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Study By IIM-B professor debunks claims of ‘jobless growth’

Rahul Gandhi and the Congress party have continuously accused the government of not fulfilling their promise of creating jobs for the youth of the country. He repeated this accusation in his recent visit to Amethi and praised job creation in China.  Labour bureau figures have been cited as the source for justifying this misconception.

However, a deeper analysis shows that this perception of poor job creation under NDA tenure may be false.

Concerns of poor job data by former NITI Aayog chief

Former NITI Aayog chief Arvind Panagariya had remarked that job data in India is not accurate in an interview to Hindustan Times. This is because the labour bureau data on jobs, which is collected every three months covers only those firms which have more than 10 employees. Jobs created in informal sector are not covered. He also said that a more accurate source for job data , the NSSO household survey (Employment and Unemployment Survey) ,is collected once in five years. This makes it difficult for the government to assess real numbers of jobs created or lost in the economy.

Existing surveys to measure employment are misleading

In a study titled  ‘Towards a Payroll Reporting in India’,  conducted by Pulak Ghosh (Professor IIM, Bangalore) and Dr. Soumya Kanti Ghosh, (Group Chief Economic Adviser, SBI) have tried to address the poor jobs data scenario in India’s formal sector. They call the existing surveys to measure employment as ‘most misleading’ in their report. The reasons cited for this remark are (emphasis added) :

Information was sought from around 11,179 units as a representative sample for 8 sectors at all India level.

  • Number of non-respondent not disclosed in the Survey
  • The survey result comes with a huge lag. In the Dec’17 month Labour Bureau has published employment situation as of Mar’17
  •  This is primarily an establishment survey for collecting information on employment in the unit; therefore, it does not provide any information on unemployment in the country
  • The survey is based on either record or response of the unit. However, verification of record has not been resorted to for collection of data
  • The Collection of Statistics Act-2008, is not applied to QES. Hence, all the information provided by the selected unit/ establishment is on a voluntary basis
  • The Scope of QES is limited to all establishments having 10 or more workers and the scope & coverage is further limited to employment in Non-farm Industrial economy covering 8 selected sectors (vis-à-vis universe of 190 industries)

A better method for collecting employment data

The researchers have studied payroll data generated for new employees ( in the age group of 18 to 25) in formal sector for the financial year 2017-18. They have got the raw data for the study from ESIC (Employees’ State Insurance Corporation), NPS (National Pension Scheme) and GPF (Government Provident Fund) to understand the real scenario of jobs in the country. The main findings of their study is captured in two graphs.

Graph 1

Graph 1 : This graph captures the total number of payrolls collected from various organisations

Graph 1 is a compilation of the total number of payrolls generated for new employees in the age group of 18-25. This is more reliable than the labour bureau data as there is a confirmation of the employee numbers because of the social security payment records for the entire workforce in formal sector.

Graph 2

Graph 2 Number of jobs created is equal to new payrolls generated as per the study

Graph 2 captures the data of EPFO (till November ’17 ) ESIC (till September ’17 ) NPS (till October’17). It finds out the number of new employees on the payroll tIll the end of these months and estimates the number of jobs that may be added to the economy by the end of fiscal year.

7 million new jobs in 2017-18 is a conservative estimate

While commenting on these two graphs researchers say that the study is the first such study on payroll situation in India. They also remark that it is a conservative estimate and inclusion of data from other professional bodies could show a higher number of jobs in the economy. They suggest that the job scenario could be properly understood if EPFO, ESIC & NPS in collaboration publish a monthly report of new payrolls in India . They suggest big data analyses to capture payrolls generated in informal sector as well.

Thus the myth of poor job creation under the Narendra Modi government could turn out to be false. If a similar study is done for previous fiscals, the number of jobs generated so far under the NDA government might end up higher than those posted by the labour bureau data. A better method for capturing job data needs to be set up by the government to capture the scenario at ground level to debunk false perceptions created by the media and opposition

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