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Indian labour market data is devilishly difficult to analyse. Illustration: Jayachandran/Mint
Indian labour market data is devilishly difficult to analyse. Illustration: Jayachandran/Mint

The difficulty of making sense of Indian jobs data

The new payroll numbers are welcome. The next step should be a greater use of Big Data analytics to understand job creation in India

The jobs debate has kept economists busy. Their estimates of how many jobs are being created in India vary wildly. Consider the most recent disagreement. Surjit Bhalla of The Observatory Group estimates that 15 million jobs were created in fiscal year 2017. Mahesh Vyas of the Centre for Monitoring Indian Economy believes the number is barely a tenth of that. Their exchange should be seen against the wider debate on whether India has been growing without generating enough jobs for a young population.

Indian labour market data is devilishly difficult to analyse. There are several reasons why this is so. First, a large part of the labour force is in the informal sector, where information is very difficult to collect on a monthly basis. Second, sample survey data is often confusing because of the withdrawal of women from the labour force over the past 15 years. Third, employment numbers for the young need to be handled with care since more children are staying back in college rather than seeking work. Fourth, the formalization of the Indian economy means that there are profound structural shifts taking place in the composition of the labour force.

The decision by the government to release payroll data last week—based on the number of accounts in key social security schemes such as the Employees’ Provident Fund Organization, the National Pension Scheme and the Employees’ State Insurance Corporation—is thus welcome. Economists Soumya Kanti Ghosh of the State Bank of India and Pulak Ghosh of the Indian Institute of Management, Bangalore have been pioneers in this work, and their paper had also sparked off heated debate. Such payroll data could eventually give us a good idea about job creation in the Indian economy.

The new data series needs to be handled with care. It tracks the growth in payrolls rather than actual job creation, as even its proponents warn. 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 could be balanced by job losses in the unorganized parts of the economy (it is interesting that economists on both sides of the argument accept that the role of the formal economy is growing rapidly).

However, there is little doubt that the release of monthly payroll data is a big step in the right direction. The NITI Aayog task force on improving employment data had said in its report last year that there are four primary sources of employment data—household surveys, enterprise surveys, administrative data and data from government schemes. The release of payroll data last week deals with the third of these four possibilities. There is now an urgent need to improve capabilities in the other three. Existing data sets such as the Employment-Unemployment Survey conducted by the National Sample Survey Office or the Quarterly Employment Survey of the Labour Bureau are riddled with problems. In a recent interview with television channel CNBC TV 18, former chief statistician T.C.A. Anant said that the other missing elements will begin to fall into place later in the year, especially information about employees working in enterprises covered by social security laws.

What now? Technology can play a part. Household surveys could be conducted every year rather than every five years using new technologies that bypass time-consuming data collection methods. The new goods and services tax network (GSTN) offers an excellent opportunity to use Big Data analytics to extract employment data for all enterprises covered by the new tax. All sorts of data related to employment can be stored in a central data warehouse into which every level of government, from the panchayats up, feeds information. The economists in the Union finance ministry have already used Big Data from the Railways and GSTN to estimate migration and interstate trade, respectively. The same skills should be used to generate better job statistics.

All this will take time. So expect no miracles. India is an extremely complicated country, and the sort of credible monthly data that is available in more advanced economies is extremely difficult to deliver here. However, it is good that the first steps towards overhauling employment statistics have been taken with the release of the payroll data. The employment situation is one of the key variables considered by policymakers the world over. Indian policymakers are flying blind in the absence of credible employment numbers.

Till then, the trend in wages is the best proxy for understanding job creation. Prices carry a lot of useful information. Rising wages across all job categories over the past decade are strong proof that the extreme narrative about jobless growth is just not true.

Will the new monthly payroll data help gauge employment generation? Tell us at views@livemint.com

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