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

[op-ed snap] The paradox of job growth

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Mains Paper 3: Economy | Development & employment

From UPSC perspective, the following things are important:

Prelims level: Central Statistics Office (CSO), Employees’ Provident Fund (EPF), National Pension Scheme, Employees’ State Insurance Scheme, Employment-Unemployment Surveys (EUS), Index of Industrial Production (IIP), Annual Survey of Industries (ASI)

Mains level: Mismatch in actual job growth and data being provided and how jobs can actually be created in economy


Context

Latest employment estimates

  1. Central Statistics Office (CSO) released employment estimates recently
  2. The CSO’s press release has claimed that 4.1 million new jobs were created in the economy’s formal sector during eight months since last September
  3. They are off the mark, and confined to the economy’s organized or formal sector, accounting at best for 15% of the workforce
  4. NITI Aayog and official economists have also put out similar estimates since early this year
  5. But the official estimates are completely silent about the majority of the workforce engaged in the informal sector

CSO definition

  1. The CSO release defines jobs as ones that provide at least one government financed (or mandated) social security benefit such as Employees’ Provident Fund (EPF), National Pension Scheme, or Employees’ State Insurance Scheme

Reliability of these estimates

  1. The estimates are based on administrative records of implementing the social security schemes, whose completeness, consistency and accuracy are unknown
  2. Since a formal (organised) sector worker, in principle, can legitimately access (or subscribe to) more than one social security scheme, double counting is a distinct possibility
  3. The official data also suffers from a conceptual problem
  4. The social security databases, by design, are lists of workers enrolled in the schemes, as an entitlement or as voluntary subscribers — not employment registers
  5. These schemes are applicable to establishments above a certain size (of employment), and to certain kinds of enterprises

How actual job growth doesn’t happen

  1. For instance, in the factory sector, those employing 20 or more workers are mandated to provide EPF to all the workers (with a matching contribution by the employer)
  2. So, if in a factory, employment goes up from 19 to 20 workers, it comes under the purview of the EPF, to be provided to all the 20 workers
  3. The EPF enrolment increases by 20 workers, but the additional job created is just for one worker

India’s job sector

  1. The formal sector stands at the apex of India’s labour market pyramid, agriculture being at the bottom, employing 50% of the workforce
  2. The remaining workers are in the non-farm informal sector, spread across rural and urban areas
  3. This sector has grown in recent decades at the expense of the other two sectors mentioned above
  4. Nearly half of the informal labour workers are self-employed in household (or own account) enterprises, often engaging unpaid family labour
  5. Varying degrees of under-employment or disguised unemployment are the defining feature of informal labour markets

Lack of data on job sector

  1. Since 1972-73, the five-yearly Employment-Unemployment Surveys (EUS) conducted by the National Sample Survey (NSS) have been the mainstay for analysing labour market trends
  2. The last round of the EUS was in held in 2011-12
  3. Now, there is no reliable way of updating employment trends
  4. The EUS has been replaced with an annual Period Labour Force Survey, and a time use survey but these are yet to be released

Why low job growth?

  1. GDP growth figures are probably overestimated on account of the mis-measurement of GDP in the new National Accounts Statistics (NAS) series
  2. The economy is probably growing much slower
  3. In manufacturing, in the last few years, the growth rates reported by the Index of Industrial Production (IIP), and the Annual Survey of Industries (ASI) are consistently lower than those reported by GDP in manufacturing, suggesting an overestimation of manufacturing value added in the NAS
  4. Demonetisation and the Goods and Services Tax (GST) seem to have dented informal sector production and employment

Way forward

  1. The recent output growth rates are probably overestimated after the latest revision of the National Accounts Statistics a few years ago, on account of the questionable methodologies and databases used
  2. The faulty barometer of economic well-being seems to be misleading the nation
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