One of the best articles I read last week was by Dr Surjit S. Bhalla which provided an explanation behind the rise of the use of fake news and fake analysis. The article linked the rise of fake news and of questioning the data on the economy to the record performance of Congress in 2014 as it managed to get its lowest ever tally in its history. The article got me thinking and eventually, I realized that I agree with this conclusion as there has been a lot of unnecessary politicization of a lot of things post 2014 by the opposition.
Ironically, a lot of the new-age media platforms and self-claimed fact checkers have also frequently peddled fake-news that has been then cited by opposition leaders to corner the Modi Government. It takes time to debunk fake-news and the opposition has constructively used this fact to its advantage as it tried to set its own narrative. This article focuses on the issue of jobs as we try to understand the reality of employment creation. At the onset, I must state that I had indicated way back on 22nd May 2018 that missing data on jobs will play a critical role in the 2019 elections. I had also stated in the same article how the issue is not the lack of jobs but the lack of data on jobs.
The issue around PLFS and CMIE
At the onset, I must emphasize that the government should release the Periodic Labor Force Survey (PLFS) to ensure that there is at least some data that can be objectively analyzed by individual researchers. Chances are that PLFS may have findings that may not be consistent with other indicators of job creation in the economy- if that’s the case then they should make the report public to identify potential flaws in the survey so that it could be improved in future.
On PLFS being used and compared with the previous employment and unemployment survey, Mr Kant has rightfully put how they both can’t be compared due to the differences in sampling techniques. So, all the exclusive headlines by “eminent journalists” are just headlines that are devoid of any substance and are only serving the interest of those who benefit from such fraudulent analysis as they mislead their readers and construct a false narrative.
A bulk of the criticism on the lack of jobs from the opposition has come with the start of CMIE’s data on jobs [OpIndia has already expressed concerns regarding the reliability of CMIE’s data and you can read that article by clicking here]. While the sample size of most labour force surveys in India has been historically small, the important aspect is whether CMIE is drawing its sample without any skewness in its sampling technique. Mohandas Pai and Yash Baid make a compelling argument against the use of thin surveys as against verifiable and robust data sets such as EPFO, NPS and PPF.
The true picture of jobs
Now the key question in front of us is the true reality of the labour market over the last five years. I refrained from writing it extensively because there was relatively less data points that were available a couple of months ago [an old blog on this issue can be accessed by clicking here], but now, with multiple data points available we can finally make sound conclusions regarding the situation of job creation in the economy.
Dr Bhalla and Dr Das have arrived at an approximate estimate of 8.7 million annual jobs being added by the government. This is based on the estimate of total employment of 448 million in the year 2017/18. Their estimate seems robust and it is likely to be closer to the true scenario of job creation in the economy.
More that arriving at an exact estimate, let us try to establish the situation of jobs. As evident, Dr Bhalla and Dr Das have provided an estimate that shows the positive situation of jobs. It is also important to highlight that these estimates use the EPFO and NPS data both of which also show a positive trend in the job’s growth post demonetization. EPFO data has improved over subsequent months. In fact, 72.32 lakh new subscribers were added to social security schemes of the Employees’ Provident Fund Organisation (EPFO) from September 2017 to December 2018 as formal sector jobs touch 16-month high at 7.16 lakh in December. This further indicates that there’s a positive change in the data so there must be robust job creation within the economy.
A criticism of the use of EPFO is that it tends to represent more formalization of jobs rather than fresh creation of jobs, but those who criticize the EPFO dataset on these grounds also believe that demonetization didn’t lead to improved tax compliance and more formalization so clearly, their argument is incoherent. Indeed, EPFO data represents a formal sector of jobs and it is likely that some informal jobs may be becoming formal but the robust jobs growth in the 18-21 age group suggests that there must be a high proportion of the EPFO subscribers who are first-time employees. The latest numbers from EPFO suggests that for the categories of sub-18, 18-21 and 22-25 age groups, there has been an addition of 4 million jobs and a bulk of these must be first-time employees. These jobs are formal jobs that come with all social security benefits, so there is a robust creation of good and decent jobs in the economy.
Another source of job creation comes from Mohandas Pai and Yash Baid’s analysis using the data for automobile sector where they found that the sector created 3.4 million jobs in FY18, with a further 2.8 million jobs created in the 9 months ended December 31, 2018. The automobile sector tends to grow only when there is robust demand for automobiles which is again a very healthy sign for the growth of the Indian economy. This robust demand further indicates that the labour market continues to be robust.
Moving on to another indicator, an Aon Hewitt survey indicates that the average salary hike in 2018 is 9.4%. If indeed the labour market would have witnessed massive layoffs and unemployment was at an all-time high, then clearly labour supply would have gone up which would have suppressed incomes. The argument of hysteresis as advocated by some is not valid here as labour supply would have invariably gone up because the unemployment if at all was high (which it wasn’t), it wasn’t high for a prolonged period. Additionally, India has witnessed very moderate inflation for this period so even the real salary hike on an average is robust and positive. Thus, clearly, there must be jobs in the economy which is why companies are keen on retaining their talent.
Leading HR platforms such as Naukri.com also produces its index to measure the employment situation in the country. According to their report, there was a 3 per cent addition in hiring by companies in March 2018 compared to March 2017. Yet again, we find their findings to be consistent with other indicators of job creation in the economy. In the digital space, there are estimates that suggest that the start-up and digital economy added 3.9 million jobs between 2014-18. This means 0.975 million jobs annually.
Recently, even the CII came out with its own numbers for the MSME sector which tends to employ a significant proportion of India’s non-agriculture labour force. According to their report, MSMEs created 14% more jobs in the last four years. This is consistent with the acceleration in growth rates of the GDP that the Indian economy has witnessed over the last couple of years along with the revival of the investment cycle in the economy. The report estimates a total of 13.5-14.9 million job additions per annum. These estimates are again indicative of robust job creation in the economy over the last five years.
While there are ample jobs that are being created in the economy across different sectors, a key area of concern that remains is regarding the skills of those who are entering the labour force. While the government has ensured that there is ample labour demand, what needs to be done now is to ensure that there is a significant push towards augmentation of labour supply through successive skilling and reskilling endeavours. Some amount of policy push has already been given towards skill development and perhaps, in subsequent years we will witness a far more robust and dynamic labour market in India than ever before.
Now that we have multiple sources of jobs, it is important to look at all these sources before we conclude the state of employment in the country. It is evident that apart from CMIE, which is a true sense of outlier for reasons best known to them, all other sources categorically demonstrate that there is robust job creation in the economy. This doesn’t come as a surprise as the government has ramped up public infrastructure projects which have a significant multiplier effect in terms of job creation in the economy. Through these multiple sources of data, we can safely establish that in terms of job creation the last five years have been exceptionally been good and any further debate around jobs would be driven by political considerations rather than all available empirical evidence.
Karan Bhasin is a political economist by training and has diversified research interests in the field of economics. He tweets @karanbhasin95.