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Companies add blue-collar staff; wait for well-paid jobs lengthens

Most payroll additions are being made in poorly paid jobs, EPFO data shows.  (Mint)Premium
Most payroll additions are being made in poorly paid jobs, EPFO data shows. (Mint)

  • Figures gleaned from the Employees’ Provident Fund Organization (EPFO) show that these payroll additions are being made in poorly paid jobs
  • The ILO, in a report last week, said the youth unemployment rate in India may touch 32.5% in 2020 if the country fails to tame the pandemic by end-September

India may have added nearly 800,000 people to its formal workforce in the April-June quarter, including half a million in June alone, driven by expert services comprising private security agencies, small contractors and manpower agencies.

Figures gleaned from the Employees’ Provident Fund Organization (EPFO) show that these payroll additions are being made in poorly paid jobs even as most parts of the formal sector are yet to recover. Good jobs in manufacturing, financial establishments and core engineering firms are far from making a recovery.

For example, on the one hand, nearly a quarter of a million 18-25-year-olds—considered freshers in the labour market—joined expert services payrolls in April-June. On the other, there were 9,000 payroll additions in trading and commercial establishments, 16,000 in core engineering and a mere 649 in financial establishments in the same quarter, according to payroll data at EPFO.

The situation is almost identical across verticals and age groups. For example, in June, expert services accounted for 345,500—or 65%—of the nearly 530,000 payroll additions among all age groups in the top 10 industry segments.

These segments include computer and hardware, engineering, trading and commercial establishments, financials, building and construction, textiles and hospitals.

Expert services are considered separately from other jobs for provident fund accounting.

“The recovery across industries is yet to happen. The MSME (micro, small and medium enterprises) sector is still in turmoil. The recovery that you see is largely driven by the expert service payroll additions. And they are largely not considered decent jobs. A segment of them may have decent jobs, but a large portion of the expert services payroll additions is low-paid jobs," said a government official who declined to be named.

“The engineering jobs, the technology and hardware jobs that EPFO payroll data terms as establishments engaged in manufacturing of computers, servicing, marketing and usage of computers are far behind expert services. The small contractors and private security agencies have certainly deployed people, maybe more because of reopening of establishments and beginning of small construction work, yet they are largely low paid and blue-collar in nature," said the official cited above.

Economists and experts seem to concur. “There is a huge demand-supply mismatch. The wage disparity is key and in the absence of decent jobs, people are getting into whatever is available. They are low paid, and relatively less productive work. The manufacturing sector is yet to function with full capacity, and commercial trade is facing a demand crunch; hence, job creation in those sectors is low and will take a long time to revive. What is happening right now is replacement jobs—people who had left because a unit or a factory was closed are coming back to join," said K.R. Shyam Sundar, a labour economist.

“Though we see e-commerce platforms are adding people and a segment of construction is taking back their old people, largely the formal sector is still in pain," Sundar said, adding that this should be a matter of concern for the entire labour market in general and the youth in particular.

The International Labour Organization, in a report last week, said the youth unemployment rate in India may touch 32.5% in 2020 if the country fails to tame the pandemic by end-September. It has urged countries in Asia-Pacific to address the youth employment crisis through comprehensive labour market policies.

K.E. Raghunathan, former president of the All India Manufacturers Organization, a federation of small and medium firms, said MSMEs are still in pain. “Some of them have started operations with limited capacity, but they are assessing the loss. Exactly when job creation picks up is a tough question. Decent job creation will depend on how long key sectors take to recover after a massive loss in business and poor demand," he added.

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