The Union government’s first-ever estimate of payroll count based on Employees’ Provident Fund Organisation (EPFO) subscription database showed that 3.11 million jobs were added in the formal economy in six months, even as there was a fall of 22 per cent in incremental employment in February 2018, compared to January to a four-month low of 472,075 persons.
The payroll count is essentially the difference between the number of workers who joined and exited from the EPFO’s fold and as such is the net addition to jobs.
The provisional figures released by the EPFO for six months showed 3.11 million workers joined the workforce in the formal sector during September 2017-February 2018. On a pro-rata basis, this would mean that 6.22 million additional jobs were created in 2017-18. However, this may be a generalisation as the pattern of jobs every month was quite erratic from September to February. For instance, addition to jobs slowed in three months out of the six months under review. The slowdown was steepest for February on a monthly basis.
Madan Sabnavis, chief economist with CARE Ratings, said, “Definitely some jobs are being created. The last few months of a financial year are never really a recruiting time, if you are looking at the organised sector. Also, people may exit during the end of the financial year. That is why February figures might be throwing a lower number."
However, more hands were hired in February than September and October.
“It has now been decided to publish the age-band wise estimate of all new subscribers as declared by their employers. This data can be helpful in policymaking, planning and research work as the planners may have an idea as to what is the estimate of employees in different age band,” the Ministry of Labour and Employment said in a press statement.
The payroll estimates, released by the EPFO based on its enrolment, threw up some contrasting trend between September 2017 and February 2018. While there was a net addition of 8.4 per cent to non-farm sector payroll in January, there was a net reduction of around 14 per cent in workers on payroll in December 2017. In November, while there was a 64.3 per cent jump in workers on payroll, there was a 9.5 per cent decline witnessed in the previous month.’
A majority – over 57 per cent – of the new enrolments was in the age group of 18-25 years in February 2018. Workers over 35 years of age constituted around 15 per cent of net addition to the payroll.
One significant trend observed from the payroll estimates is that there was a consistent dip in the payroll for workers belonging to the age group of less than 18 years and 18-21 years since November last year. The payroll addition of workers belonging to these age groups was the lowest in February in the last six months.
This is the first-ever month-wise estimates on payroll count released by a government agency in India. The EPFO manages social security funds of workers in the organised and the semi-organised sector and it has 60 million members with active contribution at present.
However, the payroll database by EPFO will cover firms, employing more than 20 workers, which are required to mandatorily make provident fund contributions, at present. In India, 99.35 per cent of the firms employ less than 20 workers, as per the Sixth Economic Census of 2013-14.
The government’s payroll estimates follows a study titled ‘Towards a Payroll Reporting in India’ conducted by State Bank of India (SBI) Chief Economic Advisor Soumya Kanti Ghosh and Indian Institute of Management (IIM) Bengaluru professor Pulak Ghosh in January. The study had estimated 7 million jobs employment generation in 2017-18 and critics had argued for a similar access to EPFO, National Pension System (NPS), and Employees’ State Insurance Corporation (ESIC) database based on which the two researchers had arrived at its estimates. Ghosh and Ghosh had recommended the government to release a monthly payroll data.
Instead of using EPFO payroll data on the pro-rata basis for the remaining months of 2017-18, if one combines Ghosh and Ghosh data with the one released by the EPFO on Wednesday, around 4.6 million jobs were created during April-February 2017-18, Soumya Kanti Ghosh said.
“If we project the March number on pro-rata basis, the total FY18 payroll as per the EPFO records would be thus around 5.1 million,” he said. However, the task force on employment data, led by former NITI Aayog Vice-Chairman Arvind Panagariya, had pointed to a few “serious limitations” to gauging job creation based on administrative data from EPFO, NPS, and ESIC. “An important limitation of these datasets as sources of estimates of job creation is that new entries into these datasets do not necessarily represent new jobs. For example, only firms with 20 or more workers are required to contribute to EPFO for their employees. This means that when a firm with 19 workers adds another worker to its payroll, it must begin contributing to the EPFO for all its employees,” the taskforce said. It, however, said that the data sources can be useful in getting a count of formal jobs.