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Many of the new jobs created in India’s formal sector seem to be low-paid and temporary work, offering little job security or upward mobility, official payroll data showed, raising questions over its long-term socio-economic implications.

Employees’ Provident Fund Organisation (EPFO) data for April and May showed that maximum jobs were created in the ‘expert services’ category comprising manpower agencies, private security firms and small contractors, while established sectors such as engineering, financial establishments, and construction sectors lagged behind.

Payroll trend
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Payroll trend

In the 18-25 age group, almost 58% of net payroll additions in May came from expert services. Of the net addition of 345,000 new hires across 10 top industry segments, the category contributed over 200,000, with the rest spread across the other nine sectors.

While the expert services category added 83,903 people in the 29-35 age group, the ‘trading and commercial establishments’ category added 8,500 employees in the same age cohort, textiles sector 5,800 employees and building and construction firms added 7,478 workers. In this age bracket, the contribution of expert services was slightly more than 60% of the total payroll additions of 139,532.

The trend is a continuation from April when expert services contributed 101,349 out of the total of 173,797 people joining formal work in the 29-35 age group.

The trend is similar across several age groups, prompting labour economists to say that decent, well-paid jobs are missing from the market, and the formal sector additions may be happening in low-paid and contractual works.

K.R. Shyam Sundar, a labour economist and professor at XLRI Jamshedpur, said the sectoral details indicate a changing labour market. He said the government and its statisticians need to take note of the changing nature of work and its long-term impact on the economy, poverty alleviation and consumption.

“The data shows two key aspects of the labour market as well as the broader economy —stunting of the conventional employers in core sectors and, two, the growth of new-age services and allied service sector jobs managed and supplied by manpower agencies," he said.

Arup Mitra, professor of economics at the Delhi University’s Institute of Economic Growth, said manpower agencies, small contractors and private security guards are largely hiring young people because of the nature of the job. It helps principal employers lessen human resource headaches and eases the process of firing, compared with those who they hire directly, Mitra said.

“But it has three long-term implications—the new recruits at the lower end of the value chain don’t have bargaining power; decent salary is missing for a majority of them; and the idea of upward mobility for the poor and lower middle class gets stymied," said Mitra.

Sundar said the trend shows that more workers are now getting engaged in low-paid, temporary work, which is not a positive trend for poverty alleviation.

“The gig-ification of formal work is not a permanent solution to our labour market problems. Of course, you can say they are contributing to the economy and taking care of families. But are they structurally strengthening the employment market? The answer is: No. These expert service jobs, as EPFO payroll calls them, may give a temporary high on formalization, but we must know—they are formal from a social security coverage point of view, but grossly informal from the quality of jobs and job security standpoints," he added.

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