Should you trust the employment data?
PremiumTake the example of payroll data – number of subscribers that join Employees' Provident Fund Organisation (EPFO), National Pension Scheme (NPS) and Employees' State Insurance Corporation (ESIC)
The employment figure that you see either from provident funds or surveys by institutions like CMIE don't give a complete picture, according to a note from SBI Research.
Take the example of payroll data – number of subscribers that join Employees' Provident Fund Organisation (EPFO), National Pension Scheme (NPS) and Employees' State Insurance Corporation (ESIC).
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According to a report by SBI Research, the data doesn't give a complete picture as all the new subscribers don't reflect new jobs created in the economy. Some of the new employees are replacement for those who retired. "Hence, this is not purely fresh job creation," according to the SBI Research's note.
The recent data by EPFO indicate that net new EPF subscribers during FY21 were 94.5 lakh which was almost the same as FY20. SBI Research estimated the actual net new payroll (first job), which was 44 lakh for FY21. It means there were 16.9 lakh less subscribers for EPF compared to the previous financial year.
It also analysed the NPS data and found a decline of 1.74 lakh new subscribers in 2020-21.
"Cumulatively, total payroll generation of EPFO and NPS was almost 19 lakh less than the previous fiscal," stated the research report.
The report also looked at the employee expense data for 284 listed companies to go deeper into the employment figures. It found that the employee expenses have declined in every other company in FY21.
"The largest decline was seen in smaller firms, indicating that employees of these firms were most impacted due to the covid-19 pandemic," the report stated.
Of the 284 companies, 163 had a turnover of less than ₹50 crore. For these firms, employee expenses fell the highest, by 10%.
Should you then trust the employment surveys done by organisations like the Centre for Monitoring Indian Economy (CMIE) and Periodic Labour Force Surveys (PLFS)?
According to SBI Research, even those are distorted. They suffer from a plethora of limitations. Some of them include problems in the design, collection, problems of coverage frequency of interviewing and reference period.
There are further limitations of such data as there can be measurement errors, which may arise because of faulty response due to unclear questions, memory errors, wrong recording of responses, and so on.
Next time you look at the employment numbers from any institutions, take them with a pinch of salt.
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