Updated: April 6, 2020 10:16:44 am
Advice around dealing with a virus outbreak is not very different between the “jaan hai to jahaan hai” from Indian poetry (if there is life, there is the world), Warren Buffet (you have to survive in order to succeed) and medical education (post-mortems have a certainty that prescriptions don’t). Rich New York — per capita income of $93,000 for nine million people — is unable to handle being virus-struck New York, so resource-constrained India — per capita income of $2,000 for 1.3 billion people — chose wisely with our 21-day lockdown.
The outlook for work is unmodellable until the virus is controlled — the first input into a GPS is where you are. However, the diverse national, organisational and individual responses to the planet taking a gap year offer political scientists, economists, sociologists, psychologists, entrepreneurs, board directors, managers and central bankers the mother of all randomised control trials about work. Writer F Scott Fitzgerald suggested a first-rate intelligence has the ability to hold two opposed ideas at the same time and function; the lockdown has surfaced many trade-offs about work that are easy — and wrong — to position as conflicts.
First, lives vs livelihoods. Everything we are doing to murder the virus is murdering the economy and this is the right sequence. But no amount of CSR, government borrowing or printing money can substitute for the wages and self-employment income of our 50-crore labour force and their dependents. If the lockdown continues beyond two months, we must plan for citizens’ well being to move out of the commercial possibilities to the realm of fiscal policy.
Second, employers vs employees. Employers can’t do deficit financing because they are rivers (flow) not oceans (stock). Shareholders and lenders don’t pay salaries — customers do. It’s a mistake to believe that Tata Steel, HDFC or Infosys are the typical Indian employer — only 19,500 companies of our 6.3 crore enterprises have a paid-up capital greater than Rs 10 crore. If schools don’t receive fees, teachers don’t get paid.
Third, formal vs informal employment. Formal employment pays higher wages than informal employment because of the higher productivity that comes from access to talent, technology, and credit. But the lockdown also demonstrates the higher resilience of formal employers to demand shocks, their ability to handle supply chain disruptions, and their efficacy as vehicles for traceable fiscal transfers.
Fourth, mind vs hand workers. The lockdown impacts people who use their minds and hands differently — our guesstimate is that 65 per cent of our graduates can work from home but only 10 per cent of our non-graduates can do so. And while knowledge workers have delivered lockdown continuity from home, time will tell if they deliver productivity. Unscientific feedback about home working locked down employees suggests CEOs agree with Andrew Carnegie who answered the question “How many employees work at your company?” with “About half!”
Fifth, the current vs the future generation. There is no doubt that governments should borrow massively to handle the crisis. But the multi-decade narcissism of stealing from our grandchildren without a virus or world war has taken debt to 225 per cent of global GDP and US student debt to $1.5 trillion (half of which was unserviceable before the crisis). Economic complexity and size allow higher leverage but this debt overhang blunts economic flexibility in handling the virus lockdown. Presentism is understandable in a crisis but trusteeship needs financial prudence.
Sixth, residents vs migrants. The virus won’t change the reality of taking people to jobs rather than taking jobs to people, but it has exposed the ovarian lottery. The residents of West and South India have much lower vulnerability than the economic migrants from North and East India. The huge overseas diaspora of Kerala (about 10 per cent) and the huge Bihari diaspora in Kerala (about 9 per cent) expose how Kerala and Bihar have been economic wastelands that forced migration for many of their residents.
Seven, liquidity vs solvency. Employers fund themselves with debt and equity — equity is payable when able and debt is payable when due. The lockdown creates debt challenges and the RBI’s recent measures were proactive, comprehensive and prudent. But liquidity can’t solve solvency problems, central banks aren’t mandated to act as commercial banks and should be careful with “whatever it takes”, and solvency problems need a fiscal response. European and American employers have been promised $8 trillion “virus” state loans and subsidies — about two years of their profits. India can’t afford this calibration but will need to do more.
And finally, the rule of written law vs law of spoken rule. The written regulatory cholesterol for Indian employers — 57,000 compliance, 3,100 filing and 4,000 annual changes — is painful enough without spoken rules like arresting employers for considering attendance in paying salaries, threatening employers for not providing housing, telling parents not to pay school fees, etc. Some of these are therapeutic or “fog of war” directives but they need discouraging in favour of a rule of law that is justiciable, documented and fair. Without employers there are no employees.
April 15 and May 1 are important milestones for employers and economic policy. The lockdown’s continuance, partial lifting or end must be decided on purely medical grounds (even though it turns out epidemiologists are like economists — they don’t agree with their past selves or each other). If it ends, employers will return to normal quickly, despite a wage spike in cities for 15 days. If it continues, employers will accelerate fixed costs, supply chains, and debt servicing actions. And policy makers will have to decide whether the most effective relief vehicle is paying employers, employees or citizens.
Military historian John Keegan suggests the most important role of leaders in a crisis is a “Mask of Command”. Business leaders must take this advice till the next lockdown milestones but recognise that the mask is a mask because the end of this crisis is unmodellable. And policy makers must start thinking about world of work trade-offs because this crisis will end.
The writer is chairman, Teamlease Services
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