Don’t use EPFO data as a proxy for jobs-creation – Here is why

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Published: November 22, 2018 4:22:30 AM

In itself, the data coming out from the Employees Provident Fund Organisation (EPFO) is quite impressive in terms of what it says about creation of employment in the country.

New job creations, EPFO payroll data, job creations, pension, insurance, EDLI, social security funds of workersBetween September 2017 and September 2018, the data suggests formal employment grew a whopping 2.4 times, from 4.1 lakh to 9.7 lakh.

In itself, the data coming out from the Employees Provident Fund Organisation (EPFO) is quite impressive in terms of what it says about creation of employment in the country. According to the latest numbers, for instance, a total of 8 million new jobs were created in the 13-month period since September 2017 to September 2018; the data compiled takes the number of new EPFO subscribers in any month and deducts from this the number of these who cease to be members but, if they join a job again, they are added back to the number of fresh jobs. The problem, however, is that the data is difficult to believe.

According to Crisil analysis, for instance, while 52 million non-agriculture jobs were created between FY05 and FY12, less than 38 million will be created between FY12 and FY19; or around 5.4 million a year. Put the two sets of data together, and this means more formal sector jobs—only they pay PF to their employees—were created in the September 2017 to September 2018 period than the total number of formal and informal jobs! Certainly, there has been a lot more formalisation of the economy after both demonetisation and GST, but the EPFO numbers don’t really pass the smell test.

Between September 2017 and September 2018, the data suggests formal employment grew a whopping 2.4 times, from 4.1 lakh to 9.7 lakh. While that number looks very high compared to the speed at which the economy grew, it is still plausible given the growth seen in the e-tail business, for instance, or in the app-based cab aggregator services. But, keep in mind that, when the EPFO first started coming out with this data, in April this year, it said 6 lakh jobs were created in September 2017; in the space of seven months, this has been lowered by as much as 31%. In April, EPFO told us a total of 3.3 million formal jobs were created between September 2017 and February 2018. In November, the same EPFO put this number at 2.7 million, or a number that is 16% less. In May, the EPFO said 3.9 million formal jobs were created between September 2017 and March 2018; this number has now been lowered by 24%, to 3 million.

While EPFO data has always shown a rosier picture of employment growth than that shown by the National Sample Survey or Labour Bureau data, it was generally treated with a fair amount of scepticism since most employees tended to have 3-4 EPFO numbers at least, one for each job they had held in the past. While employees moved to new jobs, they didn’t always transfer the money to their new EPFO account and close the earlier one. This time around, however, EPFO said it had cleaned up its records using big data and also by linking it to Aadhaar which would ensure there were no duplicate records; in which case, it would not be possible for one person to have more than one EPFO account. And while Aadhaar-seeding would still take time for older records, it could be done immediately for the new subscriber base.

In which case, it is not clear how, or why, the numbers given for new EPFO accounts should change each time they are being reported. One possibility, as Radhicka Kapoor of Icrier points out, is that the EPFO data includes temporary employees, so it doesn’t really indicate the number of permanent jobs being created. Also, as units grow and employ more than 20 persons, from say 18 earlier, they come under the ambit of EPFO but, instead of two persons, 20 people are shown as new employees. An additional complication is the Pradhan Mantri Rojgar Protsahn Yojana (PMRPY) which offers to pay the government share of the EPFO contribution of new employees for three years; a total of 85 lakh persons have been added under this scheme, but there is no way of knowing whether this is new employment or existing employees being rebadged. In which case, a large part of the new employment shown by EPFO may just be the PMRPY numbers.

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