‘19 million people from the formal sector have lost jobs between April-August 2020’.
New Delhi: As jobs in the informal sector are slowly coming back with the easing of lockdown restrictions across the country, the Covid-19 pandemic has hit salaried class employees from the formal sector the hardest, leaving them bleeding with job losses and salary cuts.
A Centre for Monitoring Indian Economy (CMIE)–an independent economic think tank–report states that around 19 million people from the formal sector have lost their jobs between April and August 2020, and this includes 11 million salaried employees who have lost their jobs from the urban areas and 8 million from the rural areas.
Urban areas, of course, have more salaried employees than the rural areas and an estimate of more than 80 million people are employed in the formal sector in the urban areas.
“Salaried jobs in urban India are likely to be the better paying jobs, they offer better terms of engagement and also, are jobs that yield higher productivity compared to salaried jobs in rural India. Loss of these urban salaried jobs is, therefore, likely to have a particularly debilitating impact on the economy besides causing immediate hardship to middle class households,” the Centre for Monitoring Indian Economy report said.
Various economists and industry stakeholders say that the IT and the BPO sector has been one of the hardest hit, with a majority of formal sector job losses being reported from this sector.
According to a report in an Indian media outlet, more than 50,000 employees from the IT and BPO sector have been laid off till the first week of August and the report also quotes company human resource representatives who say that the industry is likely to witness more job losses in the coming future as clients these companies are engaged with have either deferred their payments or have withdrawn contracts with the companies.
A report by the Asian Development Bank (ADB) and the International Labour Organisation (ILO) also says that 41 lakh youth in the age group of 18 to 24 years have already lost their jobs.
“The young people’s employment prospects in Asia and the Pacific are severely challenged due to the pandemic. Youth will be hit harder than adults, in the immediate crisis and risk bearing higher longer-term economic and social costs,” the report titled “Tackling the Covid-19 youth employment crisis in Asia and the Pacific” said.
Reports of job losses and salary cuts from the aviation, hotel and tourism industry, manufacturing industry, media are abuzz with salary cuts and job losses and this comes at a time when Prime Minister Narendra Modi and his government have been repeatedly asking employers to be compassionate and not to layoff people and deduct salaries at such a time.
Reports of job losses and salary cuts in the formal sector also can be corroborated from the reduction in the wage bill of companies that filed their financial reports ending in the June quarter.
The manufacturing and textiles industry has been the hardest hit and its wage bill fell by 29%, while the leather industry reported a lower wage bill by 22%, indicating salary cuts and job losses.
In the services sectors, the wage bill of the tourism industry was down 30%, hotels and restaurants down by 20.5%, road transport down by 27.6%, education by 28%. Wage bill of the real estate sector was down by 21%. The wage bill of the telecom sector increased by 10.7%.
The filings of 40 leading BSE 100 companies, which includes top auto to aviation companies that have announced their results for the quarter ended June 2020, also show how the salaried class people are facing the heat of the Covid-19 pandemic with job losses and salary cuts.
Mahindra Finance has seen a drop of 36.7% on employee expenditure; Havells India has seen a drop of 27% on employee expenditure; while Tata Motors dropped 26% employee expenditure, HDFC Life Insurance 21% and Maruti Suzuki India 15%. In the aviation sector, one of the largest Indian aviation companies, InterGlobe Aviation, operating under the brand name IndiGo has cut 14.8% on employee expenditure, Bajaj Finserv 13% and United Spirits by 12.9%.
The increase in the number of withdrawals from the Employees’ Provident Fund Organisation (EPFO) between April to July 2020 also suggest slump in the salaries of formal sector employees and job losses. EPFO accounts are only held by formal sector employees.
According to the Ministry of Labour and EPFO data, a total of 11.27 lakh claims for withdrawals from the EPF accounts was received by the EPFO organisation. Unnamed officials from the Employees’ Provident Fund Organisation also told some business media organisations that more than Rs 8,000 crore has been withdrawn under the Covid-19 window between April to July 2020.
Reports also suggest that many of the start-up companies are also winding their shops with investors pulling out their money or due to the slump in their business. The start-up ecosystem in India also employs a significant number of people across the country, especially in the urban areas.
Employees who have lost their jobs or have faced a major salary cut are worried about their EMIs as the loan moratorium given by the Reserve Bank of India is coming to an end on 31 August. The Sunday Guardian had reported on the hardships that people are going to face once the moratorium comes to an end with no jobs and reduced salaries.
However, sources in the RBI have said that they are not considering a further extension of the loan moratorium, given the fact that banks are going to face tremendous financial crunch if a further extension is given.
But economists and people who have lost their jobs feel that the extension on moratorium should be given to the affected people till the time the economic situation improves or the person secures another job.