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MOSL: ECOSCOPE: Part-II: Assessing India’s employment situation; MGNREG indicates continued stress in the Labor market

ECOSCOPE: Part-II: Assessing India’s employment situation; MGNREG indicates continued stress in the Labor market

 

• In of this series, we had concluded that India is not witnessing any wage inflation. The massive growth in employee costs in the IT sector (and Banks) was driven by higher employment - as growth in wage per worker remains extremely weak. Does this mean that the employment situation in India is changing? This is what we discuss in this note.
• On an aggregate basis, the total number of workers in the listed universe (~3,500 companies) has stood at 6.5m for the past three years (FY18-20), amounting to under 2% of the country's total employment. Furthermore, the share of the IT sector, the largest in the listed space, would be just ~3% (including indirect employment) of the total employment. Without wage inflation, better employment growth in these sectors is unlikely to have a nationwide impact, unless complemented by some other broad measures.
• One of the best and most comprehensive methods to gauge the employment situation in India is to analyze the Mahatma Gandhi National Rural Employment Guarantee (MGNREG) scheme. Since MGNREG is a demand-driven program, higher (lower) demand under this program is a good indicator of the stress (buoyancy) in the Labor market.
• As many as 112m people (9.3m workers per month) were employed under MGNREG in FY21 (up 42% during the year) as the rural workforce moved from the workplace (in urban centers) to the homeland (also called 'reverse migration'). In the first eight months of FY22 (Apr-Nov'21), as many as 11.2m people per month worked under MGNREG, implying further growth of 20%. The work demanded under MGNREG in Nov'21 was more than 90% of the work demanded in Nov'20, 1.8x the pre-COVID trends in November. Such strong demand for work under MGNREG is a clear sign of continued stress in India's Labor market. This confirms the gradual pace of reversal in the reverse migration that occurred in the wake of COVID-19. Migrant workers, thus, are yet to feel confident enough to move back to urban centers.