Delayed Informalisation in India’s Post-COVID Labour Market: Evidence from Pooled Repeated Cross-Sections of the Periodic Labour Force Survey, 2017-18 to 2023-24
Using pooled Periodic Labour Force Survey data from 2017–2024, this study reveals that India's post-pandemic labour market recovery was characterized by "delayed informalisation," where informal employment significantly increased during the 2021–23 recovery period—particularly among low-educated and socially disadvantaged workers—rather than immediately following the 2020 shock, highlighting the need for targeted policies to address job quality and security.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
In the vast landscape of India's economy, a clear divide has long existed between two types of work. On one side are formal jobs: positions with written contracts, steady pay, and protections like health insurance or paid time off. On the other side is the informal economy, where work is often day-to-day, lacks legal safeguards, and offers no safety net if a worker falls ill or loses their income. For decades, this informal sector has absorbed millions of workers, acting as a buffer when the formal economy cannot provide enough jobs. When a massive shock like a pandemic hits, economists and policymakers watch closely to see how this balance shifts. They want to know if the crisis simply pushes people out of work entirely, or if it forces them to trade secure jobs for precarious ones. Understanding this difference is crucial because a country can appear to be recovering simply because people have found some work, even if that work is far more dangerous and unstable than what they had before.
A recent study by Anupam Hazra, an economist at the University of Kalyani, digs into exactly this question using data from India's labor force surveys spanning from 2017 to 2024. The research investigates what happened to the quality of work during and after the COVID-19 pandemic. Instead of just counting how many people had jobs, the study looked at the nature of those jobs: were they secure? Did they offer benefits? Who was most likely to lose their protections? By analyzing millions of individual records, the study challenges the common assumption that the pandemic caused an immediate, massive shift toward informal work. Instead, it reveals a more complex story where the damage to job quality happened slowly, surfacing only after the initial crisis had passed.
The study began by examining the immediate aftermath of the nationwide lockdown in 2020. Many expected that the sudden stop in economic activity would instantly force a huge number of workers into informal, unprotected roles. However, the data told a different story for that specific year. In 2020, the overall number of people employed actually increased, and the share of workers in informal jobs did not rise significantly at the national level. This was not because the economy was healthy, but because the informal sector acted as a sponge, absorbing workers who had lost formal jobs. These individuals found new work, but the study found that the immediate shock did not yet show a massive, measurable jump in the percentage of people working without protections. The real story, the research suggests, was hidden in the details of who was working and under what conditions, rather than in the headline numbers of employment.
The true impact of the pandemic on job quality emerged later, during the recovery period from 2021 to 2023. It was only in these subsequent years that the study detected a significant rise in informal employment, which grew by approximately 1.55 percentage points. This delay is a critical finding. It suggests that the shift toward precarious work was not an instant reaction to the lockdown, but a slower, cumulative process. As the economy reopened, workers who had been displaced did not immediately return to their old, secure positions. Instead, they gradually drifted into informal roles, perhaps after exhausting their savings or waiting too long for formal jobs to return. This "delayed informalization" means that the labor market was reorganizing itself in a way that made work less secure, even as the total number of jobs grew.
The research also highlights that this shift was not felt equally by everyone. The burden of moving into less secure work fell heavily on specific groups of people, particularly those with lower levels of education and those from socially disadvantaged backgrounds. These workers were much more likely to end up in informal jobs compared to their more educated or privileged counterparts. Interestingly, the study found that the location of the work mattered less than the characteristics of the worker. Even in states that already had high levels of informal work, the pandemic did not cause a disproportionately larger spike in insecurity. The risk traveled with the worker's personal circumstances, not with the geography of their state.
Another striking finding concerned women. Conventional wisdom suggested that women would be hit hardest by the pandemic, losing their jobs and being pushed into the informal sector at higher rates. The data, however, showed a different pattern for the year 2020. The study found that the share of women in informal work actually decreased relative to men during the initial shock. The researchers explain this not as a sign that women were safer, but as a result of a "selection effect." Many women may have left the workforce entirely to manage increased household care duties or because they could not find work. The women who remained employed were often those with stronger attachments to their jobs, making the group that stayed look more secure on paper. This highlights a limitation in simply looking at employment numbers; the data misses those who have quietly dropped out of the system.
The study also examined the quality of the jobs that remained. It found that eligibility for paid leave dropped significantly in 2020, meaning that even workers who kept their jobs lost some of their protections. This erosion of benefits happened across the board, weakening the safety net for the workforce. While earnings data was harder to interpret due to the fact that only some workers reported their income, the overall picture points to a labor market where the quantity of jobs recovered, but the quality did not keep pace.
Ultimately, this research paints a picture of a labor market that is more fragile than it appears. The pandemic did not just cause a temporary pause in work; it contributed to a structural change where more people are working without the security they once had. This shift happened slowly, becoming visible only after the immediate crisis had faded. The findings suggest that policies designed to help workers during a crisis need to look beyond just getting people back to work. They must also focus on ensuring that the work they find is secure, protected, and fair, particularly for the most vulnerable groups who are most likely to be left behind in the informal economy. The recovery of the number of jobs is not the same as the recovery of the quality of life for those workers.
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