Ashoka University study shows 14 million jobs lost during Jan 2020-Oct 2022; EPFO data shows 2.9 million subscriptions lost during FY20-FY22 and CMIE data shows unemployment rate touched 16-month high of 8.3% in Dec 2022

India has officially acknowledged that 62.5% of its population or 813.5 million people are extremely poor and need to be fed with a “free” ration of 5 kg grain each from January 1, 2023. What hasn’t been acknowledged yet is that India’s chronic “job-loss growth” is getting worse by the day.

India had entered into the “job-loss growth” during 2011-12 and 2017-18 when the Periodic Labour Force Survey (PLFS) showed the unemployment rate went up to a 45-year high of 6.1% and 9 million jobs were lost. Now comes more bad news that the media and Indian government seem to ignore.

14 million jobs lost during 2020-2022

The Ashoka University’s Centre for Economic Data and Analysis (CEDA) and business portal CMIE published their latest report on the job status a few days back. It shows 14 million jobs were lost during the past 44 months between January 2020 and October 2022 – 4.5 million fewer men and 9.6 million fewer women were left in the workforce.
It also shows that the job loss hit the youth (15-39 years) hard with a 20% loss. The old (40-59 years), however, increased their numbers by 11%. Urban employment remained relatively stable while rural employment fluctuated. As for sectoral shares, there were a marked decrease in manufacturing (loss of 6 million since FY19) and services (loss of 11 million since FY19) jobs, while agriculture saw an increase (addition of 5 million since FY19). Overall, the number of farmers and entrepreneurs increased both before and during the pandemic – reflecting job loss in formal manufacturing and services (high-productive and high-income or better-quality jobs) and workers’ migration to informal agriculture and self-employment (vulnerable and low-productive, low-income jobs).

The CEDA-CMIE report of 2021 had shown that in the five years between FY17 and FY21, there was a 7% decline in total jobs or a net loss of 29 million jobs during FY17-FY21. The manufacturing jobs nearly halved (46% decline) while there was an increase in agricultural jobs by 4% and services by 4.9%.

The four PLFS reports of 2017-18 to 2020-21 also indicate a similar trend – migration of workers to low-productive, low-paying informal jobs as jobs were lost in high-productive, high-paying jobs in both manufacturing and services (the share of services also declined while that of construction increased).

EPFO reports show 2.6 million subscriptions lost during FY20-FY22

Since 2018, the Indian government has been citing the Employees Provident Fund Organization (EPFO) data to claim job creation. Recently, a central minister claimed 1.5 to 1.6 million new jobs are being created every month.
Here is another shocking piece of news. The EPFO annual reports reveal a fall in its subscriptions.

In fact, the EPFO annual report of 2021-22 (FY22), released last month, shows a decline in both the number of establishments and that of members contributing to the PF fund went down from the pre-pandemic level of 2019-20 (FY20).
The EPFO members declined by 3% or by 2.6 million– from 46.3 million in FY20 to 48.9 million in FY22.
The establishments contributing to EPFO declined far more sharply by 5%, from 0.66 million to 0.59 million, during the same period. It has fallen below even the FY19 number by 29,506.

More than the loss of members, it is the sharp 10.5% decline in establishments contributing to EPFO is a cause of worry, as it reflects either establishments are shedding workers to below 20 or closing shops.

This is shocking since 2016 the Central government is running two specific and direct schemes to raise EPFO subscriptions: (i) Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) in which the government gives the entire 12% of employer’s contribution to the fund and it has an outlay of Rs. 10,178.60 crores and (ii) Aatmanirbhar Bharat RozgarYojana (ABRY) with an outlay of Rs 22,810 crore for those who lost jobs during the pandemic lockdown (and earned less than Rs 15,000) by contributing the shares of both employers and workers (12% each) or workers’ alone (12%).

The obvious reason for the decline in establishments seems the economic distress caused by a prolonged slowdown, starting with the pre-pandemic and man-made disasters like demonetization and GST. This slowdown is reflected in the GDP growth falling from 8.7% in FY17 to 3.7% in the pre-pandemic FY20 and then the growth averaging just 1.05% during FY21 and FY22. The GDP growth has averaged 5.3% (2011-12 series, constant prices) in the eight years of FY15-FY22 – which is way below the 7.6% average growth during the previous 10 fiscals of FY06-FY14 (2004-05 series, constant process).

A few caveats are needed here.

One, the EPFO data reflects the “formalization” of jobs in the limited sense that its members have access to the contingency post-retirement fund (or security cover), which also comes with a pension element. It is not about the creation of jobs and it doesn’t cover the entire formal sector either. There are plenty of contract workers in the formal sector with no subscriptions to PF. There, of course, is no PF for the huge informal sector (89% in 2019-20, as per the Economic Survey of 2021-22). Hence, EPFO data is about a small segment of the workforce – the point of departure from the CEDA-CMIE study mentioned earlier.

Two, the monthly EPFO data, which the government loves to quote, are highly exaggerated and go through multiple downward revisions, which is a well-known phenomenon. Mahesh Vyas, CMIE’s managing director and CEO, recently demonstrated how such revisions go up to 11 times in a year and bring down the numbers by 44-52% in his article “EPFO data shows employment dip”. But the revisions stop for March every year as annual reports are released at the end of this month.

Unemployment rate at 16-month high

The CMIE provides a monthly status of jobs (for both urban and rural areas) while the government’s annual PLFS comes out with a year apart – the PLFS of 2020-21 was released in June 2022 and its quarterly PLFS is only for urban areas). It shows the (open) unemployment rate touched a 16-month high of 8.3% – 10.09% in urban areas and 7.44$ in rural areas.
Ironically, India has no national policy to address “job-loss growth” and high unemployment. Its dependence on GDP growth and push manufacturing (Make in India, PLI etc.) have spectacularly failed for decades and yet, there is no rethink.

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