Labour market post Covid

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Lock-downs are imposed by many countries. International borders are sealed and trade has a hit a low. Manufacturing plants are closed due to lack of labour. Daily wagerers are out of jobs. There is less money with people to spend even for food. All this has led to a reduced economic activity. Market indices have fallen and even long term mutual fund returns are in the lower single digits.  So, is there a recession that is looming ? Or are we already in a recession?

There are enough evidence to suggest that this dip in the economic activity is not due to any structural deficiencies. It is expected that the economic activity will pick up post lifting of the lock-downs. But, when will this lifting happen and when will international trade resume normally.

My thoughts from Indian standpoint
As India opens its economic activity there is going to be a shortage of labour supply due to the reverse migration that has happened. Migration happened due to the lack of opportunities in one place and the presence of opportunities is another. This is a constant flux and migration will happen. But, the reverse migration is artificial. A lot of questions come up. 

What will the people do for a living after going back to their hometowns from where they migrated due to lack of jobs? How are governments going to find job for these people? How is the labour shortage going to be met? Will people migrate again ?

Looks like some people will migrate again while some may not. But, there is going to be a shortage of labour which will increase the wages in the near term. This will increase the cost of ongoing projects and the cost will overshoot the budget. This can really impact the unorganized sector and many shops, hotels etc. will have to be shut. 

While unskilled labour cost increases, the skilled workforce may see reduced salaries. As jobs are lost, people will be willing to take up jobs at a lesser pay. We will be in a unique position where the skilled labour and unskilled labour may have similar pay. 

Would we now start seeing the unskilled workers with less prejudice? Only time can tell. But, this situation would persist for a year or two till the labour movements start again. The action is yet to begin and it is interesting to see how this pans out.

This is also a right time for our manufacturing companies to ramp up production capacities and utilize this talent chaos. India could become a manufacturing hub since many industries are hit badly and people would be willing to do any job for sustenance. Time to utilize our demographic dividend and unleash our capabilities thereby creating more jobs.


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