge amount of fixed cost.

Just imagine if this happens, then there is one thing which will prohibit these industrialists to set up their factories in these states. That one thing is Law and Order, especially of BIMARU states.

This has a lesson for the Chief ministers of different states, especially of BIMARU ones, that if they want their citizens' migration to decline. Therefore, they should focus on their state's law and order as it is the greatest hurdle in setting up of industries.