How the Covid crisis may impact the future of labor markets across the global South

With Sabina Dewan


How will the coronavirus pandemic impact different constituencies of labor markets across the world? Will it drive large parts of the Indian labor force, already working in an informal and precarious setup, towards further destitution?

Will gig workers, thrown into the frontlines of this crisis, be able to negotiate for better social and employment protections? Will platform companies be forced to make structural changes in the aftermath of this crisis?

Sabina Dewan of the JustJobs Network believes that the trend of informalization will accelerate in a post-Covid world, as will an uptake in technology and gig work. Platforms are unlikely to step up employee protections, which means government must fill the gap.

Digitization and platformization of economies over the past few years have heralded monumental changes in the nature of work. The emergence of platform-mediated gig work, in particular, has meant an increase in jobs in informal and precarious setups. In this backdrop, the Covid-19 pandemic has exacerbated the crisis in the labor market, with upended global supply chains, fractured markets, and loss of livelihoods.

We spoke to Sabina Dewan, President and Executive Director of the JustJobs Network, on the impact of this crisis on global labor markets, the implications for gig work and on-demand location based services, and the possible outcomes for a post-Covid future of work.

Q: What is your assessment of the pre- and post-Covid situation, both in terms of what this crisis will mean for longer-term unemployment and for labor markets across the Global South, particularly India. Large parts of the Indian labor force was already working in an informal and precarious setup; how does Covid-19 affect these people?

Sabina: As you rightly noted, there was already an existing trend toward informality and greater precariousness in the labor market. According to the 2017/18 Periodic Labor Force Survey, India’s non-agricultural informal employment stands at about 68 percent. 83.5 percent of non-farm workers are in informal employment. The last few years have also seen greater precaritization of work. We know, for example, that 71 percent of regular wage workers do not have a written contract. This number has gone up from 59 percent in 2012. Nearly half of all regular wage workers do not have social security benefits. So there's already this existing trend towards informality and greater casualization.

These numbers point to the fact that a majority of the workforce is trapped in unproductive jobs with low wages. Informal employment and casualization also signifies a race to the bottom in terms of the quality of work. Informal workers tend to lack social protections and are beyond the purview of labor protections.

This is the backdrop against which we are experiencing the Covid-19 pandemic. And there's no question that the pandemic is going to exacerbate these trends in a big way. We are inevitably going to see several micro and small businesses fold. Businesses continue to incur expenses such as having to pay rent and employees' salaries, but they don't have revenue coming in. Even if you give a moratorium on loans for these distressed businesses, it's not enough. And if we see small businesses collapse, it will affect unemployment.

Migrants and daily wage workers are also feeling the pain of the lockdown. Many of them live in rental housing, they still have to eat, they still have to pay for their kids’ education – their expenses continue to accumulate while they have no money coming in. The negative consequences of a decline in economic activity is going to exacerbate not only the unemployment problem, but also the quality of work problem. We already know that it's out of desperation to make a living that we have such high degrees of informal employment and high numbers of people willing to work in precarious jobs. We're going to see those trends accelerate because of this new scenario.

Q: What do you see as the outcome of this crisis for gig work, sectors like e-commerce, which is now an essential service, and delivery work, which is one of the few bands of work that is still alive?

Sabina: The trends vary across countries that are under a full lockdown versus those that have more lax conditions. In some developed countries, for example, where you don't have a full lockdown, where people are being told that it's better if they remain at home but where economic activity is still underway, you have a rise in delivery and logistics services. In the United States for example, Amazon has announced that it is hiring more people because home deliveries have gone up. In countries where you have a lockdown, like in India, we are experiencing a lot of problems with deliveries. Not only are supply chains disrupted because of the lockdown, but inefficiencies in the e-pass system and the police cracking down on delivery personnel is stymieing online and delivery logistics.

We don’t have data at the moment, but anecdotal evidence suggests that there has not been an uptick in delivery services in India or in countries with have similar lockdowns. Second, it's anyone's guess how all of this shakes out post-Covid. It depends on how consumption patterns change. Are people going to go back to restaurants or will they prefer to order in? Are people going to feel safe in crowded buses and metros or will they resort to individual modes of transport? Are people going to opt for in-home services provision like beauticians coming to their homes, or are they going to be reluctant to let people enter?

How behavioral patters change will impact whether location-based gig work goes up or down.

We are going to see a lot more women doing work that isn't necessarily visible - an uptick in domestic work or other kinds of work that help support their household income. But it's not going to be a major shift in female labor force participation rates.

As far as home-based work is concerned, we might see a lasting effect, in that, some companies may be more amenable to having employees work from home. Home-based work could create more opportunities for women who want to balance domestic responsibilities with income generation. This may facilitate greater labor force participation of women in the more educated strata. Having said that, (a) we don't know how working from home is going to affect productivity levels -- it's too soon to tell, and (b) I think there's something to be said for social contact and physical interaction for an exchange of ideas.

Q: In India and most Global South nations, on-demand location based services don’t quite pan out the same way as in the US or Europe. Here, you have complex layers of subcontracting, people taking out loans to finance equipment, etc. Do you see the likelihood of people slipping out of the labor market because their access to resources or working capital is gone, after a downturn like this?

Sabina: There are two sides to that story. First, people that have already invested in the products and bought the taxis, when they can resume those activities, they're going to rush back to work. This is because many such workers, in India and in the Global South, rely on these activities as a primary or a significant source of household income. In the Global North, a lot of the location-based services—whether it's a micro-tasking, other kinds of cloud-based work, or location-based work like driving an Uber—often provide supplementary income.

We know that, for example, that UrbanCompany and some other online platforms are giving moratoriums on loan repayments. So there are steps being taken to ensure that workers in the gig economy don't drop out. Because that's not good for the platform; its not good for the consumer; nor is it good for the worker. Anecdotally, we are seeing some platform companies being accommodating to ensure that the people affiliated with them, their service providers, are able to jump back in when things open up.

The debate over whether a digital intermediary should be forced to provide the same protections to their workers as a regular employer does, has been going on for a long time. I'm not sure we're going to see a rapid change in the resolution of that debate in favor of workers in a post-Covid world.

The other side of the story is whether there will be enough capital, or enough demand, in the market for new entrants to take up gig work. If there is a demand for beauticians, logistics personnel, cab drivers, delivery services and other services, then gig work is going to grow faster than brick-and-mortar businesses. So I actually expect technology and gig work, in general, to see an acceleration post Covid.

Q: Do you think platform companies will be forced to make, and should make, structural changes in the aftermath of the crisis, given that the lack of social protection for gig workers is something that needs to be tackled on a more sustained basis and not just as piecemeal, band-aid measures in the short term?

Sabina: So one part of that question is, should they? There of course, I think all workers should get, at the very least, a minimum level of social protection. And the government, platforms, businesses, and where possible the workers themselves, should all contribute to making this happen. On part of the platforms, if not as employers, they should have to pay taxes such that it helps governments provide basic protections for self-employed workers, including gig workers. So we are in complete agreement on that.

‘Will they’ is a different question. I don't anticipate seeing any major changes in regulations that will make it mandatory for platform intermediaries to provide more and better protections for workers. I think inevitably, given the economic impact of Covid, the government is going to have to think through a much broader safety net and how to finance it for all workers, informal and formal, self-employed, not self-employed, contractual, especially the most vulnerable.

Where I see a role for businesses, including digital intermediaries, is to contribute to such a system. The debate over whether a digital intermediary should be forced to provide the same protections to their workers as a regular employer does, has been going on for a long time. I'm not sure we're going to see a rapid change in the resolution of that debate in favor of workers in a post-Covid world. The government is not going to suddenly decide that now all technology platforms have to treat people that work with them as employees and provide them with benefits. I don't see that happening, particularly at a time when jobs will be scarce and there's going to be the need for more livelihoods.

But the government must think through how to institute a broader and more efficient social security system after this crisis. And in that context, the question is how do you get businesses, employers, digital intermediaries to contribute their fair share? Through the tax system and/or through some other form of cess?

Q: We can speculate on what the future of work will look like, but in its present, irrespective of what form of work we talk about, there is a deep gender segregation in that women are concentrated in the low-paid and precarious jobs. Will the crisis end up exacerbating that gap? And more importantly, will it end up driving more women out of the workforce because of (a) shrinking jobs, and (b) a rising burden of unpaid care work?

Sabina: So one set of speculators suggest that as households see incomes decline, they're going to need more hands at work. This means that one may see more women entering the labor market in order to help their families make ends meet. In that sense, to put it crudely, this is kind of a reversal of the middle income effect.

The other set of speculators suggest, what you just alluded to, that as good jobs become in even more short supply, women that are already relegated to poor quality, low value-added jobs, paid poor wages, and that confront all kinds of exploitation, are going to see their prospects deteriorate even further. If this happens, at some point, the trade-off between staying at home, or losing a meagre wage in an unproductive, sometimes exploitative, job stops being worth it. If you're having to travel and withstand unsafe conditions to get to a workplace where you get paid bad wages and face all kinds of exploitation, at some point, you will say, “it's not worth it. I'll just stay at home and take care of my kids and do the housework.”

Inevitably, given the economic impact of Covid, the government is going to have to think through a much broader safety net and how to finance it for all workers.

My sense is that we are going to see a lot more women doing work that isn't necessarily visible - an uptick in domestic work or other kinds of work that help support their household income. But it's not going to be a major shift in female labor force participation rates.

Q: In terms of macro trends, even before Covid, we were witnessing automation of jobs, a lot of reshoring in the Global South context where jobs that available earlier were being shipped back, because it was no longer viable to have them outsourced. What do you think the impact of this pandemic will be on these macro trends?

Sabina: I do think that the crisis is going to accelerate the adoption of technology, whether it's automation, whether it's online learning, digital payments. If we thought that technology was moving at a fast pace before, I think we're going to see it accelerate even more.

Automation, the proliferation of platforms, all of this will have a social impact. People that have access to technology and the skills to engage with it will be better off and others will fall behind. This also raises questions about what the government will do to moderate these disruptive, inequality inducing, effects of technology?

With regards to reshoring, we saw some companies, like Adidas and a couple of others, move operations from emerging/developing economies back to the Global North. But this did not happen on a large scale. As far as the trend of reshoring goes, it depends on how quickly consumption in developing and emerging markets resumes. My theory with regards to reshoring has always been that companies want to locate where their consumer base is, and Asia is one of the most dynamic and the fastest-growing consumption markets in the world. Companies want to be present here, not just because of the low-cost labor, although that was one factor, but also because of proximity to market. So if consumption resumes, we will see less reshoring. If it doesn’t, we may see more. Certainly East Asia has fared a lot better than South Asia. This also underscores the need for governments to rebuild labor markets and social security systems to revive demand.

 


This interview is part of our Labor in the Digital Economy series.