By March 31, India would have added over 7 million new jobs in the current fiscal year, according to Towards a Payroll Reporting in India, a report prepared by Professor Pulak Ghosh of IIM, Bangalore, and Dr Soumya Kanti Ghosh, Group Chief Economic Adviser of the State Bank of India, which was released last week.
The estimate in the report is based on organised sector employment data — which include the Employees’ Provident Fund Organisation (EPFO), the Employees’ State Insurance Corporation (ESIC), and National Pension System (NPS) enrollment numbers — up to the end of November 2017, which the researchers have extrapolated for the full year 2017-18. In order to be conservative on estimates, and to avoid any data anomaly, they have excluded the zero-contribution accounts and considered new workers in the age group 18-25.
Experts say these assumptions and exclusions are justified. However, they point out, the study does not provide the full picture of the country’s jobs situation, as the big unorganised sector — which was impacted severely by the November 2016 demonetisation exercise and the implementation of the Goods and Services Tax (GST) regime — remains uncaptured.
In contrast to the new estimates, the Labour Bureau’s fifth Quarterly Employment Survey (QES) showed that in the period between January and March 2017, job creation stood at 185,000 as against 122,000 in October-December 2016 and 32,000 in July-September 2016.
Also, an analysis by The Indian Express (published October 4, 2017) showed that 121 companies that are part of the BSE 500 index — excluding IT and financial services firms — saw a net decline in net hiring in 2016-17. The net hiring in these companies fell from 742,012 to 730,694, the data showed — a decline of 11,318 employees across sectors such as metal, power, capital goods, construction and FMCG.
One of the slides that is part of the latest report said: “Based on all estimates, payroll of 5.9 lakh (i.e. 7 million annual) (was) generated every month in India in current fiscal.” According to the study, the total stock of payroll for the major organised sector segments (EPFO, ESIC, GPF and NPS) was 9.19 crore in March 2017. And if zero contribution accounts too, are included, the organised sector workforce numbers would rise to 10 crore. The QES published by the Labour Bureau has several limitations, and does not capture job creation appropriately, the report said. The authors said they had tried to take a fresh approach towards reporting payroll data, which was in line with the practice in the US.
As per EPFO data, 5.5 million new jobs would be created in 2017-18, as against 4.5 million new payroll additions across 190 industries in 2016-17. ESIC data indicate 6.12 lakh (0.6 million) new jobs were created in 65 industries in 2016-17.
In a section titled “Way Forward”, the authors said: “We have done a very conservative estimate. EPFO, ESIC, and NPS in collaboration should publish monthly report of new payroll… who have made a first contribution to their schemes monthly with age buckets, geography, top 20 industry classification by the 25th of succeeding month for the previous month”, and that “formal sector payroll number may be enlarged further if we are able to include data from professional bodies (like ICAI, ICSI, National Bar Council, Medical Council of India, etc.) and Income-Tax payees… We estimate 1 crore people are employed across all such professional bodies.”
The data base could subsequently be widened to include school and university teachers who are not covered under EPFO, as well as police, and municipality and road transport undertaking employees.
Limitations of jobs data
The report listed the limitations of the QES fifth round data. Information, it said, was sought from 11,179 units as a representative sample for eight sectors at an all-India level. QES does not disclose the number of non-respondents, and that the survey result comes with a huge lag. (For instance, the Labour Bureau published employment situation data for March 2017 in December 2017.) Also, this is primarily an establishment survey for collecting information on employment in the unit; therefore, it does not provide information on unemployment.
The survey is based on the record or response of the unit. However, the record is not verified. The Collection of Statistics Act, 2008, does not apply to QES; hence, selected units provide all information on a voluntary basis.
QES does not capture employment data from units that emerged after the Sixth Economic Census (2013-14). Also, the scope of QES is limited to establishments with 10 or more workers in the non-farm industrial economy, covering eight selected sectors (vis-à-vis a universe of 190 industries). “In essence, such a survey or even other employment surveys carried out even with a larger sample, miserably fails to portray the extent of job growth. We need to correct this,” the report said.
A new approach
The authors said the attempt to capture payroll data in India is similar to the nonfarm payroll numbers published monthly by the United States, which also publishes monthly wage growth data. ‘Nonfarm payroll’ is the term used in the US for any additional jobs during a month, excluding proprietors, farm work, unincorporated self-employment, and employment by private households. The military and intelligence agencies are also excluded. Nonfarm payroll accounts for approximately 80% of workers who produce the GDP of the US.
The study suggested measures to improve the quality of payroll reporting, such as making it mandatory for professional bodies, hospitals, nursing homes etc. to submit details of new joinees every three months to local government offices, and the government asking every GST filer for the total numbers of permanent and contract employees on their payroll.
“Some tax deduction (per person) may be given for domestic help, if their name and details are registered with tax authorities by the household employing them,” it said. The report suggested that the government should continue with the Rs 50,000 extra tax deduction for contributions to NPS.