In India, recent evidence suggests that wages of formal workers were cut by 3.6 per cent, while informal workers experienced a much sharper fall in wages of 22.6 per cent during the Covid-19-induced lockdown, the International Labour Organisation’s ( ILO) Global Wage Report has said. The report estimates that 40 lakh and 6.94 crore informally employed workers were at risk of job loss during lockdown 1.0 and lockdown 2.0 respectively. Informally employed workers in the unorganised sector suffered wage losses amounting to ₹63,553 crore (₹635.53 billion), which is almost equivalent to the annual Union Budget allocated for the employment guarantee scheme MGNREGA in 2020-21.
The report adds that in many countries, including India, delayed increases or freeze in minimum wages because of the Covid-19 crisis have taken place at the local or sectoral levels.
Lockdown 1.0 was imposed for 21 days ― March 24, 2020 to April 13, 2020. Lockdown 2.0 was imposed for 19 days ― April 14 to May 3, 2020. Closure of workplaces had an immediate impact on workers who lack job or income security, especially those in the informal economy, observed Xavier Estupinan and Mohit Sharma in their research paper titled ‘Job and Wage Losses in Informal Sector due to the Covid-19 Lockdown Measures in India’. The paper adds that the prevalence of informal labour markets calls for a larger change in the social protection framework to deal with the uncertain economic situation.
About 79.4 per cent of workers in all economic activities in India are found in the informal/unorganised sector, with only 0.5 per cent under formal employment contract within them. Even in the formal/organised sector, the share of workers with informal employment is about 52 per cent, which constitutes the ‘informalisation’ of the formal sector. Overall, India holds about 91 per cent of informal workers in the labour market.
According to Estupinan and Sharma the total wage loss for all workers in the period between March 24, 2020 and May 3, 2020 (at 2017-18 prices) was ₹86,448 (₹864.48 billion). The wage loss of formal workers was ₹5,326 crore and informal workers ₹81,122 crore. In proportionate terms, informal workers suffered more losses than formal workers, i.e. informal workers lost 22.62 per cent wages in comparison to 3.66 per cent for formal workers.