Work with numbers: EPFO data has re-set the debate on employment

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 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 enrolment 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 per cent if one counts just youngsters, and 11 per cent for the total EPFO system. Few will believe that either can translate one-for-one into the rate of employment growth in an economy growing at just over 7 per cent, or even for just the formal sector, when the working population itself is growing at only 1.25 per cent. 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 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 per cent. Fifty-two per cent 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 EPFO are generating nearly two-thirds of the 6.24 million new jobs required in a year—though EPFO’s share of total employment is just 12.5 per cent (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.

The key issue is how much the EPFO enrolment numbers translate into new jobs in the economy—as different from formalisation and other trends. Proper mining of the data should provide an answer. The subsidiary issue is that the last 18 months have been an unusual period for the economy, and also for EPFO which had a special enrolment drive last year. So the data of the last six months may not be representative, and firm conclusions should wait on the numbers for some more months.

Going a step further, the EPFO data must be subjected to a reality test, because other data sets have been saying quite different things. If the numbers are for real, they will survive the test. For that very reason, it is important to not stop generating survey-based employment data, as the government proposes, lest it be implied that all survey-based data (and not just with regard to employment) are now suspect. The task is to get to the reality on employment, not score propaganda points.

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