Rising EPFO registrations may not mean new jobs as savings and consumption data do not reveal any sharp uptick
Data provided on new registrations with the EPFO are useful insofar as being one of the indicators on employment. At present, getting authentic data on jobs is difficult because of the amorphous concept of employment, especially in the non-organised sector. In the corporate sector employment numbers are provided in annual reports.
The Central Government provides the same for its staff in various ministries in the Budget document, while the information on State governments and other government-related organisations are less transparent. The Pay Commission provides numbers, but that would be for the past and are not contemporary. It is here that the EPFO data add value because if the number of new registrations is going up, there must be reason to believe that more jobs have been created. But is it really so?
The EPFO data however could be also indicative of people already in the workforce getting enrolled by their employers. There could be switches from private EPF funds to EPFO. Also, with GST coming in and smaller units being registered with the tax authorities the formalisation process has also meant that the employees get registered with the EPFO as all this would go into preparing their tax statements and claiming tax exemptions.
If these numbers are large, then the 4.7 lakh being added in February 2018 or six lakh in January may not be presenting an accurate picture of fresh employment. Typically, most employment in the organised sector takes place when students pass out from their institutes in March or April. High numbers towards the end of the calendar year would be more on account of shift in jobs or currently employed getting registered.
While this ambiguity will remain, a way to link these registrations with EPFO and job creation is to go back to some intuitive questions. Typically when more people are employed, there should be a reflection in higher income being earned in the country. This should mean that the money earned is either spent or saved.
Therefore, it would be interesting to see how the production of goods has been during the period September 2017-February 2018 relative to past years for some goods which would typically be purchased by the new labour force. Table 1 lists some of them. The three time periods taken are September-February 2016, 2017 and 2018 and the growth rates are calculated accordingly.
The table is interesting as it presents a fairly uneven picture. Typically one would expect new workers to spend on mobile phones, where the rate of growth is in negative territory compared with 2017. The same holds for garments which is top on the purchase charts of youngsters. Computers are an indicator of corporate activity in general and could mean more employees. However, this comes over a decline of 52 per cent last year and in value terms at ₹825 crore is still lower than that in 2016 when it was ₹1,384 crore.
Therefore, this does not look like growth due to employment. Two-wheelers is probably the more convincing indicator of higher growth with a qualification that the stagnation in 2017 was largely due to non-satiated demand due to demonetisation, which could have been recouped in 2017-18.
Another way of looking at higher employment would be whether or not they took loans for housing, vehicles, consumer goods, etc. Here too the answer is not very clear. Incremental retail credit in the period September-February is provided for the three time periods in Table 2.
The table indicates that incremental credit was higher in the most recent period compared with 2017 with the number doubling. However, compared with 2015-16 there was an increase of 18.3 per cent. The drop in 2016-17 was due to demonetisation. But these retail loans are dominated by the housing segment, which is normally not the preference for fresh employees.
Incremental auto loans had increased from ₹10,200 crore to ₹12,450 crore, which could be loans taken by new workers as there is a tendency to own a vehicle once employment is procured. But the numbers are not very high to point to large employment generation.
The logical question is that in case individuals were not spending their incomes, were they saving the same. Here the incremental deposits in the last three years can be compared during these months (Table 3). The closest alternative for deposits is mutual funds, which have been included in the table.
The incremental deposits in 2016-17 were distorted due to demonetisation and were high. But the amount in 2017-18 is much lower than that in 2015-16 too, meaning thereby that if a very high number of new jobs were created, the savings do not reflect the same. A similar picture is seen for mutual funds.
The discussion on whether new registrations with EPFO are indicative of more jobs being created will be an ongoing one. Based on the use of income earned through employment, the available data on both consumption — as denoted by production of specific products which find favour among this group — as well as savings do not reveal any sharp uptick.
No conclusive proof
In that case, the question to be asked is what is happening to the money, which is being generated by these new jobs? Based on this analysis, there is a tilt towards the belief that these registrations may not be conclusive to show that jobs have been created. The fact that these months are not normally the recruiting season for companies is also significant.
Growth in value addition as per the GDP would provide broad indications of job creation. This would mean acceleration in the growth rate. The fact that GDP growth this year would be lower than that in FY17 would prima facie indicate that there cannot be acceleration in employment growth.
The present array of GDP numbers under the new methodology is lower than those under the earlier one by at least 1-1.5 per cent. Growth has to be upwards of 8 per cent to convince that jobs are really being created. The EPFO data, though encouraging, do not look that assuring when analysed this way.
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