Section 4.4 addresses the informalisation by sector of employment.
One indication, at the aggregate level, that such transitions did occur is provided by the change in the overall composition of the workforce.
Compared to the pre-pandemic period there was a reduction in the proportion employed in salaried employment, with a corresponding rise in self- employment of about 3 percentage points (from 50 to 53 per cent). However, simply studying the overall structure conceals the nature of underlying transitions, making it important to study individual level transitions during the pandemic (Kesar 2020).
This is possible with panel data from the CMIE- CPHS.
To do this, we map the transitions in the
employment arrangements for those workers who were employed in both periods, i.e. September to December 2019 and September to December 2020 (wave three of CMIE-CPHS, see Figure 1.1). Additionally, we also follow new entrants into the workforce, that is, those who were not
transitions over the same months in the previous two years (employment in 2019 against employment in 2018) to understand to what extent patterns observed during the pandemic year differ from previous years.5
4.2.1 / Transitions in employment arrangements
The transitions are presented as matrices or tables, where each row represents the pre- pandemic employment arrangement and each column represents the post lockdown employment arrangement as well (Table 4.1). The cells can therefore be interpreted as follows: for every 100 workers who were in a particular employment arrangement prior to the pandemic, how many ended up in another kind of employment
arrangement, and how many remained in the same kind. The diagonal represents the percentage of workers who continued in the same employment arrangement, while the off-diagonal elements indicate the proportion that transitioned to another employment arrangement. Since some transitions are expected even during normal times, we compare these numbers to the transitions in a baseline period, that is, from September-December 2018 to September-December 2019.
First, we look at the diagonal shares in the transition matrix, that is the share of workers in each employment arrangement who remain in that arrangement between two time periods. Note that, even in normal times, a significant share of workers transition across arrangements, indicating a general volatility in the labour market. However, here we wish to emphasise that across all arrangements, compared to baseline we see fewer workers able to remain in the same kind of employment during the pandemic (Table 4.1). Self-employed work
4. Informalisation and earnings losses
temporary salaried workers see among the highest levels of transition into other arrangements. During the Covid period, this was further exacerbated.
Only 36 per cent of temporary salaried workers in 2019 remained in that employment arrangement into 2020 (compared to 54 per cent during baseline).
31 per cent of temporary salaried workers moved into self-employment, and 23 per cent became casual wage workers. To gain some more insights into the working life of a temporary salaried worker, we provide a first person account in Box 4.1 of
a worker in an automobile factory interviewed by Yadav (2021).
Notably, in the most secure of employment arrangements, permanent salaried, which typically does not have much flux (77 per cent remain in the same status during baseline), nearly half moved to other kinds of employment between 2019 and 2020. The massive exit of workers from permanent salaried work is indicative of the impact of
the shock.
Casual/daily wage worker
Self-employed Temporary salaried Permanent salaried Overall (2020)
Casual/daily wage worker
57.9
15.0 22.5 9.8 27
Self employed
33.1
75.5 31.3 34.1 55 Table 4.1 :
Transitions in employment arrangements, 2019 to 2020 and 2018 to 2019
Sources and notes: Authors’ calculations based on CMIE-CPHS. Data is for the months of September, October, November, December (wave 3) of 2018, 2019 and 2020. See Appendix
Section 2 for details of the sample. The 2018-2019 panel is different from the 2019-2020 panel. Hence overall distribution of the workforce in 2019 will be slightly different between the two panels.
Temporary salaried
5.6
4.1 35.6 8.5
8
Permanent salaried
3.4
5.5 10.7 47.6 10
Overall (2019)
27
53 9 11 Employment arrangement in 2019 100
Employment arrangement in 2020
Casual/daily wage worker
Self-employed Temporary salaried Permanent salaried Overall (2019)
Casual/daily wage worker
70.8
11.5 12.9 2.3 29
Self- employed
23.3
81.8 23.0 15.9 50
Temporary salaried
4.9
3.5 54.2
5.3 10
Permanent salaried
1.0
3.2 9.9 76.5 11
Overall (2018)
29
50 9 12 Employment arrangement in 2018 100
Employment arrangement in 2019
Legend :
High Medium Low
Box 4.1 : Hearing from a ‘temporary salaried’ worker
The CMIE-CPHS divides salaried employment into permanent salaried and temporary salaried. Pre- Covid, the temporary salaried accounted for 10 per cent of the workforce with the predominant occupations being support staff, industrial workers and non-industrial technical employees. The experience of these temporary workers, both during the lockdown and afterwards indicates that this kind of work is particularly insecure since not only did a large share lose work during the lockdown, they were also unable to return to work in the months after, unlike daily wage workers, and self-employed who lost work but were able to return. In her background paper, Yadav (2021) shares her interview with a temporary worker in a multinational automobile factory throwing valuable insight on the nature of this employment and the challenges these workers face.
I am 25 years old. I work as a contract worker in Haryana. The factory where I work – one of India’s largest automobile factories – terms contract workers like me as a ‘Temporary Worker -TW 1, TW 2’ and so on till TW 3, based on how many times it has employed us earlier in the previous two to three years.
Earlier, I had worked as ‘Temporary Worker TW 1’ in the same factory four years back, in 2016.
Then, after a seven month term, the company removed me, and the whole batch of recruits who had joined along with me, saying it may recruit us again later as ‘Temporary Worker 2’, after a gap of a few months. The company refers to us as
‘Temporary workers’, but we do all the assembly and main work. At one time, it hires for a seven month contract, then it lays us off for a gap, and it may call us again a second or third time with gaps
This factory (belonging to a multinational corporation) in this industrial township, pays I21,000 a month. This is nearly twice what other firms pay in the area, though it is less than one- third of permanent workers’ pay. But the tenure is so short. When one applies for jobs in this area after this seven month TW stint, the new employer will usually pay around I8,000-10,000. Then, this drastic drop in wage feels odd, uncomfortable.
Also, one wonders, what is the point if one earns one lakh in seven months and spends it in the next 4-5 months without a job? It would be better to keep looking for a job where at least one can find employment for a year, rather than remain stuck in this seven month system.
This is because in our monthly pay of I10,300, a component of I2,000 is given only if we stayed present and worked the whole month, it is shown as an ‘extra’. If we take two days’ leave in a month, we lose I3,000, which is about a third of the monthly pay. So, there is no scope to fall ill, or if anyone in your family falls ill. When my husband was in the hospital, I was away from work almost 12-13 days, and that month, I earned only I2,000 or so. After the lockdown, the contract has stopped even providing a pay-slip, citing the pandemic.
In-depth interviews such as the one above reveal that temporary salaried workers often have to negotiate the responsibilities and workload of a permanent salaried worker, while at the same time having an insecure job with unpredictable earnings.
See Nayanjyoti and Amit (2018) for more on this system. During the pandemic, these vulnerabilities increased.
4. Informalisation and earnings losses
Flows of workers between employment
arrangements can be depicted using ‘alluvial graphs’
shown in Figure 4.2. As can be seen, during the Covid period, self-employment saw a large influx of workers from other employment arrangements.
For instance, about 34 per cent of permanent salaried workers were now in self-employment.
This is twice what is normally seen in the baseline.
A similar share, about 30 per cent, of temporary salaried and daily wage workers moved into self- employment into 2020. Again, during the same time in our baseline period (2018 to 2019), only about 20 per cent of such workers had moved to
self-employment. Clearly, self- employment emerged as fallback employment in the face of massive job losses during and after the lockdown.
Thus, it is evident that employment recovery is characterised to a significant extent by increased levels of informality. This indicates a paucity of labour demand since both self-employment and casual labour markets typically expand to accommodate an excess supply of labour, via income and work-sharing norms (Ghose 2016).
Other analyses also confirm an unabated transition to informal work post-lockdown (Kumar and Kumar 2021; World Bank 2020).
Nearly half the permanent salaried workers who usually have the most secure jobs moved to
informal work during the pandemic.
Figure 4.2 : Informal employment arrangements saw a larger influx of workers in the pandemic period
Sources and notes: Authors' calculations based on CMIE-CPHS. Data are for the months of September- December (wave 3) of 2018, 2019 and 2020. See Appendix Section 2 for details. Numbers in brackets indicate the percentage share of that employment arrangement in total workforce in that year. The 2018- 2019 panel is different from the 2019-2020 panel. Hence overall distribution of the workforce in 2019 will be slightly different between the two panels.
Transitions in employment arrangements, 2018-2019 (baseline)
Transitions in employment arrangements, 2019 to 2020 Key
DW : Casual/
Daily-wage worker;
SE : Self- employed;
TS : Temporary salaried;
PS : Permanent salaried
Finally, there also seems to be a clear ordering in terms of who moves into what. Among permanent salaried workers, the predominant transition is into self-employment, whereas, for temporary salaried workers, the larger share moves into daily wage work. Given that daily wage work is the least paid occupation, this suggests that even in transitions, initial hierarchies matter in determining the kind of transition.
Notably, the degree of stability and transition also varies by region, that is, rural and urban (data not shown). While the percentage of those who continued in self-employment was 80 per cent in rural areas, the percentage was 65 per cent in urban areas. These percentages in the non-pandemic baseline period were 83 and 72 per cent. In other words, not only is urban self-employment relatively more unstable, this instability (and the difference between rural and urban areas) increased during the pandemic period - from a difference of 8 percentage points between rural and urban areas in the non-pandemic period to 15 percentage point.
It is likely that agriculture absorbed much of the transitioning workforce, and the absence of such a fallback sector is reflected in the higher volatility in urban areas. We examine this more closely when looking at sectoral transitions.
Salaried work, unlike self-employment, saw more flux in rural areas than in urban areas. While salaried work was equally stable in rural and urban areas in the baseline period, during the pandemic period, only 41 per cent of rural permanent salaried (compared to 51 per cent of urban permanent salaried) were able to retain their employment arrangement. Furthermore, the proportion transitioning into casual wage employment from salaried employment is also higher in rural areas than in urban areas.
workforce. In terms of exit, temporary salaried work saw the highest share of workers exiting with 21 per cent exiting the workforce. Thirteen per cent of permanent salaried workers and about 16 per cent of daily wage workers exited. Self-employment saw the least share of workers exiting (11 per cent). For all employment types, the share exiting during this period was higher than in the baseline.
In sum, on one hand, several of those who were employed prior to the lockdown have moved to more precarious forms of employment and towards sink sectors. There was also an exodus of workers, particularly from salaried wage work. On the other hand, many individuals who were not employed in the period prior to the lockdown entered into the workforce - suggesting a replacement of the worker who was earlier employed. This indicates a high degree of churning both across employment arrangements and towards and out of the workforce. In the next section, we see to what extent these transitions varied by gender, caste and religious identity of the worker.