India will need to create 10 million jobs per annum until 2030 to see a healthy reduction in unemployment and underemployment numbers.
The Indian economy is chugging along at a fairly healthy rate. We’re told that new jobs are being created every month. And the claims by the govt are fairly large. EPFO data claims that nearly 40 lakh jobs have been created since September last year. Critics have panned these numbers as, at best, low wage jobs like selling pakodas or, at worst, make believe and badly written fiction.
On SOTD today, we’re going to try to make sense of the govt’s data and perhaps get at the actual story that these numbers present.
The whole job creation back-and-forth was kicked off by a report by two men, Pulak Ghosh, a professor at Indian Indian Institute of Management, Bangalore, and Soumya Kanti Ghosh, chief economic adviser at State Bank of India, who declared that their research indicated India will add 7 million jobs in 2017-18. The numbers cited in the research paper were based, for the most part, on new registrations in the EPFO, the retirement fund body under the labour ministry.
This started off various rounds criticisms and counter charges. Varying and equally confusing job creation data was being cast about frequently, each contradicting the other by a fair margin.
Jobs are essential in a country for a healthy economy. And it is likely that job creation could prove a contentious issue in the 2019 general elections.
Let’s take a brief look at the workforce numbers and their growth to understand what the issue is. The United States, with a population of 315 million and a working population of 200 million, creates 2.5 million new jobs every year. That is, 1.2% eligible work force with an annual growth rate of 2.5 per cent. China creates 15 million new jobs every year, adding to a working population of 780 million. That’s a 2% eligible work force with an annual growth rate of 6.5 per cent.
In comparison, India has working population of 480-500 million. Most of whom are engaged in agriculture. If we exclude the 45% engaged in agricultural activity, we have between 260-275 million employed in manufacturing and services.
India will need to create 10 million jobs per annum until 2030 to see a healthy reduction in unemployment and underemployment numbers. That’s over 8 lakh new jobs every month for the next 12 years! Combine that with the stunning number of job applicants. Consider this: the railways received 2.38 crore applications by March this year for 90,000 vacancies. That’s nearly 24 million applications for 90,000 vacancies! Does that give you an idea of the dire need for jobs in our country? Little surprise then, it has now become a big ticket issue.
A few weeks ago, the Employees’ Provident Fund Organisation , or EPFO, released data that showed 3.9 million jobs were created between September 2017 and March 2018. That’s 39 lakh jobs created in a span of 6 months! Similarly, data for the National Pension Scheme for the same 6 months indicated that 4,65,000 new accounts were created. While this data could, in theory, provide a rough idea of the employment scenario in the country, it may not quote translate into new jobs created.
According to the payroll data, 39.3 lakh jobs were created between September 2017 and March 2018. 6,00,000 new jobs were reportedly created in March alone. Some analysts attributed this robust jobs data from the EPFO to better reporting of jobs, and not actual job creation. Another contention is that while the number of new EPFO or NPS accounts could be a reflection of the employment situation, it does not take into consideration duplication of accounts and those companies not registered with either bodies.
One media report sounded a warning about the data. It said the data needs to be handled with caution – It needs to be seasonally adjusted. More data points are needed. Payrolls give us some sense of what is happening in organized sector enterprises, but it is possible that job growth there 0could be balanced by job losses in the unorganized parts of the economy. Interestingly, economists on either side of the argument concur that the role of the formal economy is growing rapidly. Well, something positive that both sides can agree on.
Now, let’s look at the conflict in the data that seems to be at the heart of this showdown. A recent report by UBS Securities claimed there are two sets of data with conflicting outputs. “A study based on EPFO data suggests 7 million formal jobs created in FY18. This number is a positive surprise to us and markets, “ said UBS, adding, “The BSE-CMIE index suggests that not many jobs have been created in this same period and unemployment levels (formal + informal) may have started to go back up.”
In April, the EPFO, the Employees’ State Insurance Corporation and the Pension Fund Regulatory and Development Authority declared they had released payroll data for the first time. Since then, data has been released every month. EPFO data indicated 3.11 million new additions were made in payroll between September 2017 and February 2018 across all age groups. The EPFO did hint that the data could be a conservative estimate. Meanwhile, New Pension Scheme data from PFRDA showed 4,20,000 new payroll generation during the same period, that too only from Tier-I account. New Pension Scheme manages the corpus of around 5 million employees across state and central government offices. Add the two reports and we’re looking at 3.53 million new payrolls generated during the six-months from September to March.
This data is being contested. The UBS report cited earlier claimed that members of the Employees' Provident Fund are those who have a PF balance in their PF account. It must be noted that while all EPFO subscribers have PF accounts, that does not mean all account holders are currently employed. EPFO has a little over 170 million accounts but only about 50 million are active subscribers. The UBS report says, “The investment corpus per member has been growing less than inflation. This seems to suggest that the quality of jobs may not necessarily be improving.”
Further, the EPFO added 10.13 million, or more than one crore, subscribers to its pool between 1st January and 30th June 2017 via an amnesty scheme. Some media outlets have claimed that this number is a case of under reporting of formal employment between 1st April 2009 and 31st December 2016 by companies and cannot be considered new jobs in the period they were registered.
Some economists say after formalisation, organisations employing less than 20 people will count all those jobs as new. Hence, the EPFO payroll data is, again, merely a rehash of existing jobs.
In another twist, some analysts claim that the BSE-CMIE index suggests growing unemployment levels after July 2017. The survey suggests a declining trend in the labour participation rate, and paints a worrisome picture, according to the analysts. In 2016, BSE and CMIE collaborated on on unemployment and consumer sentiments data. The data does not measure how many jobs were created or added every month, but is a representation of general joblessness in the country in a given period. They collect data covering 5,00,000 adults from 1,58,000 households, spread across 325 cities and 2,900 villages. And this survey indicates that unemployment is probably showing an increase.
However, one big impediment for our purposes is that India doesn’t have a unified annual survey that captures the exact number of formal and informal jobs created in a particular year. For example, in the US, payroll data by the Bureau of Labor Statistics measures new job creation accurately by releasing data each month to present the health of the economy.
Roughly 60,000 households are selected and informed by the US Labor Bureau on a rotational basis. Each respondent is asked a fixed set of questions- do they have a job? Is he/she looking for a job? And what type of job? The basic concept of identifying employed and unemployed people is simple. People with jobs are employed, while those who are jobless, looking for a job and are available for work are unemployed. Those who are neither employed nor unemployed are not in the labour force. The total unemployment rate is the number of unemployed people as a percentage of the total labour force in the country during a given period. Pretty straight forward math there.
Manufacturing is a major source of employment in India. But the picture is not promising. A CRISIL report, ‘4 years through 6 lenses’, looked at the data from 2014-2018 and said GDP in construction has trailed overall growth, while manufacturing has not shown any notable improvement. An expert with Crisil said, “…construction is one employment-intensive sector which has not been doing well. Manufacturing has not grown in a material way. The challenges continue to be there on the job creation front.”
In a draft report released in February, the World Bank announced that India needs to create regular, salaried jobs with growing earnings rather than self-employed ones, in order to join the ranks of the global middle class by 2047—when India will have been a country for a full century.
This may, or may not, have been a dig at the govt’s statement that even selling pakodas was a type of employment. The Union labour ministry is considering a proposal to bring establishments deploying less than 10 people into the fold of job creation data. That means small businesses, even shops run by a single owner or with a single employee, will be part of the job creation data.
Until recently, a data source that was considered for welfare schemes and official purposes was the National Sample Survey Office, or NSSO, employment and unemployment survey which was released every five years. Much like the US jobs survey we discussed earlier, the NSSO data covered select households across India to obtain information about the number of people employed, duration of employment, type of employment etc. However, a taskforce appointed by PM Mod recommended that NSSO surveys be scrapped in favour of a more periodic survey that mines data for more precise results on jobs being created and/or lost.As one analyst noted, there is a need for research organisations to collaborate and release statistics that are reliable and that accurately report the demographic differences of the country to counter the confusion that we currently have due to conflicting data.