Labour Market Dynamics and Worker Flows in India: Impact of Covid-19

The Indian Journal of Labour Economics https://doi.org/10.1007/s41027-022-00420-7 ARTICLE Labour Market Dynamics and Worker Flows in India: Impact of Covid‑19 Partha Chatterjee1 · Aakash Dev1 Accepted: 14 December 2022 © The Author(s), under exclusive licence to Indian Society of Labour Economics 2023 Abstract Tracking and analyzing the labour market dynamics at regular, frequent intervals is critical. However, this was not possible for India, a large emerging economy with a significant population undergoing demographic transition, due to a paucity of data. We use the new dataset Centre for Monitoring Indian Economy (CMIE)—Consumer Pyramids Household Survey (CPHS) and use a panel to create Labour Flow Charts and Transition Matrices for India from January 2019 to December 2021. To the best of our knowledge, this is the first time these were created for India. We then use that to look at the impact of Covid-19 on the Indian labour market. We not only look at transitions between employment, unemployment and out of labour force, but also across types of employment—full-time and part-time. The rich data also allows us to consider heterogeneity in the labour market and look at the differential impact of the pandemic across different education groups and gender. From the labour flow charts and transition probabilities, we find that while all groups have been impacted, the magnitude of the impact is different across groups. The recovery is also uneven, and the extent depends on education levels. Further, we do an event study analysis to examine the likelihood of getting a full-time job across different educational and gender groups. Men, on average, enjoy a higher likelihood of getting a full-time job than women. The likelihood coefficients also go up with increasing educational qualifications. Looking at skill heterogeneity, while the likelihood of getting a full-time job either goes down for most groups during the pandemic or the change is minuscule, strikingly it goes up for those with no education, for both men and women. The likelihood coefficients remain elevated for men even after the restrictions are removed, and that for women reverts to the level seen before the pandemic. Finally, this paper provides a way to continuously monitor the dynamics of the labour market as data is released in the regular intervals in the future, which would be of great value for researchers and policymakers alike. * Aakash Dev Partha Chatterjee 1 Department of Economics, Shiv Nadar University, Greater Noida, UP, India 13 Vol.:(0123456789) ISLE The Indian Journal of Labour Economics Keywords Covid-19 · Labour flow chart · Transition matrix · Event study analysis · India · Labour market dynamics 1 Introduction Tracking the dynamics of the labour market is of utmost importance for both understanding the health of the economy as well as for understanding the welfare implications arising out of the changes in the labour market. It is, therefore, not a surprise that one of the most watched statistics of an economy is the unemployment rate in the country. However, just looking at the aggregate numbers of unemployed may not be enough given the great degree of heterogeneity in the labour market. There is a need to look at details of people in the labour force by— income class, gender, educational attainments, skill levels, and such. Moreover, it is essential to determine what changes are occurring across these groups. To do this, it is necessary to track labour flows frequently over time. The recent Covid19 crisis and its huge impact on the labour market and the economy has brought this into focus even more. However, this has been difficult for an emerging economy like India. Given the sheer size of the population of India, the demographic structure, the heterogeneity, and the development stage of the country—it is probably more urgent to track the labour market dynamics as frequently as possible as it will have implications not only for India, but for the global economy also. So far, it has been challenging to do that; but with the availability of new data from Centre for Monitoring Indian Economy (CMIE), it is now possible to track the labour market in India three times a year. In this paper, we use the CMIE-Consumer Pyramids Household Survey (CPHS) data to construct a panel and track that every four months. Using that, we create labour flow charts and transition matrices. We then use that to study the impact of Covid-19. Further, using the same data, we do an event study analysis to find if and how different the impact has been across various heterogeneous groups by education levels. To study labour transitions, a standard technique is to construct Labour Flow Charts and Transition Matrices. In a developed country like the USA, for example, this is done by the Bureau of Labor Statistics every month. The labour flow charts track and map the flow of eligible workers across different employment categories over time (Bleakley et al. 1999). This is done continuously at a regular frequency. The transition matrix uses these labour flow charts and creates a rectangular array describing the probabilities of moving from one state to another in a dynamic system across categories. Each cell in a row of a particular transition matrix represents the probability of moving from the current state to another state during the reference period considered. Each row of the matrix adds to one individually (Bronson & Costa 2009). So far, it was not possible to create these labour flow charts or transition matrices for India due to lack of data at regular intervals. We use a pan-India comprehensive longitudinal panel dataset to generate Labour Flow Charts and the corresponding Transition Matrices for India from January 2019 to December 2021. To the best of our knowledge, this is the first time these have been created for India. This opens up the possibility of studying 13 ISLE The Indian Journal of Labour Economics a large number of questions in the context of the Indian economy, which was not possible so far. In this paper, in particular, we look at the differential impact of Covid-19 on diverse groups of people in the working-age population. The pandemic engendered a once-in-a-century global crisis that resulted in unprecedented recessions across the globe, resultant job losses and an unprecedented rise in unemployment across economies (Global Economic Prospects June 2021, World Bank 2021). India has not been an exception. The impact of the crisis on the Indian economy has been devastating. The GDP of India nosedived by 23.9% during the first quarter of FY-21 (NSO, Government of India). On the policy front, the government of India reacted early and resorted to one of the world’s most stringent lockdowns to minimize the loss of lives and livelihoods with the onslaught of the pandemic (Anand & Miglani 2020, Chatterjee et al. 2020, Oxford Covid-19 Government Response Stringency Index, Oxford University, G (...truncated)