Job growth or number jugglery -Arun Kumar

-The Indian Express

The problem is under-employment. It won’t be resolved if the residually-employed are notionally shifted from the informal to formal sector.

In an article in January, Soumya Kanti Ghosh and Pulak Ghosh (Ghosh and Ghosh) claimed that seven million new jobs have been created in the formal sector. Their claim is based on the increase in registration under the Employees Provident Fund (EPFO), National Pension Scheme and Employees State Insurance Corporation. The government and the ruling party are now widely quoting this figure. In a column in this paper (‘Robust job growth, not fake news,’ IE, April 28), Surjit Bhalla has, by and large, endorsed this study. The Niti Aayog vice chairperson has discounted these figures slightly but added that 36 million jobs have perhaps been created by the Mudra Scheme and via self-employment in enterprises such as those pertaining to taxi aggregation and e-commerce.

This runs counter to the impression that the shocks of demonetisation and implementation of GST resulted in the loss of many jobs. There were reports of retrenchment of workers and workers migrating from urban to rural areas to seek employment under MGNREGS, and youngsters not getting jobs commensurate to their skills.

With no social security, few in India can afford to remain unemployed. Many who do not get formal employment often have no option but to carry headload or push carts. Hence, the issue at stake is under-employment. This author has been arguing for long that the sector in which a person is employed, formal or informal, matters much in reckoning employment figures. If there is an increase of seven million jobs, has there been a corresponding decline in informal sector jobs? If taxi aggregators are offering jobs, are these at the expense of traditional taxi drivers and private chauffeurs?

Seven million new jobs on a base of about 50 million in the formal sector would represent a growth of 14 per cent. Is this likely when the economy’s growth rate plummeted after demonetisation and implementation of GST?

Why have the EPF registrations shown a sharp increase? There are two possibilities. One, this is a one off increase due to special reasons. Second, it is a trend. But then how come the total employment in the formal sector is only 50 million? With a 14 per cent growth rate, employment would double in 5.2 years.

Public sector employment has been stagnant at about 20 million. So, the increase of seven million would have taken place largely in the private formal sector. This would give a growth rate of about 23 per cent with employment doubling in 3.5 years, and there would be no dearth of decent jobs for the young.

Two factors could explain the rise in EPFO registration. First, earlier only employers who had more than 20 employees on their rolls were required to register under the EPFO. In 2016, this was changed to employers employing more than 10 employees. Since in India, most firms employ less than 20 employees, the numbers of those eligible for enrolment would have shot up. So, this is just a definitional shift from informal to formal employment and does not represent an increase in total employment.

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The Indian Express, 16 May, 2018, http://indianexpress.com/article/opinion/columns/narendra-modi-govt-indian-economy-demonetisation-gst-job-loss-unemployment-5178184/

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