Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

EPFO data not the right gauge of employment level

Note4students

Mains Paper 3: Indian Economy | Development and Employment

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level:  Disparities in Employment statistics in India.


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Complications in EPFO data

  1. The EPFO recently revised down the net enrolment numbers for the period from September 2017 to May 2018 by 5.54 lakh (12.4%) to 39.2 lakh from its earlier estimate of 44.74 lakh made last month.
  2. The downward revision in the Employees’ Provident Fund Organisation data does not imply a decrease in formal sector employment.
  3. According to labour economists there are several problems with the EPFO data and caution against its use as a gauge of formal sector employment in the country.

No clarity

  1. EPFO data is a very complicated piece of work. There is a lack of clarity about the methodology being followed for this dataset.
  2. It is not clear what happens when a person changes jobs — and that happens very, very frequently.
  3. When someone applies for a new policy and already has an older one, what does EPFO do? Does it merge the two policies? Does it delete one? Does it keep the older policy active?
  4. EPFO is not actually disclosing this. They must make a deduction somewhere, but it is not clear if this is happening.
  5. Another major lacuna in the EPFO numbers was that it does not make clear whether the additions are to the total number of members (about 150 million) or to the number of active members who actually make payments and who number only about 60 million.
  6. If this addition is simply people moving from the member to active member category, there is no new job creation, or even new formal job creation, at all.

Impact of GSTN registration

  1. Most of the informal employers have been outside the EPFO net; enterprises may not have registered at all, or may not have admitted that they employ enough people to meet the EPFO threshold.
  2. The new GST regime created a certain incentive for many small enterprises to register themselves on the GST network, and so they may have registered under EPFO.
  3. Thus, these are not new jobs being created; it is simply that they are newly registered under EPFO.

Why EPFO number does not matter?

  1. Changes in EPFO numbers are not always indicative of a change in employment levels since there are several reasons why EPFO numbers might change without a corresponding change in employment.
  2. Some examples are a worker quitting their job to start their own company, a worker being transferred to a foreign branch of an Indian company etc.
  3. Employees retiring, and employees quitting once they get married are the prime factors of reduced employment.
  4. For example, a company employing 19 people may not be in EPFO, but as soon as it adds one more employee, all 20 are added to EPFO.
  5. But the actual increase in employment has only been a single person.
  6. The estimates may include temporary employees whose contributions may not be continuous for the entire year.
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