(GIST OF YOJANA) Using Payroll Reporting [SEPTEMBER-2018]

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(GIST OF YOJANA) Using Payroll Reporting

[SEPTEMBER-2018]


Using Payroll Reporting

There are no comprehensive reports detailing job creation in India. Numbers for formal sector employment have been arrived at for the first time in the ‘Towards a Payroll Reporting in India’ report by Prof. Pulak Ghosh of Indian Institute of Management, Bangalore and Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser of SBI. The predecessors to the Ghosh Report were NSSO reports that, through their estimates, did not adequately represent the employment situation in the country. Thus emerges the need to develop a better mechanism to determine and report the job situation in the country.

A good place to start is analysing the supply of human capital in the jobs market. Taking into consideration the data from the Census of years 1991, 2001, and 2011, the Ghosh Report reveals that 2.5 crore babies are born every year. Consequently, 2.5 crore people attain the age of 21 annually today and will do so for the next 20 years as well.

Labour participation rate among these 2.5 crore people is estimated at about 60 per cent, i.e. 1.5 crore people enter the labour force every year. Further, the AISHE (All India Survey on Higher Education) report for 2016-17 highlights that the total number of graduates that pass-out in the county each year is around 88 lakhs. Within this demographic, the drop-out .rate (not wanting a job) can be approximated at around 25 per cent, helping us determine the incremental number of qualified people added to the labour force annually, i.e. 66 lakhs. Non-graduates as a proportion of the labour force would then come in at 84 lakhs. Jobs, by definition, are split into the formal and informal sectors in India. Formal sector jobs are characterized by social security coverage. Social security in India is provided by three organisations: EPFO, ESIC, and NPS (NPS is specific to government employees). The best sources of data for formal job creation are the EPFO and ESIC, which cover a gamut of 190 and 90 industries, for those employing over 20 and 10 employees, respectively. The data for the last 6 months has been released by EPFO and ESIC and has been analysed thoroughly in the Ghosh report. As of March 2018, their findings revealed that 55 lakh incremental jobs have been registered with the EPFO, 9 lakhs with the ESIC, and 7 lakh with the NPS. Therefore, a total of 71 lakh jobs have been created in the formal sector according to incremental social security coverage in 2017-18. This data has been well construed and will only see nominal changes with better data coverage as 2018 progresses. It is, however, safe to assume that the formal sector generates close to 70 lakh jobs a year as this data is based on monthly contributions and payroll

The transport industry generates a large chunk of informal employment, made up of individuals or small firms owning vehicles. Data available from Society of Indian Automobile Manufactures (SIAM) is segregated by the types of vehicles, providing us sales and exports numbers across the commercial vehicles, three wheelers, and passenger vehicles categories. The capacity for employment for each of these vehicles can be assumed at around 2 per commercial vehicle, 1.5 per three-wheeler, and about 0.25 (1 in every 4 cars) for every passenger vehicle. Following this premise, it can be surmised that the transport sector contributes close to 20 lakh jobs per year, a figure oft overlooked by employment surveys and reports. These jobs would be in the informal sector as these vehicles are typically owned individually and not by firms. This is buttressed by the fact that the EPFO and E81 data do not reveal these jobs in any large measure.

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This analysis elucidates the fact that India does not, in fact, have a job creation problem, but a wage problem. Low wages (of about INR 15-20K per month), especially in the informal economy, do not allow the country’s citizens to live a comfortable and productive life. Efforts need to be directed towards greater job formalisation, including increased social security coverage and better data gathering so that appropriate policies can be made. It is important to note that India does not face a problem of not possessing the data to drive at its employment disposition. The right data is lying with the government, the authors of the Ghosh report have demonstrated that a planned approach of using ‘Payroll Reporting’ can be used to unclutter this data and provide accurate and invaluable insights.

Most importantly, this incontrovertible data proves that claims of jobless growth are completely unfounded and totally wrong. The Indian economy has grown significantly between 1991 to 2018 at the rate of 8.7 per cent a year from USD 275 Bn to USD 2.6 Tn. Such growth cannot be jobless growth. Further, India’s current GDP growth rate of 7.5 per cent per annum would most certainly contribute towards a job growth rate of at the very minimum, 2.5-3 per cent per year. As our Prime Minister said, we need better jobs data so that the focus is on good policy directed at creating more formal jobs rather than empty rhetoric about jobless growth.

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