Perspective

Viral impulse

The coronavirus crisis could be a catalyst for change, for labour reforms and towards a more dynamic workforce

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Published 5 months ago on Apr 24, 2020 Read

Everything we are doing to murder the virus is murdering the economy. Turns out epidemiologists are like economists — they don’t agree with their past selves or each other. And it is now clear that we will never be certain about the right time to lift the lockdown. After all, we can only control risks, never eliminate them. What is needed right now is to stop this health crisis from becoming an economic and a labour market crisis. On the positive side, this crisis, like any other has many opportunities for India’s world of work. 

Our labour market is confronting an unprecedented uncertainty and we suggest it is better to think in terms of seven trade-offs rather than conflicts:

1. Lives versus livelihoods: Here, democracies often make the wise choice of being poor than dead. 

2. Employers versus employees: The stereotype of an employer is Infosys or HDFC but, out of the 630 million enterprises in the country, only 19,500 have a paid-up capital of more than Rs.100 million. Almost 97% of them have less than 10 employees. 

3. Formal versus informal employers: The former has always been impacted more, but turned out to be more resilient during the current crisis.

4. White collar versus blue collar labourers: This epidemic has brought to surface a caste system under which 65% of our graduates can work from home, but only 10% of the non-graduates can. 

5. Residents versus migrants: Those from North and East India have suffered a worse fate than the ones in the South and West of the nation, since most migrate from the former regions to the latter. 

6. Liquidity versus solvency: Zero revenue is a crisis of solvency for employers who require fiscal interventions more than monetary policy. 

7. Verbal orders versus written law: The fog of war has led many local, state and central policymakers to issue orders around labour markets that may not stand the scrutiny of courts but need to be followed.

Looking ahead
Indian employers have spent the first three weeks of the lockdown trying to make sense of how a post-COVID world will look like. While businesses are operating with zero revenue, they have also been hit since many formal migrant workers prioritised safety over job security and absconded. Meanwhile, informal migrant workers are stranded in cities without wages and shelter. Needless to say, the deep demand disruption and supply chaos will have long-lasting shadows. 

Employers have suddenly been divided into two buckets — essential and non-essential services. The former includes medical supplies and services and consumption, telecom and education sectors. But we believe the fastest to recover from the lockdown will include the likes of logistics, agriculture, construction (rural areas), IT and ITeS (Information technology enabled services), and banking and finance. On the other hand, hospitality, physical retail, airlines and restaurants will be the last to recover even if legal restrictions are lifted. 

India’s regulatory cholesterol is showing its fangs in the worst possible manner as employers and employees struggle under the burden of high mandatory deductions, fixed employee costs and a lack of flexibility (the massive and unreasonable compliance universe for employers includes 57,000 compliances, 3,100 filings and 3,000 changes a year). But COVID-19 could be a catalyst for change. For instance, consider labour reforms. We hope to see fast-tracking of the four labour codes into one, but we will take what we get. The other changes that we are counting on are in education (only 30 of the 800+ universities are allowed to offer online learning), finance (increasing credit to GDP ratio from 50% to 100%) and civil services (performance management, better training and more accountability for the bottom of the pyramid. Only 4,700 of our 20 million civil servants are IAS officers). Moreover, we wouldn’t complain if there was better formalisation of our regulatory system, which would include simplification, rationalisation and digitisation of the regulatory cholesterol. 

Corona will also change the world of work. Employers are being reminded of the need to be more flexible, agile, and fluid. They had become fat during the good times, but are now being compelled to be flexible enough to morph their organisation structures from pyramids to cylinders and Eiffel Towers. They have been reminded of the need to variabilise their employee costs and chunk them. This will mean organisations will view their staff in concentric circles. The core circle will always be a bunch of permanent employees with higher variable pays. The next one will comprise apprentices —- newbies on a test drive. The next circle will be direct fixed-term contracts — seniors they are taking for a test drive or alumni being used for surge capacity. The next circle will be third party fixed-term contracts (staffing) —- those hired for specialised skills. The outermost circle will be freelancers a.k.a the gig workforce.

Most importantly, the planet undergoing a mandatory crash course in digital literacy will bring forward massive productivity gains. Within a month, 2020 has become 2030 in terms of digital learning, compliance, payments and e-commerce. This is going to blunt the unfair advantage that big firms have, reduce the rural and urban access divide, and enable labour market outsiders to compete on fairer terms. 

Policymakers understandably have a duty to save lives first. But life would be difficult, if not empty, without livelihoods. We get much more from work than income. Work is often the source of identity, community, skills and self-esteem. Economists suggest that prolonged absence from work can lead to ‘hysteresis’ — an atrophy of skills, relationships and human capital that is hard to recover from. As academician Neil Carothers once said, “Look back along the endless corridors of time and you will see that four things have built civilization: the spirit of religion, the spirit of creative art, the spirit of research and the spirit of business enterprise”. The spirit of business enterprise was blunted during the lockdown. It will come roaring back. But you can never step in the same river twice; we will all come back to a different world of work for India, employers, and employees.

— You can reach the authors of this article on Twitter at @TeamLease and @ritu205, respectively