Opinion | Jobs growth claims in India: a fact check
The present government has incentivized employers to comply with the EPF law by making their contribution for three years to expand formal sector employment
Surjit Bhalla and Tirtha Das’ (B-D, hereafter) background paper, titled All You Wanted To Know About Jobs In India, But Were Afraid To Ask, is now available on the Prime Minister’s Economic Advisory Council (PMEAC) website (goo.gl/Y5CLtF)—a welcome initiative. It claims: “While there are no official employment surveys post 2015...there are several individual pieces of data suggesting a healthy growth in employment in 2017/18” (page 3), and concludes: “For the 2013-2017 period (a span of 3.75 years) net job creation was 22.1 million—a pace considerably higher than the 11 million jobs created between 2004/5 and 2011/12” (p. 4).
We seek to verify the truth behind B-D’s reported estimates and projections, using publicly available and up-to-date official statistics for the post-2011-12 years.
B-D’s claim 1: “In this early 2014 survey, the estimated employment in India was 428 million for the age-group >=15 years...Our estimate for employment in 2017, according to principal status, is 449.8 million, a job gain of 12.8 million over the 2016 employment estimate of 437 million.” (p. 2).
Absolute employment levels may go up, as the population and labour force are also growing. More realistic measures of employment status are (i) worker to population ratio (WPR), and (ii) unemployment rate (UR). Using the same data source, Figure 1 shows, between 2011-12 and 2015-16 (the latest data), WPR has gone down from 51 to 48, and UR has gone up from 3.8% to 5% (annual report, the ministry of labour and employment, 2017-18). The trends hold good, separately for rural and urban areas, and for both genders. So, these economy-wide yardsticks clearly point to a worsening employment situation.
B-D’s claim 2: “... quarterly surveys of employment, conducted for only labour-intensive industries, and covering less than 5% of the total workforce in the economy (establishments with more than 10 workers) are available. The last such survey was for October 2017 and it revealed that 3.85 lakh jobs were added between January and October 2017, or approximately 4.6 lakh jobs in 2017. This result, extended to the entire non-farm economy, yields the result that employment change was close to 8 million in 2017” (p. 3).
Using the same data source, which is limited to just eight industries employing about 20 million organized sector workers, Figure 2 reports annual employment growth rate (“change in employment” officially) for 2009-2015; and, for April-December 2016, and Jan-June 2017 (p. 175-176, annual report, the ministry of labour and employment, 2017-18, 22 June 2018). Evidently, yearly employment generation has steadily fallen from 0.419 million workers in 2013 to 0.135 million workers in 2015. Given the secular decline, B-D’s projection of job creation in the non-farm economy in 2017 to be close to eight million seems to strain one’s credulity. It’s like an earthworm magically turning into a rattlesnake!
B-D extensively analyse the Centre for Monitoring Indian Economy’s (CMIE’s) employment data to demonstrate large-scale employment generation. But this is a redundant exercise as CMIE’s chief, Mahesh Vyas, has repeatedly dismissed the claims based on combining the (official and CMIE) irreconcilable databases as “dubious statistical analysis”, and “invention”. Similarly, B-D’s lengthy digression into female employment rate during 2000-17 is also superfluous—the fall in the female participation rate has little to do with the post-2014 policy regime.
B-D’s claim 3: “The recently released, but controversial, EPFO (Employees’ Provident Fund Organisation) employment data suggests a healthy expansion of 7 million jobs in 2017 (Ghosh and Ghosh 2018). For the very young likely first timers—18-21 years— EPFO job creation has been proceeding at close to a 2 million annual pace, with a worst case estimate of 1.8 million” (p. 3).
EPFO database is not a payroll—dictionary definition, “list of persons to be paid, with amounts due to each”—as it is being misleadingly called officially. It is a register of (mostly) organized sector workers working in establishments employing 20 or more workers, entitled to receive legally mandated social security benefits from their employers.
But the law is widely violated. The present government has incentivized employers to comply with the EPF law by making their contribution for three years to expand formal sector employment. Similarly, the Maharashtra government has extended EPF membership to all power loom workers (regardless of the establishment size).
As on March 2016, the EPF had 171.4 million members, which rose by 11.8 million since March 2014—the organization’s Annual Report 2016 shows – as per Radhicka Kapoor’s careful analysis (goo.gl/uM9B9T). The accumulative register of PF subscribers does not represent a list of unique or currently employed workers regularly contributing to PF accounts. Moreover, the rise in the enrolment does not represent job creation, as it includes efforts to bring in workers currently denied the PF benefit, or those being brought into the PF’s ambit to formalize their employment.
B-D’s claim 4: “There has been a large emphasis on road construction in the last few years...we estimate that construction activity alone added between 1.7 and 3 million jobs in FY18” (p. 3).
Evidently, the completion of road construction has recovered since 2014-15, but it is still below the level reached in 2012-13 (not shown here for lack of space) (the National Highways Authority of India Annual Report, 2016-17). Growth in gross domestic product in construction at 5.7% consists of all construction activity, not of the highways alone.
In sum, B-D’s background report made available on PMEAC website has projected rosy employment estimates for 2017-18 (and for the present political regime), claiming it to be much better than in the previous period (2004-05 to 2011-12). When critically examined, using uncontroversial publicly available and up-to-date official data, the claims do not seem to stand up to scrutiny. Let the readers verify the information sources cited above to decide the true value of B-D’s contentions.
R. Nagaraj is a professor at the Indira Gandhi Institute of Development Research, Mumbai.
Comments are welcome at firstname.lastname@example.org