New EPF enrolment during Sep., 2017 to Apr., 2018 confined to a few industries & states, indicates data

New EPF enrolment during Sep., 2017 to Apr., 2018 confined to a few industries & states, indicates data

 
A document of the Ministry of Statistics and Programme Implementation (MoSPI) dated 25th June, 2018 says that the number of members subscribing to the Employees' Provident Fund (EPF) scheme give one an idea of the level of employment in formal sector viz. mostly employment in establishment employing 20 or more persons (though EPF is applicable for certain organisations, which employ less than 20 persons, subject to certain conditions and exemptions). The updated estimates on enrolment in EPF scheme released on 25th June and then again on 20th July this year prove that the total formal sector employment may not have grown that much between September, 2017 and March, 2018 as was calculated earlier on 25th May, 2018.
 
The modified estimates of payroll data, which was provided by the MoSPI on 25th June this year, indicates that 34.4 lakh net new subscribers were added to the EPF scheme between September, 2017 and March, 2018. However, previous estimates as provided by the MoSPI on 25th May, 2018 show that the net new subscribers to the EPF scheme during September, 2017 to March, 2018 stood at 39.4 lakhs. Clearly, updating the payroll data related to EPF subscriptions between September 2017 and March, 2018 leads to a drop by 12.6 percent.   

As compared to the initial enrolment estimates released on 25th May, 2018 (viz. around 39.4 lakhs), revised estimates of net new subscribers as per the EPFO figures released on 20th July, 2018 (viz. roughly 30.6 lakhs) was down by 22.4 percent. The Employees' Provident Fund Organisation (EPFO) has also lowered the earlier estimates of the number of net new subscribers by 9.6 percent, from 41.3 lakhs to 37.3 lakhs for the period September, 2017 to April, 2018. Please check the table-1.

It is revealed by the table-1 that the difference in EPF enrolment estimates (viz. between the one dated 25th June, 2018 and the other dated 25th May, 2018) range from -6.2 percent in September, 2017 to -21.6 percent in March, 2018. One also gets from the same table that the difference in EPF enrolment estimates (viz. between the one dated 20th July, 2018 and the other dated 25th May, 2018) range between -8.6 percent in September, 2017 and -40.0 percent in March, 2018.

Table 1: EPFO enrolment numbers between September 2017 and May 2018, as per various estimates

Table 1 EPFO enrolment numbers between September 2017 and May 2018 as per various estimates
 
Source: Report: Provisional estimates of payroll as per EPFO, dated 20th July, 2018, please click here to access

Press release: Payroll Reporting in India (provisional estimates): An Employment Perspective - April, 2018, MoSPI, dated 25th June, 2018, please
click here to access

Press release: Payroll Reporting in India (provisional estimates): An Employment Perspective - March, 2018, MoSPI, dated 25th May, 2018, please
click here to access

Note: N.A. means data not available


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The table-1 also shows that the net new EPF enrolment between September, 2017 and May, 2018 was 44.7 lakhs, as on 20th July, 2018.

The MoSPI press release dated 25th June, 2018 says that the tables on EPF scheme subscribers, Employees’ State Insurance Scheme (ESIC) subscribers and the National Pension Scheme (NPS) subscribers reflect a dynamic status.

A footnote in the EPFO report dated 20th July, 2018 states that the EPF enrolment data is provisional since updating of employees’ records is a continuous process and gets updated in subsequent month/s. It is age-band wise data of all non-zero contributors who are registered under EPFO during particular month. For each age-wise band, the estimates are net of the members enrolled and ceased during the month as per records of the EPFO. Experts think that although companies are reporting leaving/attrition of employees after a lag, the joining of employees to an organisation is reported immediately in the EPFO payroll.  

Concentration of new EPFO subscribers in few sectors/industries and states

The analysis of industry-wise payroll data of EPFO by the Inclusive Media for Change team shows that between September, 2017 and April, 2018 roughly 77.3 percent of net new subscribers to the scheme were employed in six industries, namely 'Expert Services', 'Building and Construction Industry', 'Engineers - Engg. Contractors', 'Trading - Commercial Establishments', 'Textiles' and 'Establishments engaged in Cleaning, Sweeping Services' (for all ages). Around 50.5 percent of net new subscribers of the EPF scheme were employed in 'Expert Services' sector between September, 2017 and April, 2018. Please check table-2 for further details.

Table 2: Age-wise and overall net new subscribers to EPF scheme in various industries or sectors   
 
Table 2 Age wise and overall net new subscribers to EPF in various industries or sectors
 
Source: Net New Payroll in Top 10 Industries & Age-Brackets, Report: Provisional estimates of payroll as per EPFO, dated 20th June 2018, Employees' Provident Fund Organisation, please click here to access

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The analysis of state-wise payroll data of EPFO by the Inclusive Media for Change team finds that between September, 2017 and April, 2018 nearly 64.6 percent of net new subscribers belonged to six states, namely Maharashtra, Tamil Nadu, Gujarat, Karnataka, Haryana and Delhi (for all ages). Around 21 percent of net new subscribers of the EPF scheme were employed in the state of Maharashtra between September, 2017 and April, 2018. Please consult table-3.

Table 3: Age-wise and overall net new subscribers to EPF scheme in various states (in numbers)
 
Table 3 Age wise and overall net new subscribers to EPF in various states in numbers
 
Source: Net New Payroll State-wise & Age-Brackets, Report: Provisional estimates of payroll as per EPFO, dated 20th June 2018, Employees' Provident Fund Organisation, please click here to access

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The above analysis brings out that formal employment (as could be guessed from the number of net new EPF subscribers) is concentrated in a few industries and states. In other words, net new enrolment in the EPF scheme is not evenly distributed across all industries and states of India.

Critiquing the EPFO based numbers


It needs to be mentioned here that the ruling government at the Centre has moved away from presenting formal sector employment (i.e. in establishments employing 10 or more workers), which used to be estimated by the various rounds of the Quarterly Employment Survey (QES) published by the Labour Bureau since 2016. After the publication of the seventh round of the Quarterly Report on Employment Scenario in selected sectors (as on 1st October, 2017) in March this year, no new report in that series has been released by the Labour Bureau so far. The seventh round of the QES covered the period 1st July to 1st October, 2017. Media reports suggest that the eighth round of QES, which was supposed to cover the period from 1st October 2017 to 1st January 2018, may not be published anymore.

Experts think that there are various problems associated with guessing formal employment based on EPFO subscription figures. Some of those problems are discussed in the following paragraphs.

One comes to know from the Sixth Economic Census (2013-14) that 58.5 million establishments were in operation employing 131.29 million persons. Out of 58.5 million establishments, 1.4 percent establishments were found in the organised sector viz. in establishments employing 10 or more persons. The list of all these establishments, in the organised sector employing 10 or more worker, in eight major sectors (namely, Manufacturing, Construction, Trade, Transport, Education, Health, Accommodation & Restaurant and IT/BPO) in the 6th EC, was used as the sampling frame for the QES (new series). The eight sectors, as mentioned earlier, constituted around 81 percent of the total employment of units with 10 or more workers in the 6th EC and approximately 15 percent of the total employment (131.29 million person) as per the 6th EC.

The draft Report of the Task Force on Improving Employment Data (2017) of NITI Aayog says that since majority of the enterprises in India are small (employing less than 10 workers), the sample covered under the QES only represents about 1.37 percent of all enterprises or 21.15 percent of non-agricultural employment. The QES in reality covers around 2.77 crore workers out of a total of 47 crore or more workers, which comes to around 6 percent.

The EPF scheme, on the other hand, covers mostly establishment in which 20 or more persons are employed. (However, certain organisations employing less than 20 persons are also covered under the EPF scheme, subject to certain conditions and exemptions). Hence, guessing the level of formal employment from the enrolment data (in net sense) of EPFO is not a good idea since it does not take into account the employment situation in establishment having 10 or more persons but less than 20 persons. Experts say that the recent preference of the government for EPFO enrolment figures instead of the figures given by the QES for estimating formal employment does not indicate any major improvement in terms of good quality and reliable data.

The draft Report of the Task Force on Improving Employment Data (2017) says that an important limitation of administrative datasets (such as that of EPFO, ESIC or NPS) as sources of estimates of job creation is that new entries into these datasets do not necessarily represent new jobs. For example, only firms/ establishments with 20 or more workers are required to contribute to EPFO for their employees. It means that when a firm having 19 workers add another worker to its payroll, it must begin contributing to the EPFO for all its employees. In the EPFO database, this will be shown as creation of formal employment to the tune of 20 workers. Yet, only one out of these 20 employees actually represent a new job.

Like the enrolment in EPF scheme, the number of subscribers of ESIC scheme also gives an idea of the level of formal employment. The MoSPI press release dated 25th June, 2018 states that since the levels of employment are from various sources, there are elements of overlap and the estimates are not additive.

However, by combining net new enrolments in the EPF scheme (viz. 44,74,859) and the NPS (viz. 5,68,376), the Prime Minister in his speech on 20th July, 2018 in the Lok Sabha said that more than 50 lakh jobs were created in the formal sector alone during September, 2017 to May, 2018.
 
One of the serious limitations of using EPFO, ESIC or NPS database is that there is very significant overlap across them, says the draft NITI Aayog Report, which was prepared under the chairpersonship of Dr. Arvind Panagariya. So, the draft report recommends de-duplication for aggregation across the various administrative databases. This requires providing a common identifier for individuals listed in these datasets. Though modern statistical techniques allow de-duplication without a common identifier, there is a possibility of error taking place. The more conservative course of action is to use a common identifier across these datasets, suggests the draft report.  

The draft report by the Task Force has also found that GSTN, EPFO, ESI, Factories Act, 1948 and Shops and Establishment Act, 1953 each assign different sets of numbers to the enterprises, which is not only a source of much confusion for enterprises that must file information under different Acts but also makes correlating information in different datasets on the same enterprise impossible.   

Since there is a pay limit of Rs. 15,000 per month in case of enrolment in EPF scheme (for establishments employing 20 or more persons), so estimating formal sector employment based on EPFO figures may not give the true picture.

Economists who are in favour of EPFO based employment estimates say that since the data of the subscribers is linked to unique Aadhaar identity, there is little or no scope for double counting. However, the footnote in the EPFO report dated 20th July, 2018 clearly mentions that the estimates on EPF subscriptions may include temporary employees whose contributions may not be continuous for the entire year.
 
As a result of the rise in net new EPF enrolment, one gets the impression that there has been a jump in formal sector employment. In an article published in The Hindu dated 5th July, 2018, Prof. R Nagaraj mentions that the increase in EPF enrolment is temporary in nature since the government has recently provided incentives to employers so that they register their employees in the EPFO. But the rise in EPF subscribers cannot be counted as creation of new jobs.
 
It may be noted that in order to boost formalisation of employment, the Central government has taken two major steps in the past 3 years:

a. Contribution of 8.33 percent of Employee Provident Fund(EPF) for new employees by the government for three years;
 
b. Contribution of 12 percent to EPF for new employees for three years by the government in sectors employing large number of people like textile, leather and footwear.

While presenting the Union Budget for 2018-19, the Finance Minister Shri Arun Jaitley announced that the government will contribute 12 percent of the wages of the new employees in the EPF for all the sectors for the next three years.

Critics say that the administrative databases like that of the EPFO, ESIC or NPS do not give an iota of information about what is happening to informal sector employment, particularly after demonetisation. In the absence of time-tested Employment-Unemployment Survey (EUS) of the National Sample Survey Office (NSSO), it is difficult to know the situation in agriculture and the non-farm informal sector, which account for 85 percent of the workforce.


References

Report: Provisional estimates of payroll as per EPFO, dated 20th July, 2018, please click here to access

Report: Provisional estimates of payroll as per EPFO, dated 20th June 2018, please click here to access

Press release: Payroll Reporting in India (provisional estimates): An Employment Perspective - May, 2018, MoSPI, dated 25th July, 2018, please click here to access
 
Press release: Payroll Reporting in India (provisional estimates): An Employment Perspective - April, 2018, MoSPI, dated 25th June, 2018, please click here to access

Press release: Payroll Reporting in India (provisional estimates): An Employment Perspective - March, 2018, MoSPI, dated 25th May, 2018, please click here to access

Quarterly Report on Employment Scenario in selected sectors (new series) as on 1st October, 2017, released in March 2018, Labour Bureau, Ministry of Labour & Employment, please click here to access
 
Quarterly Employment Survey report (new series), Labour Bureau, please click here to access all the QES reports (new series)

Draft Report of the Task Force on Improving Employment Data (2017), NITI Aayog, please click here to access

PM’s reply to the No Confidence Motion in Lok Sabha on 20 July, 2018, Press Information Bureau, please click here to access
 
Union Budget Speech 2018-19 delivered by Arun Jaitley on 1st February, 2018, please click here to access
 
Formal employment rises but less no. of regular jobs created in 2nd quarter of '17-18, News alert by Inclusive Media for Change dated 4 April, 2018, please click here to access 

Labour Bureau's new report indicate layoffs of casual & contract workers in Q1 of 2017-18, News alert by Inclusive Media for Change dated 19 February, 2018, please click here to access 

Casual Employment Worst Hit After Note Ban, Shows New Report, News alert by Inclusive Media for Change dated 2 January, 2018, please click here to access 

Job creation is a major challenge before the Govt., News alert by Inclusive Media for Change dated 5 April, 2017, please click here to access 

Jobs -- The Govt.'s Tangled Web -Subodh Varma, Newsclick.in, 23 July, 2018, please click here to access 
 
EPFO payroll data shows 4.4 million jobs created in 9 months till May, Livemint.com, 22 July, 2018, please click here to access

One crore jobs in last year: Here is how PM Modi built his case during speech in Lok Sabha, The Indian Express, 21 July, 2018, please click here to access 
 
Prof. Surajit Mazumdar of JNU interviewed by Newsclick, 17th July, 2018, please click here to access

EPFO data government cited to show job surge is now down -Aanchal Magazine, The Indian Express, 6 July, 2018, please click here to access 

The paradox of job growth -R Nagaraj, The Hindu, 5 July, 2018, please click here to access 

Employment: Government to launch enterprise-level survey in August -Aanchal Magazine, The Indian Express, 4 July, 2018, please click here to access 

The signal and the noise in India's jobs data -Tadit Kundu, Udayan Rathore and Pramit Bhattacharya, Livemint.com, 13 June, 2018, please click here to access 

Measuring Economic Development: Data points undergo changes in 4 yrs -Aanchal Magazine, The Indian Express, 10 June, 2018, please click here to access 

Why the Modi govt's move to ditch quarterly jobs surveys to make way forEPFO-based employment data is a mistake India -Dinesh Unnikrishnan, Firstpost.com, 8 June, 2018, please click here to access 
 
Labour Ministry puts on hold quarterly jobs survey -Yogima Sharma, The Economic Times, 8 June, 2018, please click here to access 

Stop this jobs charade: on India's unemployment problem -Praveen Chakravarty & Jairam Ramesh, The Hindu, 8 May, 2018, please click here to access 

The myth of 15 million jobs -Mahesh Vyas, The Indian Express, 1 May, 2018, please click here to access 

Member of PM's Advisory Council Accused of 'Inventing' Employment Data, TheWire.in, 29 April, 2018, please click here to access 

Forget more jobs, employment fell in first 2 years of Modi government -Pragya Srivastava, The Financial Express, 30 March, 2018, please click here to access 

Mega survey to track jobs in small companies starts in April -Yogima Seth Sharma & Kirtika Suneja, The Economic Times, 26 March, 2018, please click here to access
 
Unemployment Rate in India: Nearly 31 million Indians are jobless, The Times of India, 6 March, 2018, please click here to access 
 
Image Courtesy: Inclusive Media for Change/ Shambhu Ghatak



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