Why using EPFO data to show jobs growth in India can be misleading
Counting jobs growth in India from data extrapolated from EPFO may give a quick high but it has its own perils. Here are three reasons why
New Delhi: Estimating jobs growth in India based on data sourced from Employees’ Provident Fund Organisation (EPFO) can be misleading as the data hides more than it reveals.
A research paper by Pulak Ghosh, a professor at Indian Indian Institute of Management, Bangalore, and Soumya Kanti Ghosh, chief economic adviser at State Bank of India, last week forecast that India will add 7 million jobs in 2017-18. The report came as a shot in the arm for the central government, which is under pressure to create more jobs.
The job numbers cited in the research paper were largely based on new registrations in the EPFO, the retirement fund body under the labour ministry.
But there are several flaws in using EPFO registration numbers as a proxy for gross addition to jobs in India. Here are three reasons:
1. According to statutory requirements, when an organization has 20 or more employees it comes under EPFO’s ambit.
So, if a firm has 19 employees and it adds one more to its payroll, then all 20 will have to be registered under EPFO. This gives a false picture that 20 jobs were created instead of just one.
In addition, the number of organizations coming under EPFO ambit is growing. The body had 921,000 registered organizations in 2015-16. That number grew to 1.02 million in 2016-17.
2. All EPFO subscribers have PF accounts, but that does not mean that all account holders are currently employed. EPFO has a little over 170 million accounts but only about 50 million are active subscribers.
It means the data cannot be a basis to conclude whether employees getting registered to EPFO are gross additions to the country’s jobs pool.
It also indicates that PF number portability is still a distant dream for many and both the retirement body and employers have to share the responsibility.
3. EPFO added 10.13 million subscribers to its pool between 1 January and 30 June 2017 through an amnesty scheme. This number is a clear case of under reporting of formal employment between 1 April 2009 and 31 December 2016 by companies and cannot be considered as new jobs created in the period they were registered.
Besides, the quality of formal sector jobs is another major issue. The salary structure for a majority of organized sector employees is very low.
According to a 1 March 2016 finance ministry statement, of the then 37 million active subscribers of EPFO, at least 30 million were getting salary up to Rs15,000 per month. A four-member family depending on Rs15,000 a month has just Rs125 each a day to survive.
With minimum wage in some states of India as low as Rs4,500, many of these 30 million workers are far worse off.
The International Labour Organization (ILO) terms such employment as “poor quality jobs”.
In a report, ILO said on Tuesday that 77% of Indian employees will have vulnerable jobs by 2019 and the unemployment rate among 15-25 age group is three times that of unemployment rate in India.
“If you look at sectors that are adding jobs you realise that they are largely unregulated. It means, the new additions are footloose employees contributing to working poors population in the country. The decent jobs are missing and governments of all colours only talk to count numbers without talking about their quality,” said K.R. Shyam Sunder, a labour economist and professor of XLRI, Jamshedpur.
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