Latest EPFO Data Show ‘Jobless Growth’ Is Nonsense; Issue Is About Quality Of Jobs Created

Last month, when deadlines closed for sending in applications for 90,000 jobs offered by the Indian Railways for positions ranging from engine drivers and technicians to track inspectors, some 2.4 crore Indians applied. This huge number – which implies 266 job applicants for every job on offer – has been interpreted by many people as signs of jobless growth.

It is nothing of the kind. What this actually signals is a preference for secure and formal jobs – and not all the applicants may be jobless. They may be people with jobs who are looking for something better.

It may be good politics to claim that India is witnessing jobless growth under Narendra Modi, but this is nonsense. One can say that jobs growth has not been adequate to take care of the additions to the workforce every year, one can say that the jobs being provided are suboptimal in terms of wages or social security, but what one can’t say is that there are no jobs.

In January this year, two economists, Pulak Ghosh of the Indian Institute of Management, Bangalore, and Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India, estimated that some seven million payroll jobs would be created in 2017-18. They came to this conclusion after doing a rigorous study of payroll data culled from additions to the Employees Provident Fund Organisation (EPFO) and the National Pension Scheme (NPS), among others. They diligently tried to ensure that job numbers were not double-counted.

The government’s detractors rubbished this, some with good reason. Additions to EPFO and NPS may represent recognition of jobs that may earlier have existed in the informal sector. They may not necessarily mean a net growth in jobs.

But the criticism is overblown, for fresh data coming in from the EPFO and NPS shows a decent rise in new jobs. A report in The Economic Times says the EPFO has reported a 3.1 million rise in new subscribers during the August 2017-February 2018 period, of which 1.85 million were subscribers in the 18-25 age group, which is usually a considered a proxy for new job market entrants. Additionally, NPS data shows 3,50,000 additions to the government sector, which, when added to the 18-25 group, works out to a possible net addition of 2.2 million new jobs. The gap between this 2.2 million and EPFO’s 3.1 million may represent those who are already in the workforce – and may be switching jobs. These may or may not be net job additions.

If we can conservatively estimate the creation of around 2.2 million payroll jobs over six months (which adds up to 4.4 million annualised), and we additionally assume that at least two or three more millions may be created in the informal sector and on farms, we cannot be too far away from the annual 8.1 million jobs (World Bank estimate) that India needs to generate to absorb new entrants in the 15-plus age group.

The problem may be about the quality of jobs created, and not its quantity.

The World Bank’s South Asia Economic Focus report of Spring 2018, titled Jobless Growth?, estimates the long-term employment elasticity of the Indian economy at 0.19 per cent (see Table 7 in the report) – which means that for every one per cent growth in gross domestic product (GDP), we get 0.19 per cent growth in jobs. The study estimates that this works out to 7,50,000 jobs for every one per cent growth in GDP.

If the Indian economy is growing at 7-7.5 per cent now, it means we are creating 5.25-5.6 million jobs through growth alone. This estimate is not too far off from the payroll data we are now beginning to estimate.

The Centre for Monitoring Indian Economy, which brings out four-monthly estimates of employment and unemployment based on sample surveys of around 1,68,000 households, found that in September-December 2017, some 405 million people had jobs during that period. Using the same 0.19 per cent employment elasticity figure, it should be increasing by 7.7 million annually.

Surprisingly, the CMIE figure for the number of employed persons in India has stayed mysteriously stuck at around 405-406 million between September-December 2016 and the same period last year. There is surely something missing here. It is possible to assert that growth alone cannot create all the jobs we need; but it is impossible to assume that growth creates no jobs at all.

But if we go further back, to CMIE’s January-April 2016 survey, we can see that jobs have grown from around 400.8 million at that time to around 405-406 million now – over a two-year period. Thus, even with CMIE, it is not jobless growth, and the stagnation in jobs growth could relate to the demonetisation and GST hiccups that intervened. Perhaps, the next two surveys will catch up with the reality that growth does indeed create jobs. (The CMIE four-monthly reports can be accessed here)

The truth is probably simple: the issue may not be the non-creation of jobs, but non-creation of the kind of jobs (and wages) people are willing to accept in aspirational India. There may also be a data gap on the kind of contractual, short-term, casual and other kinds of jobs that exist, including self-employment.

This suggests that our jobs data needs to be more nuanced. At one level, we need de-duplicated data on formal payroll jobs (which can be culled from EPFO, NPS, ESIS, professional bodies, etc); we need data on farm sector and non-farm informal jobs; we need to estimate jobs of a contractual or informal nature. To this we can add jobs created through self-employment (Mudra loans, other forms of self-financed employment), and jobs artificially created by government (MNREGA, etc).

We need both quantity and quality data on jobs in order to dispel the myth that we are having jobless growth. Our problem is not jobs per se, but the kind of jobs we are creating.