Key takeaways India’s payroll data for FY21

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The Covid-19 pandemic has created a definite scar in labour markets. There have been persistent reports based purely on employment surveys of permanent job losses, a significant spike in unemployment.

The State Bank of India in its Ecowrap released May 28, noted that there’s a need to understand the dynamics of India’s labour market, also through the use of EPFO payroll data rather than joining in the cacophony of labour market disruptions during pandemic.

Here are key takeaways from the Ecowrap:

Low quality jobs As per EPFO and NPS, India created 100.4 lakhs payroll ( sum of 95.4 lakhs through EPFO and 5.82 lakhs through NPS in FY21) nearly unchanged from 102.3 lakhs in FY20, indicating Indian labour market though faced with massive disruptions in FY21, did not do that badly in FY21. However, it should be mentioned these are low quality jobs.

Decline first time jobs When we breakup 95.4 lakhs jobs created by EPFO payroll, 41.2 lakhs were through second jobs, 44 lakhs through first jobs and 9.3 lakhs were through formalization. The important point to note is that there was a decline in first time jobs in FY21 by 16.9 lakhs, though the no of second time jobs / no of members who rejoined the payroll rose by 17.9 lakhs. This clearly indicates that people were coming back to the labour market in later part of FY21, as the situation had improved at that time till the second wave came. The rate of formalization however declined by 1.2 lakhs, reflecting the disruptions in the MSME space.

Women enrolment The ratio of women enrolment to total enrolment in EPFO data has remained at 23% in FY20 and has not changed significantly in FY21.

Issues with EPFO data Expert Services that constitute the largest segment of payroll creation do not tell us anything at granular level. Another problem is regarding retiring employees. Given that retirees are also netted out, this may imply a downward bias to net EPFO numbers as retirees mean a new vacancy and hence a new hire. We believe the data about retirees during the month whose account has been settled must also be disclosed by EPFO as a separate line item.

EPFO should start releasing non-farm productivity (as in the US) estimates at least for those sectors for which we have output data from CSO’s GVA database. This will fill a huge lacuna in productivity estimates in India.

Clearly, the employment debate in India is perhaps haplessly one sided and only talks about problems and not the solutions! The time has now come to have a better depiction of employment numbers by using all available data sources, including payroll.