Covid-19, Migrant workers & Economic Recovery

In the quest of "Livelihood", humans have always kept moving. In some cases the movement has been natural and in some it has been forced by the circumstances.

History shows that "Productivity" gain is an important outcome of such migrations. A country or a State and Industry in particular have benefited from the efficiency gains of such migrations. Once established as a base case, the migrant workers lay down a benchmark which rest of the community has to meet up, else it looses its employment opportunities to the migrant class. Various Indian States are reference examples of such incidences. There is no denial that the benefits have accrued over a period of time.

During Covid-19 migrants have migrated again.

In the short term, result of this migration, naturally, is mismatch of demand of skills against the supply of skills, particularly in the Manufacturing & Logistics sector where labour is trained with certain skills such that he performs the tasks efficiently on the floor. With the labour having migrated to some other geography even if the Supply Chain operations, as a relaxation in government policy for Covid-19, have to commence the skills are likely to be in short supply. Training new person to gain the same skills to achieve the level of productivity of the person he is replacing shall not be an easy task. This mismatch may lead to delayed economic recovery.

Due to the demand-supply mismatch of availability of skilled resources, the cost of operating the Supply Chain may also rise in the short term. e.g. Non availability of truck drivers may lead to increased cost of the driver as well as under-utilization of truck capacity which ultimately may result into overall transportation cost increase. Similar examples pop up from various other Supply Chain execution layer activities which predominantly are undertaken by the workers. In the Long term the industry will probably evolve & find its way out of this. But that's not probably going to support the immediate economic recovery.

Recent happenings due to Covid-19 is likely to once again make the periodic shifting of industrial base phenomenon be experienced. If we date back to 1970's, industrialization in India was concentrated in the Eastern states of India. Due to the adverse developments in the Eastern part of India which resulted into lack of opportunities of livelihood the 80's experienced a shift of industry base to Western part of India. The search of livelihood made a large part of workers shift from Eastern to Western part of India. This has continued with tremendous rate of incoming population which found opportunities of livelihood & reasonable safety and income to sustain life. With circumstances, which may be natural or human driven, history stands to show that the cycle continues. Covid-19 may have given that opportunity where people migration may have just commenced. Geographies from where the migration has happened will find the void to filled up very difficult while the places where the people have migrated-to may en-cash leading to shift in Industrial base once again. This periodic shifting of the base is not new but will take time hence impact the economic recovery.

States with migrant workers have experienced productivity gains. States have enjoyed the benefits of their contribution to the State economy for a long time. Missed is the opportunity to have not stood by them during the first few months of Covid-19 & allowed them to migrate. Short term gains have sacrificed Long term benefits for the States which have gained a lot due to the migrant workers. Having said that, I think Supply Chains will get redesigned as industry has to work towards finding alternate mechanisms and work around the bottlenecks. This realignment is a costly one for the economy as a whole as time will be consumed, supply side may be slow to progress & costs may have to be incurred at the least opportune time. The country will move on with a new Supply Chain Network design.