In the context of the global macroeconomic scenario and India’s positioning in it, there are three fault lines. How each nation understands and responds to them using an intersectional lens will shape the course of the future economic trajectory.
To understand the first fault line, it may be helpful to take a close look at data from the World Inequality Report 2021. The report points out that the share of the world’s poorest 50% in total global wealth is 2%, while that the share of the richest 10% is 76%.
The wealth of the richest 10% globally, who constitute the middle class in rich countries and the simple rich in poor countries, is growing more slowly than the world average, but the richest 1% have captured 38 % of the global increase in wealth while the poorest 50% captured 2%. The richest 0.1% saw their share of wealth drop from 7% to 11% in just one year.
In the context of India, the richest 1% earned more than 21.7% of the country’s total national income in 2021, while the poorest 50% earned 13.1% of the money. The authors argue that the “deregulation and economic liberalization” policies pursued since the 1980s in India have resulted in one of the most extreme increases in income and wealth inequality.
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To understand the second and third fault lines, we need to dig deeper to study the global (national) labor market landscape, especially from the perspective of the past two years.
In a recent article measuring German workers’ beliefs about rents and outside employment options written by economists Simon Jager, Christopher Roth, Nina Roussille and Benjamin Schoefer, they find that 13% of jobs would not be viable at current wages. , concentrated in the lowlands. wage segment of the German labor market.
Most remain employed to undertake low-paid work due to being “too pessimistic about outside (work) options”, and this belief tends to give “monopsony power” (undue competitive advantage) to employers in the workplace. context of low-paid workers.
The only scenario in which these low-paid workers are forced to change their “ill-informed views” about external employment scenarios and seek, for example, better wage opportunities (or a wage premium), would be a sufficiently large shock. which would force an upheaval of the entire labor market.
Two years of Covid-19 – and its subsequent economic fallout – did just that. Most economists are now calling this “upheaval” in the global labor market a “great resignation” period.
In the United States, more than four million workers quit their jobs in September, breaking the quit record set the month before.
About 40% of the remaining employees are also considering quitting, according to a recent report from Microsoft. In tech, over 72% of tech workers based in the United States plan to quit their jobs within the next 12 months.
What is going on?
Under normal circumstances, an exodus of “job seekers” signals that a labor market is facing a severe shortage of jobs (a problem on the demand side). But, the past two years have not been at a normal distance; thereafter, a long cycle of mass resignations is not confined to the United States alone, but is part of a cause of global concern.
The “work from home” (WFH) scenario (especially in technology, other service based jobs) has changed the beliefs / expectations of workers regarding their own job and the outside employment scenario. The “misinformation” or “overly pessimistic” attitude that many low-paid workers had previously had has been reoriented in disruptive ways.
The photo of India
In the Indian scenario, its appalling labor market situation continues to gravitate towards a worse state (before the pandemic).
Data from the Periodic Labor Force Survey (PLFS) for January-March 2021, released last week, shows unemployment rates were close to pre-Covid levels of 2020. And, as has been argued earlier in 2020, women suffered the brunt of the pandemic in terms of economic fallout.
Secured, well-paying jobs in the macro-organized (secure) space have declined for the educated workforce in India. This has obviously added to the “growing concern over inequalities” among the middle class (and lower middle income).
Even during / since the second wave of the pandemic in India, only a number of sectors (like construction) have added to the time cycles of job creation when most service sectors were struggling. This highlights the third fault line, the issue of weak labor contracts, as certain “job-creating” sectors also continue to make conditions for workers more exploitative.
According to PLFS 2020 data, only less than 43% of all work contracts in India’s organized workforce (employing less than 20% of the workforce) guarantee contingency funds / tips , health care and maternity benefits. The share of regular salaried workers, who receive at least one social security benefit, ie a “protected regular job”, is 40% (according to 2019-2020 data).
Indian workers – in health, education, public services as well – increasingly find refuge in time-based ‘ad hoc labor contracts’ while those in the lowest paid job category ( plus the low-end manufacturing space) continue to be absorbed by a swelling vulnerable and “unorganized” sector.
Those with capital and more privileges than informal workers prefer to be “self-employed” (under the subcategory of “self-employed”), as CMIE recently reported.
In narrowing down the diagnosis of some of these current crises, on the Indian side, the issue seems to go far beyond any analysis that sees it as part of a single “supply side problem”.
Like Jager’s study, what is needed is a careful analytical examination of the ‘demand side’ problem in the labor market landscape through a deeper understanding of the psychology of worker expectations, which focuses on the changing composition of workers’ beliefs about rent (work-pay), housing, social security, family responsibilities, and out-of-town (employment) options.
This can help to undertake policy (fiscal) interventions to minimize not only income and wealth inequalities, but also “access inequalities”. More importantly, seeing these fault lines intersectionally from the perspective of the global and national economic landscape is essential for immediate and effective public policy intervention.
(The author is director, Center for New Economic Studies, OP Jindal Global University)
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