Are jobs really being created? – The Hindu BusinessLine

Clipped from:

While data from CMIE and EPFO present a contrasting picture, jobs in the unorganised sector continue to be difficult to assess

Employment data in India have always been controversial as the concept per se is quite nebulous. While corporate data on employment is foolproof as the headcount is known and revealed in annual reports, the same cannot be said about the non-corporate sector. Often, data on employment exchanges are used to denote demand for work, but such data cannot be banked on as they include people who are actively employed and looking for a change in terms of quality or pay.

Surveys are done by organisations like CMIE to track employment. NSSO does the same periodically and has different criteria like usual, daily or weekly status. They have their use, but it depends on how questions are asked and how they are answered.

Provident fund data is another source of information for people employed and here there is a view that as more people are enrolled in the Employee Provident Fund Scheme, it is proof that jobs are being created. Hence, this is indicative of employment created rather than unemployment. The argument here is that even if people change jobs, the account remains and the contribution only changes from the organisation, and hence any increase in the number of PF accounts must be new people coming in. The counter argument is that with the new rules on enrolment and the benefits given during the pandemic, several smaller units opted for PF for employees and hence they were technically not new jobs being created but existing jobs getting registered indirectly.

There are two views as usual. One says that jobs are being created and the growth in sales of TVs, scooters, washing machines, etc., show that people are buying goods with income that can come from jobs being created. The spectacular increase in mobile phone sales is indicative of the fact that more people are buying them and hence are employed. This sounds fair.

The second, and contrary, view is that there has been stagnation in consumption as seen by low or negative growth rates in production of consumer durable goods even when GDP was growing. This means jobs were not created and hence while the higher income groups will replace goods, it will not happen every year. The consumption stream can be filled only if new jobs are created.

There is truth in both the arguments. If jobs were created, there should have been a never-ending stream of consumption.

Comparing data

CMIE data, for instance, show that since 2017-18, the unemployment rate has been going up (see Chart). While there would be variations during the month, the annual numbers are indicative of the trend. As this is based on a sample survey, one may argue that it cannot capture the entire universe. But this holds for almost any result based on samples, and hence also holds for NSSO where even a number of one million can be contested.

Putting CMIE data alongside with EPFO data shows an interesting picture. PF data shows that in FY18, 8.5 million accounts were added, followed by 13.9 million and 11 million in the subsequent two years. In FY21, 8.5 million were added. Hence, while the EPFO data suggest a lot of jobs were added, CMIE numbers show that the unemployment rate went up. EPFO also gives net addition, which is presented with the CMIE data (see Table). There is incongruity here as CMIE shows the total employment numbers came down in three of the four years, while EPFO talks of net additions in payroll accounts.

Therefore, it is tough to draw firm conclusions as different sets of data show varied tendencies. The unequivocal call is when one looks at the corporate sector and tracks how headcount has fared as there can be no ambiguity here.

A study by CARE Ratings on employment based on annual reports of 2,618 companies shows that there was an increase in the stock of employees in FY20 by 2.2 per cent which fell by 1.3 per cent in FY21. This is significant because the drop in employment was seen in 27 of the 34 industries that were considered in the sample. Of the seven industries which had a positive growth rate in employment, three were in services (IT, logistics and banking) and the others in manufacturing (power, consumer durables, healthcare and chemicals).

There was also a strong linkage with growth in sales though the explanatory power was limited to around 36 per cent. Intuitively it can be seen that for employment to grow there must be buoyancy in growth in sales.

Interestingly, the Central Government has been hiring more people, and per the Budget document there has been an increase, from 3.27 million in 2019 to 3.30 million in 2020 and further to 3.41 million in 2021 (as of March 1). The largest employer was the Railways, which had an unchanged headcount of around 1.27 million. The police, tax departments and defence are the other ministries with high headcounts.

Mixed picture

There is, hence, a mixed picture on job creation. The organised corporate sector has witnessed a decline in employment in FY21, and the future course will depend on how the economy shapes up and companies perform. The Central Government has been on an employment drive for sure. As for the unorganised sector, there are no clear indications. The impressionistic view following the pandemic is that there was a large-scale migration away from the cities and towns to the rural hinterland. Further, several units had closed down which would mean that there would have been lesser demand for labour.

While the EPFO data may reveal that there has been some return of jobs, the true picture will be hard to ascertain as most of these units would be employing 4-10 workers at the micro level which can go up to 50 for smaller manufacturing units.

What can be said with some certainty is that for employment to be generated, ultimately there is need for growth to take place as the demand for labour is contingent on how output behaves. But one can say that if jobs are being created, consumption should be increasing more than proportionately. If this is not happening, then the pace of job creation can be questioned.

The writer is an independent economist and author of ‘Hits & Misses: The Indian Banking Story’

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