A survey of daily wage labourers in Ranchi and surrounding rural areas shows that demonetisation was more than a short-lived shock for the informal sector.
At about 9 am, in Saradkel, a village near Khunti in Jharkhand, a girl of about seven years of age was washing a bucketful of clothes, a sad smile on her face. One of us spoke to her and found out that she is in the fourth standard. Meeting her parents, who are casual labourers, we learnt that they have been unemployed since November 8, 2016 (the day of demonetisation, known locally as ‘notebandi’) and were facing difficulties. They didn’t have enough money to pay their daughter’s school fees, to buy food and other necessities or to travel to Khunti or Ranchi to find work. Some labourers in the area were even worse off than this girl’s parents, others were a little better off, but nobody was as well off as they had been before the notebandi, at least economically.
These are some of the families we met in the course of conducting a survey of casual labourers in and around Ranchi, beginning on January 8, 2017 (two months after notebandi). Our main objective was to investigate how their employment and earnings have changed after demonetisation, and related issues such as the timeliness of wage payments before and after notebandi. We were also interested in their views about the situation.
The survey covered three areas (one urban, one peri-urban and one rural): Ranchi city, Ratu block on the outskirts of Ranchi, and Khunti block in Khunti district. In Ranchi, we selected five addas (places where labourers wait for employers in the morning) spread over the city, thanks to a list supplied by a local NGO. In Ratu and Khunti, we selected three villages at random from the Census list, choosing from among those with a population between 800 and 1500 people. In each of these 11 localities, we tried to interview 30 casual labourers, more or less evenly spaced out over the queue (in the case of the addas) or over the village (in the case of villages). In a few places, we did not quite achieve the target – the total sample size is 307 (150 in urban areas and 157 in other areas).
Impact of demonetisation
For the interview, we used a simple questionnaire that included carefully-worded questions on the following issues among others: monthly days of employment before and after notebandi; daily wages before and after notebandi; timeliness of wage payments; whether November or December were the harder months since notebandi; and workers’ views on notebandi. The two-month interval from November 8 to January 8 provided a convenient reference period to gather post-notebandi information. In Ranchi, we also talked to some labour contractors.
Most of the casual labourers we met work and earn on the same day. They get their wages, if any, in the evening (generally, they work from around 9 am to 4 pm or so). When they get no work, sometimes they have to borrow money in order to eat. When they get work, they earn around Rs 350 per day. This might seem like enough to save some money, but for most of them it is not, because they do not get work every day. The survey suggests that labourers were getting around 18 days of employment per month before the note ban.
Labourers are usually paid in cash. Many of the labourers we spoke to said that contractors were offering them old notes after the note ban, and that they were initially accepting them because the deadline for exchanging old notes was still quite far away. Later on, however, they became reluctant to accept old notes. Some of them accepted old notes until around the end of November, others stopped accepting them about a week after demonetisation because they needed valid cash for immediate expenses such as buying vegetables.
The survey responses clearly show that finding work became harder after notebandi. This is not surprising, since the informal sector in and around Ranchi primarily runs on cash. The average days of employment per month, as reported by the labourers, fell from 18 before notebandi to 11 after, a decline of 39% (see Table 1). The decline was a little larger for women (44% than for men (37%).
In addition to the employment-related questions, we also asked the respondents about their monthly incomes before and after notebandi. The results are presented in Table 2. Here again, there is a sharp decline (about 36%) post-notebandi, and the drop is again a little larger for women than for men.
The decline in income is very similar to the decline in employment, implying that wages have remained much the same before and after demonetisation. This is confirmed from responses to our direct questions on wages (see Table 3). It suggests some downward rigidity of wages, despite growing unemployment in the post-notebandi period. Many labourers mentioned that there was a lot more “competition” for work after notebandi. In some cases, they said, this led to the bidding down of wages, but judging from the data, this does not seem to be the general pattern.
Are things improving?
While wages have remained much the same, many labourers complained of a decline in the timeliness of wage payments after demonetisation. As Chart 1 indicates, 69% of the respondents felt that the timeliness of payments declined after notebandi, 28% said it had remained much the same and virtually none reported that it had improved. This is a serious issue, because most of the labourers have no cash reserves, and depend on timely payments to avoid hunger and other hardships. As one labourer put it, “Timeliness is the biggest concern for us. If we don’t get our wages in the evening, after finishing the work, then the contractor starts giving excuses to pay us later, and sometimes even threatens us.”
In order to get a sense of whether the situation is improving or getting worse over time, we asked the respondents which month had been harder for them, November or December. Interestingly, a much higher proportion said December (41%) than November (28%). The rest were not sure, or felt that there was no difference – see Chart 2. This suggests that demonetisation was more than a short-lived shock for the informal sector, and that two months later there is still little sign of recovery.
Finally, we asked people whether they felt that, overall, notebandi was a good or a bad idea. About half of the respondents, men and women, felt that it was a bad idea, although a significant minority (28% of women and 34% of men) said that it was a good idea – the rest were not sure (see Charts 3 and 4). This is interesting since media reports tend to claim that a large majority of the population supports demonetisation. That may be true for the population as a whole, but it does not seem to apply to casual labourers in and around Ranchi who have been badly hit by this move. Women were somewhat more opposed to demonetisation than men, consistent with the fact that they suffered a larger decline in employment.
The main reasons for negative views of demonetisation related to the labourers’ personal experiences: the loss of employment, the reduced timeliness of wage payments, and the hassles involved when contractors paid with old notes. Those who supported demonetisation tended to mention that it will eliminate black money or that the gap between the rich and the poor would close. In other words, they went along with the dominant political rhetoric on this issue.
The survey’s findings are consistent with those of an earlier study of traders and vendors in Ranchi. Similar effects of demonetisation on the informal economy have been reported elsewhere too. The government claims that demonetisation is a game-changer for the economy, but the short-term effects on casual labourers are deeply alarming.