The jobs debate conundrum
Last week, a colleague broke the story on how in the last six months, the subscriber base of the Employees Provident Fund Organisation (EPFO) had surged by 26% to 48.1 million.
Latest official numbers reveal that the EPFO subscriber base rose 26% in the last six months from 38 million to 48.1 million.
Yes, while this news break is significant, it is the sub-text of the story which is of greater import. It begs two questions: One, is formal employment in the Indian economy being underestimated? Second, are jobs in the economy actually growing and just not being captured by the existing data infrastructure?
Indeed, it is very likely that India is underestimating its formal employment; especially if we keep in mind anecdotal information about the growth in taxi-hailing services by companies like Uber and Ola and the phenomenon of formalizing the informal. For the record, the total employment in the country is estimated at about 475 million, of which about less than 10% is considered to be formally employed (read eligible for social security benefits like provident fund).
However, on the latter question, also the most contentious point of debate today, frankly, there is no easy answer. Firstly, this spurt in enrolment is the fallout of an amnesty scheme the government had announced. The scheme, which ended in December, allowed companies to come clean on their actual staff strengths and avoid the normal penalties and censures. Second, more disclosures do not necessarily mean more jobs have been created.
This segues to the core of the ongoing debate: jobless growth. It is a term that got hooked to the Congress-led United Progressive Alliance (UPA) after the release of the 66th round of the National Sample Survey Office (NSSO) data on employment in 2011. It damagingly showed that between 2004-05 and 2009-10, only 1 million jobs were added per year, when the economy averaged a record 8.43% growth annually—take the two together and you have jobless growth.
Consequently, of the 55 million people who joined the labour force, only 5 million joined the workforce. Worse, from the UPA’s point of view, the previous tenure of its principal political rival, the National Democratic Alliance (NDA) led by Atal Bihari Vajpayee, saw a substantially higher number of additions to the workforce. The NSSO data for that period, 1999-2000 to 2004-05, showed that the economy generated 62 million jobs.
The new NDA regime led by Prime Minister Narendra Modi is now at the receiving end of a similar charge. The high profile retrenchments in the information technology sector, an economy struggling to break out of the freeze and little or no off take of bank credit have led analysts, Modi-baiters to claim the worst.
However, unlike in the case of the UPA, there is no NSSO data available to establish the claim of either the government or the opposition on job creation. Worse, the next set of NSSO data—the only reliable measure of employment in the country—is not available till 2019; by which time the country may have finished voting in the 17th general elections.
The political rhetoric is restricting the contours of what is otherwise a very relevant debate. Instead of focusing on the quality of the jobs being created, a binary debate is forcing the conversation to be restricted to aggregates. Similarly, the big question is how many in the workforce are formally employed; something implicitly signalled in the disclosures made in the latest EPFO data referred to earlier.
To an extent, the ball on this has been set rolling by the high-level panel on employment data under the chairmanship of Arvind Panagariya. The findings posted for public comments, among other things, suggest that enrolment in provident funds, medical insurance or pension schemes can be the starting point for counting the formally employed.
Deeper analysis and more fundamental questions have to be addressed on jobs; expertise, overlooking political prejudice, outside the government needs to be tapped. But will political expediency cloud good judgement?
Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics.
His Twitter handle is @capitalcalculus.
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