The riddle of a rebound seen in our job market2 min read . Updated: 21 Oct 2020, 08:46 PM IST
- According to CMIE, the country lost as many as 18.9 million salaried jobs from April to July, as the pandemic forced people home and stalled businesses
- A chunk of PF accounts opened post-covid could simply reflect a switch from informal to formal employment, rather than job creation
The nationwide lockdown that was imposed by India in March and lasted for months wrecked various businesses and turned millions out of their jobs, even as our economy shrank by almost a quarter in the first three months of fiscal year 2020-21. With those covid curbs mostly lifted now, several variables have shown a rebound of sorts. Yet, our overall economic scenario remains hazy, with the noise-to-signal ratio of too many data sets reigning too high to assess the strength of a recovery with a fair degree of confidence. This problem is especially acute in the country’s market for jobs, the creation of which is a national priority. Enrolment figures reported on Tuesday by the Employees’ Provident Fund Organisation (EPFO), which holds a mandatory retirement kitty for everyone formally employed on a salary, paint a positive picture. The fund claimed over 1 million net new subscribers in August, marking the third straight month that fresh sign-ups (and rejoiners) exceeded exits. April and May had seen an erosion of its subscription base, and the months since then have seen a steady payroll expansion, if EPFO records are any indication. But, are they? Employment trends put together on the basis of independent surveys by the Centre for Monitoring Indian Economy (CMIE) suggest that while general joblessness—formal or otherwise—dropped sharply in June after India started unlocking, our job scarcity has not eased very much since early August. Whether recruitment is actually on the rise remains something of a riddle.
The first sobering fact to consider is that provident fund add-ons may include temporary employees, whose contributions may not last long. Their proportion might be unusually high in the post-covid period, given the business uncertainty that most employers face and their survey-revealed reluctance to let their wage bills swell. Labour code reforms that would allow firms below a certain staff size to fire workers without state clearance may alter the calculus of some recruiters, but it seems unlikely that their effect will kick in until their growth prospects improve. White-collar employment, in particular, seems hard to find. According to CMIE, the country lost as many as 18.9 million salaried jobs from April to July, as the pandemic forced people home and stalled businesses. Even today, worries persist over how long it would take to put our corona crisis firmly behind us.
The second significant fact that impairs any effort to analyse employment in India is the existence of a vast informal sector. The Centre has made a mission of pushing small businesses to formalize their operations, and the launch of our goods and services tax (GST) in mid-2017 set off a wave of formalization, with enterprises attracted by the promise of input tax credits. This resulted in a rush for new provident fund (PF) accounts, opening which is a must for firms above a threshold. Another wave seems to have got incentivized this year, not just by a PF subsidy (which lapsed at the end of August) given to employers for their modestly-paid workers on formal payrolls, but also by India’s special offer of state-backed loans to small enterprises. This means that a chunk of PF accounts opened post-covid could simply reflect a switch from informal to formal employment, rather than job creation. In sum, our job market may be looking up a bit, but let’s not read too much into it.