The construction sector is believed to be labour intensive but at the same time it is highly sensitive to the short and long-term business ups and downs. Whenever there is a huge deceleration in economic growth, the real estate sector and construction activities suffer the most. The relationship of this sector with the aggregate GDP per capita is important. Secondly, the recruitment processes in this sector are seen to be very different from those in other activities.
The role of the labour intermediaries and the denial of minimum benefits to the workers even when the parent organisations are willing to adhere to the norms, are some of the common and prevalent practices followed within the construction sector.
Besides, the gender discriminations in terms of wage differentials and varying duration of employment also need to be considered. Even during the pre-Covid years the livelihood problems were serious in India as agriculture was not in a position to absorb any additional labour, while non-agriculture activities either in the rural or urban areas had not been amenable to gainful opportunities on a large scale, particularly for the unskilled and semiskilled workers. In the urban context, sluggish industrialisation in many parts of the country associated with the adoption of capital-intensive technology reduced the pace of industrialisation of the workforce.
The services sector involves a significant dualism in terms of a high productivity segment and a vast spectrum of residual jobs, overlapping with the urban informal economy. Livelihood diversification has been argued as an effective strategy for reducing the income risks and the consumption fluctuations. In other words, by shifting to different economic activities across seasons/months or taking recourse to multiple activities at a given point in time, household incomes can be augmented, and the probability of facing major decline in consumption and moving below the poverty line can actually be reduced.
However, there are a number of inflexibility issues in relation to occupational mobility and income augmentation, due to the lack of capital, credit, information and skill. In the urban context the shortage of space and enforcement of regulations make diversification more difficult. Since the industrial sector has been stagnating in terms of employment creation, it becomes pertinent to examine the potential that the construction sector may possess.
This sector is expected to be more flexible as it can grow and generate employment in relation to the income growth originating from either the industry or the services sector.
After the Covid-19 pandemic and the subsequent lock-down hit economic activities drastically, the concern for job creation gets even bigger. Rapid growth in the construction sector can mitigate the employment challenges and create vast sources of livelihood both in the rural and urban areas.
During the post-lockdown phase the government is trying to stimulate the effective demand so that normalcy returns soon and the economy is able to experience a reasonable rate of growth.
However, given the major losses in livelihood and the slump conditions that the economy has encountered it is difficult to revive the effective demand instantaneously. An alternate way would be to provide encouragement to producers to augment supplies so that with a rise in production, factor income will increase and demand will be stepped up subsequently. After all, the purchasing power of the consumers has a major impact on GDP.
Any reduction in employment can have adverse effects on output so much so that there can be a steady deceleration in the effective demand. When most countries are struggling to revive, it is far-fetched to rely on export demand to pick up and sustain the growth of the economy.
Export demand has a number of constraints; unless competitiveness is extremely high it is unlikely that exports can sustain long-run growth. Hence, the classical conceptualization of a close association between growth and employment is instrumental to the long-run steady state of the economy.
As a first step to providing a boost to the economy the potentiality of the construction sector will have to be utilised and employment opportunities in this sector can come as a great saviour.
Government-sponsored construction activities need to be pursued on a large scale so as to create wage income, which, in turn, may provide an impetus to the normal functioning of the economy. The second wave of Covid hit the economy and the lockdown of 2021 caused massive employment loss. In low income countries even under normal circumstances, a large number of households are vulnerable to precarity of livelihood loss.
Their capacity to withstand such employment loss is highly limited as they do not have an asset base or the flexibility to switch occupations. The strategy of livelihood diversification requires an enormous amount of guidance coming from both government and non-government agencies, which may have had the requisite experience.
While distribution of food and provision of health support are indeed the short-run rescue measures at the time of crisis, massive planning will be required to create employment both in the rural and the urban areas.
The urban employment guarantee programmes will be relevant for the urban poor/members of low income households who have been residing in urban areas for a very long time with little access to the rural areas. In this context the designing and revamping of the construction sector can play a major role in giving a realistic shape to the dream of having an urban employment guarantee programme in place.
Through the revival of construction activities, particularly in the public sector, the employment guarantee programme can be implemented successfully both in the rural and urban areas.
(The writer is Professor, South Asian University, New Delhi.)