which suggests that the sectoral shift induced by the pandemic was temporary in nature. The short-term shift into agriculture is accompanied by return-migration, primarily into rural areas. The migrant crisis that was extensively covered by the media saw almost 4 percent of the Indian population (roughly 50 million migrants) move back to their native households. Another potential crisis, albeit less documented, concerns the long-term adverse effects of unemployment spells on later employment and wage outcomes of young people. Youth of age 16-24 years in the Covid-cohort, who were not employed at baseline were 9.5 percentage points more likely to remain out of the labor force even 16 months afterwards relative to their counterparts in the pre-Covid cohort. This abstention from the labor market is not compensated by acquiring more education, as the Covid cohort is also more likely to be out of school by 9.6 percentage points, and consequently face greater learning losses relative to the pre-Covid cohort.

Our study contributes to the emerging literature on the impacts of Covid-19 on India and other emerging economies. Gupta et al. (2021) document findings similar to ours, of downward labor market churn into jobs that yield lower earnings. While casual workers faced higher relative losses in earnings vis-`a-vis salaried workers, losses were also relatively higher for individuals from richer households, with mixed implications for overall income inequality. Bussolo et al. (2021) look at short-term effects of Covid-19 indicating a large shift into self-employment. Researchers have also focused on the gendered impacts of the pandemic in India and have found that conditional on being employed, women were more likely to lose their jobs and face greater domestic burdens due to the pandemic (Abraham et al., 2021; Deshpande et al., 2020). Our results confirm early findings on the differential impacts of Covid-19 along caste lines, driven by the overrepresentation of marginalized castes in informal work and their lower levels of human capital (Deshpande and Ramachandran, 2020).

Our paper also adds to emerging evidence in developing economies on how labor markets fared during the “recovery” period that followed the first wave of Covid-19 and associated lockdowns in developing countries. In the early days of the pandemic between April and June 2020, the recession inflicted by the pandemic caused severe labor market disruptions in developing countries. The World Bank’s High-Frequency Phone Survey (HFPS) data collected in a large sample of developing countries show that work stoppage, pay-cuts and income loss were common consequences (Khamis et al., 2021) and occurred at a disproportionately high rate among those with low education, informal jobs in urban areas, women and youth (Bundervoet et al., 2022). Sectors hit hardest by Covid included accommodation and food services, non-food manufacturing, retail and wholesale, and travel and transport (ITC Business Impact Survey 2020).

Evidence on labor market recovery in developing countries since the summer of 2020 is rather sparse. The limited and indicative evidence that exists suggests that even as economic activity started reviving in many countries since May/June 2020, the job market recovery was slow and uneven in most countries. In a sample of 17 developing 3