EPFO Data Shows That This Isn’t Jobless Growth; Here’s How The Data Can Be Even More Credible

In response to the opposition allegations of jobless growth, the National Democratic Alliance (NDA) government under Narendra Modi took a great decision to release high-frequency jobs data through the Employees’ Provident Fund Organisation (EPFO) using Aadhaar numbers to de-duplicate subscribers to the extent possible.

These numbers have not only been disputed by critics, but also raise a valid observation that EPFO data can only show the number of people whose jobs are in the formal sector. These may not necessarily be new jobs.

But the quality of the data has improved substantially since the numbers were first put out in mid-2017. For example, the latest EPFO subscriber data shows that there have been net additions of over six million in calendar 2018 (January to December), an average of nearly half a million additions every month (see table).

In this total, 2.31 million are in the 18-21 age group, 1.77 million in the 22-25 age group, and around 87,000 in the sub-18 group. In short, more than four million people are either likely to be first-time job entrants, or switching jobs early in their careers.

Additionally, the latest data pack shows that new companies are being enrolled at the rate of nearly 4,500 a month – 53,947 in all in calendar 2018. That’s a pretty robust accretion to the list of companies migrating to the formal sector, either because they have just crossed the employee threshold of 20, or because they are informal sector companies seeking to now formalise for various reasons, including pressure from the new goods and services tax system that privileges formalisation.

Whichever way you read the data, this scale of accretion to the EPFO refutes the myth that there is jobless growth. That’s impossible. We may not be creating as many jobs as we require, but we are creating new jobs. The dispute is over the pace of job creation relative to need.

More important, even if the net new jobs created is below requirement, the high accretions show a massive improvement in the quality of jobs – jobs that now offer social security benefits. That’s a huge gain.

EPFO subscriptions can grow in three ways, and only the first one amounts to new job creation. The three ways are (1) new job entrants at any age, (2) migration from non-EPFO or informal status sector to formal, and (3) duplication (where an employee who leaves one EPFO subscribing company to join another, and both accounts are shown as active in the interim due to subscriptions paid in a part of the year).

If we dismiss the possibility that all the net accretions to payrolls through the EPFO are not new jobs created, how do we figure out what is the actual level of job creation from the EPFO data.

Over time, de-duplication systems may become foolproof, we should get a good enough number by sampling the EPFO base.

The EPFO should do a simple sample survey every quarter in each age group to figure out how many are new job entrants, and how many are merely migrating from one job to another.

With a subscriber base of just over six crore employees, a sample size of one lakh, with different sample sizes for each age bucket, will tell us what proportion of the net additions amounts to new jobs created. This exercise can be repeated once every quarter till the system is capable of continuous de-duplication and offer credible monthly updations.

The EPFO numbers are good, and this survey will make it unimpeachable. What EPFO cannot do is serve as a proxy for determining new job creation in the economy as a whole. That needs a properly designed household survey done at frequent intervals.