There is a reason behind the present government’s stress on higher formal employment count. It enforces minimum wages and demands proper documentation of benefits by the employer. Formal jobs, perhaps more importantly, ensure dignity of labour, enable productivity improvements and, at times, access to formal training. But if counting formal employment is difficult, calculating informal employment is even more arduous.
Pulak Ghosh is a professor of data analytics at the Indian Institute of Management, Bengaluru (IIM-B). He has advised the State Bank of India and Bandhan Bank on analytics. Now, he is a senior fellow at NITI Aayog, where his primary responsibility is to use big data in policymaking and policy evaluation. Ghosh was part of the task force that recommended changes to improve employment data.
‘The Labour Ministry doesn’t collect anything on the informal sector. Over the last 10–12 years, [a] lot of contract employment happened. Nobody surveys that. For example, IIM-B has quite a few contract staff, in addition to the permanent staff. We need the count pan-India. Today, even the government may hire an officer on special duty. That salary comes from the discretionary budget, not from payroll. So how do I count [that]?’ Ghosh says.
Ghosh estimates that informal employment has grown 10 to 15 times in the last decade versus formal employment.
So what can India do to clean up its data?
‘The government needs a different approach,’ Ghosh recommends. ‘We need a central repository of all the employment data. Second, the government has to figure out how to count the informal employment. Be it crowd sourcing, looking at informal sources such as the number of cars and trucks on the road, number of people in the mandis, number of chartered accountants graduating every year or registered, number of doctors and nurses registered [echoed in the prime minister’s speech in Parliament]. There has to be a mechanism of collecting this data yearly.’
Most doctors are employed informally in nursing homes and don’t come under the payroll system. Ghosh suggests India enact a law that makes it mandatory for organizations to disclose their employment count on a quarterly basis.
There are, of course, other proxies to count informal employment. For instance, one can look at data from telecom towers to track local migration. People travel to suburbs for work and return to villages at night. One of Ghosh’s ideas is to record mobile tower data at night and estimate how many move out during office hours in a particular area and do this consistently for three to four months. That’s a proxy of how many are employed. Satellite imagery and mobile phones can be good proxies too; poverty and wealth can be predicted from mobile phone usage. A combination of such methods might work.
While India waits for the government to improve the mechanism with which it estimates employment–unemployment numbers, let’s consider what the country’s unemployment figure implies.
Most of the government surveys, depending on the methodology used, peg the unemployment rate at 5 per cent or below. The CMIE’s unemployment study surveys 1,73,181 households over a four-month period, but the survey is also designed to estimate unemployment at a monthly frequency. The CMIE’s computations are based on the status of the respondents as on the day of the survey or on the day immediately preceding, and is designed to avoid recall problems of those surveyed. The organization pegged India’s unemployment rate, as of November 2018, at 6.62 per cent.
India is a poor country and most Indians cannot afford to remain without work. The government’s low unemployment figure suggests that most Indians are finding employment today, but are probably stuck in bad jobs, or jobs that don’t pay well, or in jobs for which they are overqualified. The industry calls this underemployment. The number of people who are in bad jobs is undoubtedly alarming. It is likely that people, unable to remain idle, start and run unproductive shops. Different wage reports underline the underemployment issue.
Recapping numbers: The International Labour Organization, in its India Wage Report, released in August 2018, states that from 1993 to 2014, India’s GDP increased four times. Average daily wages (adjusted for inflation) inched up only two times, and were at ₹247 by 2011–12. The fifth annual EUS estimated that at an all-India level, nearly 68 per cent of the surveyed households had average monthly earnings not exceeding ₹10,000. About 22 per cent of the households had monthly earnings that did not exceed ₹5,000. The Seventh Pay Commission has fixed a minimum pay more than thrice this number for government employees. This indicates the scale of the wage crisis in the private sector.
While there is a serious wage crisis now, a stronger unemployment cyclone may be forming soon, given India’s demography, the sheer volumes of people joining the workforce every year.
Mohandas Pai, who thinks there has been no jobless growth thus far, is repetitive in his warnings when it comes to the future. He talks about how India needs to prepare for tougher times ahead. Every time there is a question on India’s job crisis, he talks of the 25 million babies that have been born every year for the past 20 years.
By 2025, we could have 200 million [20 crore] people in the age group of 21 to 45 with no jobs or in bad jobs if we do not enhance focus on growth and creation of jobs. This could be India’s forgotten generation. All this talk about India’s demographic dividend is not working out. There is only a demographic nightmare: Mohandas Pai, Chairman, Aarin Capital
‘Of the 25 million, one million don’t reach the age of 21 and mostly die before the age of five. Out of 24 million, 30 per cent may go into agriculture or drop out. I’m assuming 17 million want jobs. Of these, 10 million are not getting decent jobs or earning decent wages. In the last 10 years, this amounts to 100 million people. So you have 100 million [10 crore] people in the age group of 21 to 35 all over India with no good jobs,’ says Pai.
Then comes the more hair-raising part as he continues, ‘The situation could get worse. By 2025, we could have 200 million [20 crore] people in the age group of 21 to 45 with no jobs or in bad jobs if we do not enhance focus on growth and creation of jobs. This could be India’s forgotten generation. All this talk about India’s demographic dividend is not working out. There is only a demographic nightmare.’
Excerpted with permission of Hachette India from Jobonomics: India’s Employment Crisis and What the Future Holds by Goutam Das