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Opinion | A good way to match workers with work once India reopens

Market design principles and technology can help get millions of migrants back to work in industrial areas that need them

The exodus of migrant workers from industrial centres across the country is most importantly a human tragedy. However, there could be deeper economic consequences as well, if one goes by some of the recent political moves. Uttar Pradesh Chief Minister Yogi Adityanath has said that other states will have to seek permission from his government before hiring workers from the state. The Maharashtra government led by Uddhav Thackeray has asked industrial units in the state to employ locals to replace the migrants who have gone back home. Is the Indian labour market splintering so soon after its goods market had integrated?

Meanwhile, conversations with small businessmen suggest that the availability of labour will be an obstacle to the opening of factories. One manufacturer of machinery for the pharmaceutical sector says that it takes him around three to train someone on the factory floor in skills such as fitting, welding, assembly. Another small businessman told me that even jobs such as unloading inputs from trucks need a certain degree of knowledge about the supply chain. It will not be easy to quickly find replacements when the economy gets back to normal, hopefully by the second half of the current fiscal year.

Newspaper reports suggest that the exit of migrant workers could lead to rising wage rates for those who have been left behind. There are initial signs of this happening in industrial areas around Pune. Companies will for now be more likely to absorb these higher costs, given weak demand conditions. They will not be able to pass them on to consumers. So monetary policymakers will have good reason to look past wage increases. The big mystery is whether normalization of economic activity will be enough to draw workers from the northern states to manufacturing-heavy states.

There is little clarity right now whether migrants will return to their old places of work in the coming months. Nobody would want to hazard a guess. It is hard to believe that the states of their birth will be able to generate jobs for them. However, the actual decision to return or not could depend on wage rates in their home states, those in the states that need them, and their prospects of employment as soon as they return. Researchers have also shown that informal rural insurance networks—often based on caste—tend to slow down migration because they provide financial resources to deal with negative income shocks of the type much of India has faced. Such informal insurance is weaker in urban areas for migrants. This is all the more important in the absence of a formal safety net funded by taxes.

What would be worth thinking about is how enterprises will be able to locate workers on a large scale in the coming months, especially smaller companies. Some of them may have the ability to reach out to their old workers, but not everyone. Searching for workers with the requisite skills could be an expensive process. Policymakers seem to have underestimated the scale of the challenge. Can technology help?

The origins of the Gale-Shapley algorithm can be traced back to a friendly challenge thrown by David Gale to Lloyd Shapley. If there were an equal number of males and females in an experiment, would it be possible to identify a stable set of pairings such that nobody has a reason to walk away from his or her assigned partner? Shapley quickly wrote out an algorithm to identify such pairings, given the preferences of participants. The structure of the final result also depends on whether women propose to men, or vice-versa.

Shapley shared the 2012 Nobel Prize in economics with Alvin Roth for their contributions to the field on how to design new markets or redesign existing market institutions. Their insights have been used in areas such as matching new doctors to hospitals, students with schools, organ donors with organ recipients. The underlying question is the same: How do you ensure that the matching is stable, in the sense that nobody is unhappy with the allocations, given their preferences?

The Indian labour market is far bigger than any specific market for medical residents or kidney donors where the principles of market design have been used. However, the underlying problem is the same: How does one match buyers and sellers in such a way that the pairing is stable?

Online job portals have made an impact in the formal job market, but a lot of hiring in India is still done through informal social networks. The recent disruption of the Indian labour market is still playing out. Several million economic migrants have returned to their home states. Getting them back to their former places of work is likely to be a complicated task. Old networks will play a part in the normalisation for sure, but technology can also help.

Niranjan Rajadhyaksha is a member of the academic board of the Meghnad Desai Academy of Economics.

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