All the indicators point to a coming year full of challenges for jobs. Worse, it appears some employers, using the Covid-19 pandemic, are doing as they please in firing staff and cutting salaries under the guise of ‘rationalization’. There was a small improvement in labour enrollment and jobs in September but it was short-lived. In October this year, the unemployment rate rose to 6.9 per cent, the highest recorded in the last two years. Employment further declined in November.
According to Mahesh Vyas, CEO & MD of the Centre of Monitoring Indian Economy (CMIE), “in October, the count of the employed had fallen by 0.1 per cent. In November, the fall was larger at 0.9 per cent. The October fall was 0.6 million. In November this was much larger at 3.5 million.” Among the worst hits are salaried jobs. “An estimated 21 million salaried employees have lost their jobs by the end of August. There were 86 million salaried jobs in India during 2019-20. In August 2020, their count was down to 65 million. The deficit of 21 million jobs is the biggest among all types of employment,” says CMIE’s September report.
Poor consumer sentiment
A mid-year survey, last year by LinkedIn, showed 1 in 3 Indian professionals have decreased personal income. Called the Workforce Confidence Index, it said the number of self-employed professionals who reported a decrease in income is much higher - 62 per cent.We thus see the fall in employment has been accompanied by a parallel reduction in household incomes, creating a huge depression in consumer sentiment. CMIE’s Consumer Pyramids Household Survey shows this translated into a discernible fall in sales in November of consumer durables and two-wheelers pushing down the Index of Consumer Sentiment from 52.5 in October to 51.8 in November.
Poor consumer sentiment has severe long-term repercussions. Cranking up the economy is dependent on producing goods and services that cater to demand; but, if incomes decline and consumer sentiment is cautious about spending, growth and jobs take a hit.
In this scenario, companies and businesses have scaled down, shuttered departments and laid off workers. Many have used the opportunity of ‘rationalize’ operations, a euphemism for firing staff or cutting salaries, which would otherwise have been difficult in normal times. Some of these cutbacks are illegal, but the government labour machinery and courts of appeal are on a prolonged hiatus.
A hire-and-fire regime The scale of the problem was witnessed recently in mid-December when violent protests broke out in the Wistron factory in Narasapura area, near Bengaluru. Contracted to manuf ac ture iPhone s, the facility was vandalized by angry workers who said they had not been paid their salaries. Local officials told media persons that since the pandemic, salaries ranging from `15,000 to `21,000 for technical and other casual staff had been cut by `7,000 to Rs 9,000 brewing discontent. Hundreds were arrested and charged with rioting.
The factory is currently shut. An Appl e s t at ement acknowledged that the vendor Wistron had been violating labour norms. “Our preliminary findings indicate violations of our Supplier Code of Conduct by failing to implement proper working hour mana g ement processes. This led to payment delays for some workers in October and November,” the statement said, adding, “We have placed Wistron on probation and they will not receive any new business from Apple before they complete corrective actions.”
A cursory survey shows the scale of retrenchments and closures. IT giant Cognizant in July announced it was slashing 7,000 jobs, BSNL retrenched some 20,000 casual workers, Tata Technologies put 400 employees on the bench. Others that fired or laid off employees included Oyo, Lendingkart, JCB, and SpiceJet. The list goes on. In this situation, the central and state government labour machinery, set up under the Industrial Disputes Act, 1947, is supposed to intervene through ‘ c onc i l i at i on’ proceedings to stave off job losses and closures.
When these fail, the labour department ‘refers’ the dispute to an Industrial or Labour Court for adjudication. On the ground, though, labour departments have abdicated their responsibilities, leaving the field open to indiscriminate firings. It is strange in the midst of the pandemic, the ruling party rammed through key labour reform bills in September without even a pretense of discussion. These amended laws will remove impediments for winding up of companies and allow retrenchment of staff without government permission in firms with up to 300 workers. Though laws never stopped retrenchments and rationalisation of manning levels, the legal deterrent had kept a hire-and-fire regime at bay. No more!
Much will depend on how the economy performs in the months to come. We should take note that Prime Minister Modi on 14 April, at the start of the lockdowns, had appealed to industry leaders “to be compassionate and not fire people in these troubling times”. But in practice the government seems to be doing very little to save jobs and prevent shut-downs.