A misleading story of job creation

A misleading story of job creation

Context:

India does not create 55 lakh new jobs every year, as claimed by a new report

Introduction:

• The report titled “Towards a Payroll Reporting in India” authored by the Group Chief Economic Adviser of the State Bank of India and a professor from the Indian Institute of Management Bangalore
• It used data from the Employees’ Provident Fund Organization (EPFO) which registers employees from the formal sector for provident fund benefits.

Main objectives of the report:

• The main objective of the report was to make a case for a better payroll reporting system in India
• It also made an extravagant claim that 55 lakh new jobs are created every year in India.

Highlights of the report:

• It found that as of November 2017, there were 36.8 lakh new members in the age group of 18-25 years who registered with the EPFO vis-à-vis the previous year.
• It assumed that any 18- to 25-year-old registering with the EPFO implies that he or she found a new job in the organised sector
• It then extrapolated this November 2017 data to the full year of FY-2018 and boldly claimed that 55.2 lakh new jobs were created in FY-2018.

Indian economy was subjected to massive external forces:

• The Indian economy was subjected to massive external forces of formalisation by the twin forces of demonetisation in FY-2017 and the GST in FY-2018.
• Demonetisation resulted in thousands of employers retrenching a large part of their informal workforce paid in cash and registering the remaining employees as formal workers with benefits such as provident fund
• The GST coerced thousands of small and medium businesses in the country to transition at least a part of their workforce from informal to formal employment
• The costs of formalisation may have resulted in many firms cutting costs or even shutting down.

Conclusion:

India’s jobs situation is a very grim challenge that must be acknowledged, confronted and for which we must debate solutions. All evidence, confirmed by both governmental agencies and analysis by independent organisations like the Centre for Monitoring of Indian Economy and well-known labour economists, have clearly demonstrated how growth in new jobs (formal and informal) has slowed down dramatically. A serious issue such as lack of jobs for millions of youth cannot be wished away by hiding behind misleading data analysis and a media spin.