EPFO’s employment data is very cheery, but needs a reality check

Employment data
The surprisingly upbeat data that has emerged from the registers of the Employees’ Provident Fund Organisation (EPFO) has re-set the debate on employment, and probably killed the talk of jobless growth. While the numbers are too good to be true if claimed to accurately reflect fresh employment, it is entirely likely that the news in the numbers is positive. That message should not be lost in overkill by over-enthusiastic proselytisers.
Additional enrolment by employers registered with the EPFO (those with 20 or more employees) was two million in the 18-25 age group over six months to February, within a total of nearly 3.3 million additional enrolments for all age groups. On straightforward extrapolation, the figure for under-25s gives us an annual new enrolment rate of four million and 6.6 million for all age groups. Since total “active” EPFO enrolment is generally said to be 60 million, this would mean a growth rate in enrolment of over 6.7 percent if one counts just youngsters, and 11 percent for the total EPFO system. Few would believe that either can translate one-for-one into the rate of employment growth in an economy growing at just over 7 percent, or even for just the formal sector when the working population itself is growing at only 1.25 percent. If it did, we would have the tightest job market in the world.
The larger employment context provides perspective. Census figures show that India has 25 million people in each age cohort at the start of working age (16-65 years). This compares with about 13 million who entered the working age annually half a century ago — people who would be moving out of the working-age group now if they have not died or otherwise exited in the interim. This gives an annual increase in the working-age population between then and now of (25-13 =) 12 million — the figure usually quoted as representing the employment challenge.
But all those who enter the working age do not offer themselves for work. Some become home-makers, or go for higher studies; indeed, the last 15 years have seen a sharp increase in enrolment for post-school education. As a consequence, India’s employment ratio (those working, as a share of the working-age population) has fallen to 52 percent. Fifty-two percent of 12 million is 6.24 million — which, broadly speaking, can be said to be the number of additional jobs needed every year to take care of the expanding workforce.
If fresh EPFO enrolment of those under 25, at an annual rate of four million, is said to be new hiring, netted out for those retiring, it would mean that companies registered with the EPFO are generating nearly two-thirds of the 6.24 million new jobs required in a year — through the EPFO’s share of total employment is just 12.5 percent (60 million out of 480 million). Even those who argue that the job market is getting rapidly “formalised” would baulk at this conclusion. Among other things, greater formalisation should mean a reduction in informal employment.
Source: The Print

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