Wednesday, January 16, 2019

The Myth of India's Jobless Growth

Indian economy has experienced a rapid and phenomenal growth between 2011 and 2018, specially in the last four years of this period, some major macro indicators have moved with higher gradient in their curves. The highest ever foreign exchange reserves, one of the strongest internal reserves, sizable growth in FDI, achieving a steady and steep 7+% GDP growth rate and stepping 3 slots from 9th to 6th largest economy of the World - all happening in one political regime is not trivial increment. We all agree to that. But still many analysts, mostly Left and Center leaning ones, have started building a narrative since 2016 that this growth story has detached itself from creation of new jobs which keeps the ground mood of people dull.

Leaving aside the later part of the narrative as political, let us take a deeper dive into the first half, i.e. India's is a jobless growth.

Lack of Consistent Survey

Foremost, the core of the problem is not job growth or lack of it, but absence of any formal and full proof means to measure it. The last household based employment survey India had was in early 2016, after which the Annual Employment-Unemployment Survey (AEUS) has been discontinued. This makes quantifying the job growth even more difficult. Of course, since 2016, Labor Bureau began the Quarterly Employment Survey (QES) but it is only limited to enterprises with 10 or more staffs. And hence, it is not apples to apples comparison between what was and what is.

In June 2018, the QES was also put on hold because of its payroll data time lag limitations and Government is now devising a new comprehensive employment survey, integrated with NSSO's Periodic Labor Force Survey (PLFS), that would cover formal sector, MSME, sustainable self employment and farm employment.

Now this becomes real confusing as, on one hand while it is true that all past surveys had challenged data, there is no comprehensive solution available yet. Hence, we have to rely on pieces of information available from different agencies, National Sample Survey Office (NSSO), Central Statistics Office (CSO), Ministry of Statistics and Program Implementation (MOSPI), Employee Provident Fund Organization (EPFO) and informal and private surveys.

Quarterly EPFO Data

There are theories and counters for EPFO data as it does not really show new job creation but  formalization. The factual definition of the EPFO statistics is count of EPFO payable accounts. Though it is not a payroll count but EPFO payable count, we can not truly claim it as new job creation statistics. But it is not unsafe to assume that formalization in India is always less that new job creation.

Though in some states, local administration is encouraging to provide PF accounts for all staffs, including in informal sectors, an enterprise with less than 10 staffs is not mandated to register with EPFO. Hence, EPFO data can be wrong but of course a conservative estimate.

If we are to believe the above chart, as per EPFO, there has been a consistent growth in jobs. The formalization count for the age group of 18-28 gives a good indication of new job creation. While the difference that accounts for age group of 29+ can be assumed as formalization of existing jobs.

This also shows, between Sep 2017 and Sep 2018, in last one year, net new job creations must be at least 54 Lakh. This is an over conservative way of looking at it, as 1) above quarterly numbers are adjusted already with members who exited EPFO and 2) it takes a subset of the net payroll volume by entry level age group. Observation is that it should be at east 10% higher if we add late job seekers and late entrants. We can peg the EPFO based estimate at 60-65Lakh between Sep'17 to Sep'18, which gives a monthly rate of 5.5 Lakh. But this is only a subset.

CSO Employment Outlook Report

CSO releases this report based on EPFO, Employee's State Insurance Scheme (ESIC) and National Pension Scheme (NPS) sources and according to their report, in ten months between Sep'17 and Jun'18, total 1.2 Crore jobs were added by market.

In an updated report, based on ESIC data, CSO pegs the total new jobs created during the 13 months period from Aug'17 to Sep'18, is 1.6 Crore.

Between these two recent reports in record, we can take an average monthly job creation rate as 12.15 Lakh.

With about one crore jobs getting added to formal sector that has EPFO registration and access to ESIC or NPS for employees, it is nowhere close to a jobless growth.

Government must resolve the issues behind comprehensive data collection process and include self employment and farm employment data to it as well as they are not resources available to the market or are not job seekers. My neighborhood shop owner who owns a grocery or apparel shop, or your tax consultant, the insurance agent or travel agent, who do earn decent livelihood and are constituents of the middle class segment, must not add to unemployed list. These anomalies must be factored in. The Myth of Jobless Growth must be busted.

-- Blogger is a South Asia enthusiast at @SACRIR 
-- Blogger claims no credit for photos or videos. Rights belong to the linked sources, unless specified.

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