84% construction workers in Pune, Ulhasnagar not paid in lockdown: Survey shows devastating impact of GDP contraction on migrant labourers

The construction industry in India is the second largest employer after agriculture and has an industry size of Rs 10.5 trillion. According to the Confederation of Real Estate Developers Association of India, prior to the lockdown, there were 20,000 ongoing construction projects in the country and work was being undertaken in as many as 18,000 sites.

Priyansha Singh and Prasanna Sriraman September 22, 2020 07:30:23 IST
84% construction workers in Pune, Ulhasnagar not paid in lockdown: Survey shows devastating impact of GDP contraction on migrant labourers

India economy. Reuters

The latest quarterly Gross Domestic Product data released by the Ministry of Statistics and Programme Implementation presents a gloomy picture. The Indian economy has contracted by a staggering 23.9 percent in the first quarter of the current financial year — with the labour-intensive construction sector reporting a massive slump of 50.3 percent. For a sector that was already under stress before the pandemic due to the poor financial health of many companies and dwindling output, this news has come as a shocker.

But more significantly, the data provide a frightening picture of the impact the pandemic has had on the construction workers- a glimpse of which was also visible from the mass exodus of migrant workers to their villages during the lockdown.

A rapid assessment survey conducted by Habitat for Humanity’s Terwilliger Center for Innovation in Shelter interviewed 974 respondents to better understand the impact of the COVID-19 on migrant workers in Maharashtra’s Pune and Ulhasnagar. The report reveals that nearly half the respondents belonged to the construction industry (47 percent), followed by bag manufacturing (23 percent), garment industry (13 percent) and the remaining 17 percent to other sectors. At least, 71 percent of all respondents received no wages after the lockdown and over 63 percent claimed to have no source of livelihood at their places of origin.

The survey presents a distressing picture of the plight of migrant workers in the construction sector and other industries - and what the 50 percent fall in construction output means for the many who depend on it.

Impact on the construction industry and its workforce

The construction industry in India is the second largest employer after agriculture and has an industry size of Rs 10.5 trillion. According to the Confederation of Real Estate Developers Association of India, prior to the lockdown, there were 20,000 ongoing construction projects in the country and work was being undertaken in as many as 18,000 sites.

Together, these projects involved a workforce of over 8.5 million. Moreover, demand from affordable housing segment is expected to decline significantly due to constrained spending capacity of the target group. With more than 6.1 lakh affordable houses under construction buoyed by policy fillip such as Pradhan Mantri Awas Yojana and the resultant growth in recent years — muted demand, reduced cash flows, labour shortage and cost escalations could severely hamper revival of the sector. When output from the sector is lost, the jobs and the incomes generated from those jobs are also lost. The loss in incomes was observed even in the Terwilliger Center survey, with only 16 percent of all workers interviewed receiving the same wages as before lockdown, and the remaining 84 percent receiving much less or no income. Further, even from the workers who received the wages, only around 10 percent found it sufficient enough to help them through the lockdown.

With no money in hand and no alternative livelihood in the destination states, migrant workers were forced to rely on welfare measures from the government. Data from the Terwilliger Center survey shows that about 28 percent of them received no form of help or support from the government — putting their very lives at risk. It is no surprisem therefore, that almost 26 percent of the workers suffered hunger during the lockdown, with little or no access to food. In fact, for 40 percent workers, access to food and ration was one of their biggest concerns.

In such a situation, the existence of active social protection for workers becomes imperative. The construction sector has two laws to provide protection and dignity to its workforce. The first, the Building and Other Construction Workers (Regulation of Employment and conditions of service) Act 1996 regulates the employment and conditions of service of building and other construction workers, and provides for their safety, health, and welfare. The second, the BOCW Cess Act, provides for the levy and collection of cess on the cost of construction incurred by employers, with a view to augment the resources of the BOCW Welfare Boards, used to provide for these workers.

The rapid assessment survey highlights the glaring inadequacy of the workers’ registration system under the Act: 96 percent of the workers in the construction sector were not registered under the BOCW Act and thus could not avail its relief package. The survey further reveals that among the 455 respondents employed in the construction sector, 62 percent  were not even aware of BOCW, while 20 percent were aware of BOCW, but could not register themselves.

To put this in perspective, in June 2020, Ministry of Labour and Employment stated that 20 million workers registered under BOCW were provided cash assistance during the lockdown. As per India’s Periodic Labour Force Survey of employment and unemployment, there were nearly 55 million construction workers in 2017–18. This demonstrates that only about 36 percent of the construction workers received the cash entitlements they deserved, making the situation precarious for the large majority of the workers, and often leaving them to fend for themselves.

In reality, a large number of workers in the construction industry have been living in precarious conditions even before the pandemic. This is due to the rampant informality present in the construction sector, primarily due to its reliance on migrant labour recruited through a series of sub-contracting processes. About 87.4 percent of workers in the construction sector have been categorised as casual labour, according to the PLFS 2017-18, highlighting the level of informality that prevails in the industry.

Informality is also evident through subcontracting — a process deeply embedded within the building construction work. A typical example of a sub-contracting hierarchy involves a realty and infrastructure company handing over specialised tasks to specific subcontracting companies, which in turn delegate hiring responsibilities to petty contractors, who may or may not have an appropriate license. These petty contractors, also known as labour sub-contractors, are responsible for recruiting and onboarding workers. Thus, the structure of recruitment is complex, multi-layered and hierarchical, especially in large construction firms.

Petty contractors in such contracting value chain play a crucial role in mobilising large number of labourers needed by the construction industry. The heavy reliance on these contractors was evident from the survey as well; majority of the construction workers (58 percent) surveyed relied on contractors to find jobs, while 26 percent found employment on their own and 13 percent through referrals from friends or relatives.

Labour economist Ravi Srivastava talks about how this dependence on contractors is more common among short term migrants, in this 2020 paper. "Short term migrants are much more likely to enter the migrant labour market through contractors from whom they have taken an advance payment and are more likely to be involved in a debt-interlocked migration cycle," he writes.

In addition, these short-term migrant workers are largely characterised by an absence of civic identity and citizenship at destination, poorer access to entitlements, labour market discrimination and working and living in substandard conditions. Though significant progress has been made in providing housing for economically weaker sections through the PMAY scheme, short-term migrants, who are multilocal in nature, are left out and often end up living in inadequate shelter in cities as they could neither afford nor access decent housing.

They face double marginalisation in the destination states, owing to their identity as outsiders and also due to the informal nature of their occupation. They resort to living in labour colonies and rented accommodation in informal settlements, with no access to basic services. Further, the living conditions of such migrants are congested in nature and conducive for the rapid spread of viruses and diseases. The survey corroborated this - out of all migrant workers surveyed, only 15 percent had access to all necessary conditions required for prevention of COVID-19, such as access to serviceable toilets, clean drinking water, water for washing hands, and enough space to practice physical distancing.

All this is emblematic of a larger malaise prevailing in the system- marked by an absence of social protection to the workforce that runs the economy. Seen from this perspective, the 50 percent fall in GVA of the construction sector could exacerbate hunger, loss of livelihood, and lead to distress migration and lack of dignity for workers. Findings from the Terwilliger Center study and several other field assessments since March 2020 indicate the prevalence of all these aspects in the lives of migrant workers.

Beyond the official data

There is a high likelihood that the decline of over 50 percent in the activity of the construction sector has been under-reported. This is because a country’s GDP, as economist Vivek Kaul writes, is based on formal-sector indicators; and the real state of the huge informal sector can be captured only over a period of time, as more and more data come in, not immediately. In India, given that data-collection was affected drastically during the lockdown and that the construction industry is subject to rampant informality and substantial sub-contracting, the impact on the sector, both in terms of loss of output and employment is likely to be worse.

For instance, KPMG’s report on the impact of COVID-19 in the construction sector predicted a fall in the Gross Value Added of the construction sector to be 34 percent, (in the worst case scenario of the lockdown extending to 30 June) and the consequent fall in employment to be 25 percent (corresponding to the 34 percent fall in GVA). However, the latest fall in the construction sector GVA of 50.3 percent, based on partial data collection, belies all such expectations. More so, given the nature of construction industry, a fall in output would have a multiplier effect through backward linkages, causing further reduction of the economic activity and job losses. However, all is not lost yet.

The rural economy and the role of housing

With a protracted economic recovery looming large, especially in industries such as construction that are dependent on migrant labour, there is an urgent need to revive the rural economy. Transitional remedial measures such as PM Garib Kalyan Yojana and enhanced budget allocation and expansion of works as well as workdays under MGNREGA can help in the short term revival but may not be sufficient given the magnitude of crisis and jobs to be created.

Extending the PMAY Gramin program’s tenure and upskilling returnee construction labour on rural masonry skills can create more sustainable jobs besides productively utilizing their skills acquired in cities. This can also lead to improved quality of housing construction under PMAY Gramin.

According to a recent GIZ report Improving Housing for Urban Poor - Learnings from BLC Implementation in Odisha”, it can be seen that 76 percent of PMAY beneficiaries are labourers and 56 percent infact are construction labourers. It is well known that remittances from migrant labour working in cities partly goes towards housing improvements in their hometowns. The current situation presents an opportunity to address the housing gaps among migrant households and enlist those who were left out; and also resolve the issue of incomplete houses caused by migration of beneficiaries to other places for work. Housing has also become the frontline defense against the coronavirus and in this context it is imperative that every migrant worker has access to adequate housing, in both origin and destination states.

Willingness to migrate again

One of the important findings of the survey is that, despite the hardships endured in the place of work and in subsequently travelling back to their villages, 59 percent of surveyed migrants expressed willingness to return to their destination state. This willingness was higher among construction workers, where 68 percent expressed willingness to return to the destination state once the government allowed interstate travel. For many of these construction workers (76 percent), the lack of livelihood options in the origin state was a key driver influencing their decision. Not surprisingly, the survey reveals that the migrant workers' willingness to return to their place of work was contingent upon the employer providing them with travel arrangements, food and a safe, clean and hygienic workplace and proper accommodation- all basic necessities.

Further, because of the nature of the construction sector, petty contractors are the key linchpins in recruiting workers and offering informal intermediation services to employers in mobilising labour. The survey suggests that builders and construction firms should step up in formally recognising their role and paying for their services, while keeping the relationship between the worker and employer linear. Employers can also explore partnerships with civil society organizations to sensitise, train and expand the services of petty contractors as facilitators of entitlements to migrant workers in the destination states.

As a significant number of migrant workers are employed in the construction sector, implementation issues in the Building and Other Construction Workers Welfare Act must be addressed immediately. The welfare boards in destination states need to be inclusive and ease the registration process for migrant workers. One way to do that is by engaging with petty contractors to scale up migrant worker registrations. At the same time, builders and construction firms who contribute cess to the state governments must hold the state BOCW welfare boards accountable and ensure delivery of entitlements for registered workers.

Doing away with domicile restrictions to access the Public Distribution System would ensure food security of migrants in the destination states as they return. As regards housing, India does not have a legal framework for the right to housing, which makes it difficult for migrants to acquire shelter and they end up relying on intermediaries or petty contractors for accommodation. Finding sustainable ways to develop and operate the affordable rental housing complexes for migrant workers through market-based models and utilising the Construction Workers Welfare Board funds for housing of migrant construction workers as recommended by the Working Group on Migration in 2017, could go a long way in improving the quality of lives of workers as well as help revive the GDP by rekindling demand.

To access the full report, click here

Priyansha is with India Migration Now, a South East Migration Foundation Venture based in Mumbai, India. Follow their work at @nowmigration
Prasanna is a Specialist in Market Systems and leads the Construction Labour vertical at the Terwilliger Centre for Innovation in Shelter, Habitat for Humanity

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