EPF base has expanded at faster clip in recent years, aided by an amnesty scheme and other policy support, but this hardly reflects job growth
The country’s pioneering payroll count — based on the Employees’ Provident Fund Organisation’s (EPFO) subscription database — released on Wednesday gave government managers and some data analysts their “I told you so” moment. As the EPFO said 3.1 million contributors were added on a net basis during the half year between September 2017 and February 2018, they claimed that it meant a whopping 6 million new formal jobs — roughly equivalent to the skilled workforce entering the job market annually or 10% of the retirement fund body’s active subscriber base — were created in the whole of 2018-19.
If true, that would have dismantled all criticism of jobless growth that the Narendra Modi government has had to face.
But just a bit of analysis would reveal how facile these optimistic assumptions are. Even though the EPFO wasn’t putting out month-wise payroll data earlier, it used to publish the average number of subscribers (who contributed) annually.
And the average subscriber base has seen accelerating growth over the last four to five years, from 6% in in FY15, the first year of this government, to over 15% in FY18.
So was that not a sign of a boost to job creation? Hardly. Job growth has little to do with the recent jump in the EPFO subscriber base.
An amnesty scheme for EPF defaulter firms that ran between January and July 2018 saw these firms enrolling some 4.9 million people in FY17and the bulk of these were obviously old workers rather than new recruits. Including the amnesty additions, the EPFO contributor base rose 9.5% to 41.2 million in FY17, but the base would have shrunk to 36.2 million in the year — even lower than previous year’s base of 37.6 million — had the amnesty not been implemented.
Since the amnesty extended to four months in FY18 (in April-May, 1.2 million got enrolled, as per available data) too, the reported active subscriber base in the year of 47.5 million could be deflated by 2.4 million or thereabouts to get the growth in the base attributable in at least in some measure to new jobs.
Pronab Sen, former chairman of the National Statistical Commission, said: “It (3.11 million) reflects the number of registration under the EPFO but there is nothing that suggests that these many people were unemployed earlier. Since the addition to the job sector annually is roughly 6-7 million, the claim that 3.11 million new jobs were created between September 2017 and February 2018 will mean every new entrant got a formal sector job, which is not possible.”
Apart from the amnesty scheme, the scheme for textiles and garment sectors launched in October 2016 under which the government bears the bulk (8.33%) of the employer’s contribution towards the EPF’s pension scheme also boosted the EPF contributor base.
The implementation of the goods and services tax, whose continuous tax chain has brought a wide segment of the small-scale industries into the formal economy. might also have had a salutary impact of the EPF base.
NITI Aayog vice-chairman Rajiv Kumar said: “One has to be careful in estimating addition to jobs. What happens is that companies start to contribute to the EPFO when their head count increases from 19 to 20. So, all 20 workers come into (EPF) picture in one go, while it is not that all 20 were not there (with jobs) earlier.”
At last count, the beneficiaries under the textile scheme were 250,000, but even all of them cannot be called new jobs as practically, the scheme prompted the firms to bring their existing workers under EPF cover rather than recruiting new ones.
The EPF contributor base could see rapid growth in the current financial year as well, as the government has recently rolled out an amplified Pradhan Mantri Rozgar Protsahan Yojana, under which employers in all sectors will be encouraged to provide EPF cover to “new employees” (again, those who haven’t been issued UANs rather than strictly first-time jobs) with the government contributing the employers’ entire 12% (of basic pay) contribution to EPF for the first three years.
Government policies have clearly given a fillip to the EPF contributor base, but it is simplistic to ascribe the expansion to faster job creation the economy. While the EPF’s current “active subscriber base” is 61.5 million (those who have contributed at least once in a year), it includes quite a number of people with multiple EPF accounts. Of course, Aadhaar-seeding was made mandatory by EPFO for new subscribers from July 2017 — a move that would prevent anyone from opening multiple accounts in future — but the total number of Aadhaar-linked accounts is still 33 million only.