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Migrant Worker Crisis: Economic Impact

Posted by Plakads Realty on May 29, 2020

The global economy was taken by storm and surprise by the COVID-19 Pandemic, transitioning from vague notions of fear and concern in late February to the establishment of tangible and rigid lockdowns as the norm in March. All industries experienced a state of shock.

While most of the privileged people had to face mild inconveniences like staying indoors and missing out on our much-adored outdoor activities, the pandemic had a much more sinister impact on the frontline workers and the laborers, many of them left stranded in places far away from home, with little resources to sustain themselves. The migrant worker crisis will certainly have some impact on the economic front. To understand the impact vetted out by this unfortunate tragedy, one must realize the crucial role they play in our society.

This is a video from CRUX, which has compiled the various images and videos coming out from the crisis.

Most of these migrant workers come from states like Uttar Pradesh, Bihar, Chhattisgarh & Jharkhand. Historically, these states have been the poorest in India, lacking behind in both economic and social development parameters. While other states have shown considerable development, the home states of many of these workers have failed to provide enough opportunities for their people, resulting in massive labor influx in more prosperous urban regions.

At urban centers, these laborers helped reduce the costs of workers and make Indian cities coveted internationally, for their cheap labor. Thus, looking from a purely economic perspective, most of our urban spaces need their migrant workers much more than they need us. Everyone is aware of the plight and difficulties faced by these workers, as the massive list of images and videos clearly depicts. From these visuals, one can grasp the general sentiment. Many workers are observed vowing never to return to the sprawling cities that enticed them with promises of jobs and development, only to abandon them to suffer when the crisis struck. To say that this episode won’t have an economic impact, would be inaccurate.

The Impact on Market & Economy

In the short term, with lockdown measures imposed and a recession underway, the demand for workers has anyway decreased. However, the agregate decrease in jobs does not show the type and sector it hits. Most of the jobs done by these workers were low cost & manual work, which was necessary in operations. It was’nt these jobs that would have faced the greatest of declines. However, increased costs for these jobs due to a paucity in supply can certainly cause firms to cut jobs in the managerial fronts. This increased cost in production also exaccerbates the voes of the companies. While many belive that there will be a shift in the workforce, with labourers demanding better protections, the possibility of a long term shortage remains limited.

Most of these workers came to cities with the hopes to secure incomes for their families and help their situation, the reality of their homes has not changed and thus, many will have to return to their cities again. An analysis like this, based on market forces is rarely accurate in the Indian context as governments often play a more proactive role. States like Gujrat, West Bengal, Maharashtra and many more have called for better facilities for their workers and have seen civil society & NGO’s take steps to assuage their pain. Meanwhile, Uttar Pradesh is already consedering laws that restrict their workers from travelling back to their cities and loosining restrictions to force development on the homefront. Many of these policies are controversial and incomplete.

We will have to wait for their final form before predicting their impact. However, one thing is for certain that the migrant worker crisis will certainly have an economic impact on the many construction sites, malls, eatries and factories that for years have enjoyed the fruits of their labour. For the many projects that have already seen major extensions due to the lockdown and social distancing, even as the world starts to open up, the workers running the show seem to difficult to get.

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