EPFO data proves formalisation, not necessarily new jobs

The fairly sharp increase in the EPFO payroll over the past year—it rose to 7.9 lakh new members in June—has been cited by even the prime minister as evidence of a large number of jobs being created in the country. That, however, is probably a hasty conclusion since new members do not necessarily mean new jobs. As has been pointed out before, formalisation is a big reason for increasing EPFO membership—a factory growing from 19 workers to 20 will get covered by the EPFO, but it will just be one job getting created, not 20; and, thanks to demonetisation and GST, more existing factories are also registering themselves. The rise in the number of taxpayers as well as the 53% rise in electronic tax filings till end-July is evidence of this increasing formalisation. This apart, the frequent revisions in the data are somewhat worrying—the EPFO has lowered its net enrollment numbers for September 2017 to May 2018 by 5.5 lakh or about 12.4%. Indeed, given 90% of Indian jobs are created in the informal sector, if the EPFO numbers actually represented new formal sector jobs, the total number of jobs created would be even higher.
In sharp contrast, based on the sample of companies in his database—3,441 in 2016-17 provided information—Mahesh Vyas of CMIE points out the rise in employment was poor during 2003-04 and 2004-05; this rose to a brisk 4% till 2011-12 and began slowing in 2012-13 when employment growth dropped to 0.9%. While it picked up in 2013-14 to 3.3%, the following year saw a sharp fall in the growth rate, followed by tepid growth in 2015-16 and 2016-17 when it grew at 2.7%. While government spending on infrastructure projects must surely have resulted in employment for many, the same cannot be said for the real estate construction sector which has been in the dumps for many years now. Another pointer to the fact that employment generation has been weak in the last couple of years is that the growth in exports from employment-sensitive sectors continued to slow. From 44% in FY17, the share of labour-intensive exports dropped to 38% at the end of June. Even before that, KLEMS data showed that 0.7 million jobs were lost in the textiles, textiles products and leather sectors between FY14 and FY16.
Source: Financial Express