Presenting the Modi government’s last full Budget before the 2019 General Election, Finance Minister Arun Jaitley indicated that India’s stagnant job market was finally beginning to see some movement. Announcing that the steps taken by the government in the last three years had started showing results, Mr Jaitley quoted an independent study to claim that “70 lakh formal jobs will be created this year.”
The independent study referred to by the Finance Minister, authored by respected Prof Pulak Ghosh (IIM Bangalore) and Dr Soumya Kanti Ghosh (Group Chief Advisor, SBI) is titled, ‘Towards a Payroll Reporting in India’.
What the Ghosh & Ghosh Report Says
The report is an effort towards analysing big data to determine how many Indians were employed in the formal sector instead of banking on the quarterly employment surveys to assess the employment situation in India. To do this, the academicians have collected primary data from three major sources:
1. Employees’ Provident Fund Organisation (EPFO) Manages the funds contributed by the workforce engaged in the organised sector in India. EPFO manages a corpus of over Rs 11 lakh crore for its estimated 5.5 crore subscribers across jurisdictions in over 190 industries employing more 20+ people.
2. Employees’ State Insurance Corporation (ESIC) is an autonomous corporation by a statutory creation under Ministry of Labour and Employment. Employees' State Insurance is a self-financing social security and health insurance scheme for Indian workers. ESIC manages corpus for 1.2 crore subscribers for 65 industries with 10+ employees.
3. National Pension Scheme (NPS) It was launched on 1 January 2004 and was aimed at individuals newly employed with the central government and state government, but not including ones in the armed forces. NPS currently manages a corpus of 50 lakh people in state and central govt.
The fourth source – the Government Provident Fund (GPF) – has 2 crore employees listed under it, but was not considered in the estimate for incremental payroll data. A payroll job, according to the report, is a job where the employee is enrolled under any one of the above government organisations or schemes.
Released on 15 January 2018, the report found that as of November 2017, there were 36.8 lakh new EPFO members between the age group of 18-25 as compared to the previous year – assuming that the 18-25-year-olds indicated first-time employees, and employed in the organised sector. It then projected this November 2017 data to the full year to claim that 70 lakh new jobs will be created in 2018.
This number, however, has been contested on the basis of the fact that an enlarged EPFO account base does not necessarily reflect new jobs and the report fails to discount the various factors that could be responsible for this increase in EPFO accounts.
Questions the Ghosh & Ghosh Report Does Not Answer
1. New registration does not mean a new job has been created
The report assumes that any 18-25-year-old who registered with the EPFO implies that he/she found a new job in the organised sector. It does not take into account that the possibility of an informal job turning formal with EPFO registration. A company with under 20 employees need not register with the EPFO. So if an entity that went from 18 to 20 employees from 2016 to 2018, it did, in effect, add only two jobs, not twenty as would be projected in the report.
2. Amnesty Scheme for EPF-defaulters not discounted
Between January to November 2017, one crore EPFO accounts were added. As per official sources quoted by The Indian Express, an amnesty scheme for EPF-defaulter firms that was in force during the first six months of 2017 itself brought over 20 lakh workers under EPF ambit.
Under the scheme, employers who were supposed to have registered their employees under EPF (a unit employing 20 or more persons and earning up to Rs 15,000 a month is mandated to provide EPF benefits to the workers) but haven’t added all or part of their workforce to the EPFO were given certain incentives like waiver from damages and certain administrative charges to be compliant.
3. Duplications, but no Deletions
For instance, a person with a UAN number who got employed with a company that got a new EPFO account after January 2017 would’ve been counted as a fresh registrant. Additionally, when an employee loses their job, their EPFO membership is not lost automatically . So while the data may accurately reflect the additions, it does not take deletions or the job losses into account.
4. Demonetisation & GST led to formalisation, not creation of jobs
The report quoted by Arun Jaitley does not show employment figures adjusted to the after-effects of the two biggest economic reforms implemented by the Modi government. Demonetisation led to employers enrolling employees who were earlier paid in cash, as formal workers with provident fund benefits. On the other hand, GST forced many small- and medium-scale businesses to shut shop, leading potential ‘formal employees’ to lose their livelihoods.
In a response to the report, published in The Hindu, Praveen Chakravarty – who was on Monday named Congress’ data analytics head – and Jairam Ramesh, gave another example to explain how “old, time-tested statistical tricks” had been used “to arrive at fallacious conclusions.”
If one had to truly separate out GST- and demonetisation-induced formalisation effects, then the study should have compared the EPFO numbers of FY-2016 and FY-2015. We did exactly that. And what did we find? In FY-2015, the total number of contributing EPFO members grew 7%. In FY-2016, it grew 8%. But after demonetisation, in FY-2017, it grew 20% and by December 2017, it had grown a further 23%. Are we then saying that the Modi government did not produce enough jobs in the first two years but, miraculously, after demonetisation and the GST, there were jobs galore, as per the same EPFO data set? Cherry-picking data points (EPFO data) and time periods (FY-2017 and FY-2018) are old, time-tested statistical tricks to arrive at fallacious conclusions.
5. Data should be made public, findings should be relative to previous years
In his weekly column, Across the Aisle, P Chidambaram pointed out how the Ghoshs were given privileged information which is not in the public domain, demanding the data be made public by the government and be compared to NDA years before demonetisation and GST (2014-2015, 2015-2016) and to the years that UPA was in power (2004-2014) as well.
“It is only a time series of data that will reveal the truth. Otherwise, the 70 lakh jobs claim will remain a boast and, in the course of time, be regarded as a bluff.” he writes.
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