EPFO registration data alone is not proof of job creation

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When Prime Minister Narendra Modi distributed appointment letters to 75,000 government employees a few days ago, he also claimed that new formal jobs were being created, as evidenced by data on new Employment Provident registrations. Fund Organization (EPFO). This piece examines this claim.

The first point is that the official sources of employment data in India are of three types: administrative data, survey data and census data. Administrative data in most developing countries are generally subject to large margins of error, usually evident when surveys on the same topic are conducted.

Survey data, by definition, is collected on the basis of a representative sample of the entire population; it is normally subject to a small margin of error. In India, the quality of surveys conducted by the National Sample Survey Organization has always been of very high quality.

Yet often lately there have been smears and questions raised, when it suits governments, about the results of investigations. Censuses can only take place about once a decade, whether economic or demographic, given the cost and time they take.

EPFO data are administrative. They suffer from additional infirmities. EPFO’s “provisional” payroll data released on October 20, 2022, highlights that EPFO ​​added 16.94 lakh net members in August 2022. A year-on-year comparison of payroll data payroll reflects a 14.40% increase in the net addition of members in August 2022 compared to August 2021.

Of the total 16.94 lakh members added during the month, 9.87 lakh new members came under EPFO ​​for the first time. Out of 9.87 lakh new members added, 58.32% belong to the 18-25 age group. This age group represents a crucial stage in the earning capacity of an individual who joins an organized workforce upon graduation.

The government subsequently used this increase in net enrollment as an indicator of an increase in job creation. Close examination of this claim, however, shows that not all net enrollments may come from new job creation.

Part of the net increase in registrations comes from the registration of contract employees in establishments, where the EPFO ​​becomes applicable. If you are an employer with 20 or more employees, you must register with the EPF. All contract employees of these establishments employed either directly or through a contractor, or both, must be registered under the EPF & MP Act, 1952 (hereafter “Act”). This became mandatory following the Supreme Court’s decision in M/S. Pawan Hans Limited and others v. Aviation Karmachari Sanghatana and others.

The judgment of January 17, 2020, under the law, clarified that contract employees, who receive wages directly or indirectly, are entitled to the PF. In addition, contract details must be provided by all primary employers to EPFO ​​to verify the compliance status of all contract employees. As a result, there has been an increase in enrollment of contract workers at EPFO. This assertion is reinforced by the fact that payroll figures by state show that a monthly upward trend in net addition of members has been observed in UP, West Bengal, Odisha, Jharkhand , Bihar, etc. These states have a high proportion of contracts. workers and it is likely that they were covered by the EPF following the judgment of the SC. Such formalization of contract workers is certainly welcome, but it does not mean a new generation of jobs.

The classification of sectoral salary data for August 2022 indicates that mainly two categories: “expert services” (such as labor agencies) and “commercial establishments” constitute 47% of the total addition of members to the course of the month.

These two categories have a proportionally high number of contract workers. Thus, this reinforces the fact that a significant portion of the net increase in enrollment comes from the addition of contract workers.

Another factor that has contributed to the increase in net enrollment in recent times is the ease of process brought about by technical progress. Registration is online, free and hassle-free; no obligation to go to EPFO ​​headquarters. It certainly helped the new recordings. Also, the EPFO ​​introduced the portability of EPF accounts in the sense that even in the event of a change of employer, the registration number remains the same. EPFO data shows that in August 2022, around 7.07 lakh network members exited but re-entered by changing jobs within institutions covered by EPFO ​​and opting to transfer their funds from their former PF account to the current account instead of submitting final reimbursement requests. regulation.

Another important insight is the gender aspect of the increase in net enrollment at EPFO. Net enrollment of women members was 3.63 lakh in August 2022, an increase of 22.60% from August 2021 – an encouraging trend, with the potential to increase the participation rate of women in membership. labor market in India.

An increase in net monthly enrollment of EPFO ​​beneficiaries over the past year is encouraging. However, to interpret this solely in terms of new job creation could be overstated, even misleading. Payroll data is provisional as data generation is an ongoing exercise (so previous data is updated monthly).

Since April 2018, EPFO ​​publishes payroll data covering the period from September 2017. In the monthly payroll data, the number of members joining EPFO ​​for the first time via the universal account number validated by Aadhaar, existing members exiting EPFO ​​coverage and those who exited but rejoined as members is taken to arrive at the monthly net payroll.

In this scenario, it will be difficult to attribute the net increase in schooling to the creation of new jobs. Reorganization within existing beneficiaries and the inclusion of existing contract workers add to the numbers. The result warrants a more nuanced interpretation rather than simplifying that there is a big push in job creation as postulated by the government.

(Mehrotra is Researcher, IZA Institute of Labor Economics, Bonn, and Sarkar is Professor, Goa Institute of Management)

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