#41 Don't Ignore the Looming Migrant Crisis 2.0
Sending migrant home sets us up for a bigger crisis. A freer and fairer market that offers a 'new contract' to urban migrants can avert it.
This newsletter is really a public policy thought-letter. While excellent newsletters on specific themes within public policy already exist, this thought-letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. It seeks to answer just one question: how do I think about a particular public policy problem/solution?
Welcome to the mid-week edition in which we write essays on a public policy theme. The usual public policy review comes out on weekends.
Is the migrant labour crisis in India over?
Yesterday, a Supreme Court (SC) bench gave the Union and the states 15 days to transport all migrant workers to their homes. The Solicitor General had informed the Court on June 5 that 10 million workers have left the cities for their homes by special trains or by road. The SC also directed all the states to submit affidavits on welfare schemes and employment opportunities for these workers by July 8 when it will take up the matter again. It is safe to assume anyone who wants to go back will be home in the next 15 days. Put together, about 15 million workers would have gone back by the end of this month.
Once home, they would have crossed the great Indian media chasm – from the glare of a relatable, urban-centred human interest story to the darkness of rural poverty that carries no interest because of ‘tyranny of distance’ or the collective indifference of urban India.
If a migrant suffers in her village and no one is around to see it, does she really suffer?
A bigger crisis in the making?
We believe the migrant crisis 2.0 is about to begin. Unlike version 1.0, this will play out in the anonymity of thousands of villages and small towns spread across UP, Bihar, Odisha, MP, Jharkhand and the north-eastern states. And we fear it will have worse consequences than version 1.0.
What are our reasons?
First, these states lag the rest of India in quantity and quality of jobs created. The Just Jobs Index 2019 (in partnership with Azim Premji University and Centre for Policy Research) ranked Odisha, Bihar, UP and MP at the bottom of the pile among states on parameters that included employment, formality, benefits, income and gender equality. It is no surprise most migrant labourers were drawn from these states. It is hard to imagine employment opportunities for migrants in these states when they are back home. The current economic distress among MSMEs who are among the largest employers in these states will only exacerbate the situation.
Second, the coronavirus spread in these states is inching up because of the migrants getting back home. There’s a possibility of an outbreak. These states are also among the worst on state capacity and health infrastructure. It could turn out to be a case of jumping from frying pan to fire. This can’t be wished away.
Third, the kharif sowing season is on and farms can absorb migrants for productive work till August. Beyond that, the family support structure will start fraying under the strain of 15 million more mouths to feed. In fact, many of these families depended on the remittances of their migrant kin for survival. There’s a real fear of decades of progress being undone and millions going below the poverty line.
Finally, the Union and the states will struggle to expand rural work guarantee schemes like MNREGA because of their fiscal situation. Other Keynesian projects like building rural roads, irrigation infrastructure or freight corridors will need deficit financing that the Union isn’t keen on at the moment. Also, these plans that provide ‘guaranteed wage for work’ distort the market for labour. They can be a temporary relief measure but will have unintended consequences beyond that.
Chronicle of a crisis foretold
Most state leaders are in denial. A few are displaying bravado that’s good to keep their base in rapture but offers no immediate solution. Some of the ideas like asking companies to relocate factories to these states, seeking permission from the state government before hiring workers from the state or freezing labour laws to attract investors border on bizarre. The Union is planning to build a migrant database which will take time and might help in the long run but offers little now.
It is widely acknowledged the movement of labour from rural to urban areas or from agriculture to non-agrarian sectors is good for the society. The agricultural economy contributes to 18 per cent of our GDP but supports over 60 per cent of the population. It can’t do more. We should also not harbour dreams of transforming our villages in the short-run when there’s widespread economic distress. Urban migration is good for the poor. Our best option is to find a solution to get the migrants back into cities.
There’s a concurrent crisis brewing on the demand side of the labour equation. As India unlocks, labour shortage is being felt across sectors. This is driving up the wages while suppressing the increase in capacity utilisation. In an efficient market, the increase in wages in cities would have been a signal for a willing section of migrant labourers to return. If the demand recovered to near pre-COVID levels, through stimulus or otherwise, the wages would increase till most of the migrants are back and an equilibrium is reached.
The ‘unfree’ labour market
But this won’t happen. The daily wage labour market in big cities is anything but free. It exists to circumvent India’s terrible labour laws that help neither the workers nor the employers. This has led to a parallel, unorganised black market controlled by an oligopoly of contractors. There’s coercion of labour here by prior mutual agreement except there is no contractual remedy that can be enforced if the coercion goes beyond it. It is a perversion of the free market. We have written about the kind of migrant labourer who fled the city in an earlier edition.
“Those among the unorganised workforce who had a semblance of permanence in their lives – an employer of many years, a fixed worksite or the knowledge of the local language – have stayed back despite the lack of earnings or social security. But for the million others without any anchor in the city, the walk back to their homes was another manifestation of being forever mobile.”
They were victims of these fragile markets. There’s a way to avoid migrant crisis 2.0. Make the markets work again. Make them ‘freer’ and address their faults that made the migrants flee.
Building a ‘new employment contract’
There are a few short-term fixes that can do just this. These implemented well will bring them back. The pursuit of long-term structural fixes of these labour markets can continue.
Semi-formalisation of the unorganised workforce: Every migrant worker should have a bank account or an e-wallet that should be available with the company hiring them directly or through a contractor. The industry associations or guilds in sectors like construction, textiles, SMEs and retail which account for most of the daily wage labourers must self-regulate the adherence to this. This has two benefits
Know your worker (KYW) and a mechanism to support them in time of need
All other benefits mentioned below can be enabled once a company has this database
Income security: Like we have mentioned before the near-total absence of income security was the reason for a particular type of migrants to leave the city. We propose three simple steps:
Salary must be paid in advance and in blocks of 15 days (at a minimum)
No one can be terminated without a 15-day notice. Apart from giving a sense of security to the worker, it also ensures any worker who takes the 15-day advance and absconds can be terminated and his advance adjusted against this notice period
The employer must create an emergency relief fund for every worker and contribute two weeks of salary into it for every six months worked by the worker. In any future lockdown, this fund has to be released by the employer to the employee’s account
Food and housing security: While we don’t expect employers to intrude beyond the working lives of their employees, a few initiatives in these areas will reduce anxiety as the migrant labourers think of returning to cities. These include:
The employers should help the migrant families to adopt the ‘one nation, one ration card’ scheme that’s available across most states now. The access to local PDS shop for free or subsidised grains will ensure no one goes hungry in future lockdowns. The current adoption of this is very low because of lack of awareness, friction in getting this done in a new city and language barriers. This should be part of standard assistance provided by the employer to any migrant joining workforce
There are numerous paying guest (PG) and budget hotel rooms that are available because of lack of demand. The industry associations should plan to provide the first month of accommodation free to any returning migrant and their families. This will also serve as a good quarantine measure for these workers. Such rooms negotiated and booked in bulk is available in most metros (ex-Mumbai) under Rs. 2000 per month (per room). Assuming 1 lakh migrant workers coming back every month into a typical city like Bangalore, this would cost Rs. 240 Crs for a year spread over hundreds of companies in a single city. In future years, this cost will go down since it is meant for new migrants in the city
Health and Insurance: The fear of coronavirus and the lack of access to healthcare facilities added to the panic among workers during the lockdown. Employers should create a suraksha package for the migrants that includes:
Provision of hand sanitisers and masks at their homes. Also, a health helpdesk and transport support for anyone in their family who needs to be tested for COVID-19 at government labs for free
Facilitate enrollment of the workers into Ayushman Bharat schemes and provide them with e-cards. The helpdesk can help the workers and their families utilise this scheme in case of illness
Communication of the ‘new contract’: Industry bodies should pool together funds for a campaign that highlights how the new contract addresses the problems the migrant workers faced during the lockdown. They should seek the support of the PM to highlight these in his communications
The union and state governments can help these efforts by processing GST refunds, giving TDS relief for a limited period and clearing pending invoices. These, along with the liquidity measures announced, will help MSMEs and industries in assuring uninterrupted payment of wages to workers.
These are low-cost interventions that will improve the ‘index of freedom’ and formality of the unorganised labour market. It will restore dignity of the workers and of their families coming back into the cities. These measures can be monitored through a self-regulated mechanism set up by each industry or sector. Further, any of the industry chambers can set up an annual audit mechanism that these industry bodies can use to check for adherence among their members. The creation of a database of workers at each employer can over time contribute to the planned national database.
Let the market work
The migrant crisis 2.0 could blow up in the next three months. It will then feature in national consciousness and in policy discourse. Expect knee-jerk interventions from the state then that will distort markets. That won’t be in the long-term interests of the workers or employers. The industry associations have an opportunity now to consider these short-term fixes and create a ‘new contract’ with the migrant workers. This co-operative effort will yield bigger dividends instead of individually sending special flights to get ‘their’ workers back.
The market got them into cities in times before the pandemic. The fragility of the market sent them back in panic. An improved and ‘freer’ market will draw them back.
HomeWork
Reading and listening recommendations on public policy matters
[Article] In 1945, about 16 million US men and women who served their country in WW2 returned home to an uncertain future. The G.I. Bill of Rights took care of them and set America on an unprecedented path of prosperity
[Article] Manish Sabharwal and Sabina Dewan in The Print offer reasons why migrant workers will come back and the structural reforms that might help in the long-run. It is a bit short on immediate measures and underestimates the extent of pandemic shock for migrants
[Article] S. Irudaya Rajan, a professor at CDS, believes 30 per cent of migrants won’t come back because they feel they were abandoned by the urban society