Are wages growing at faster rate than job creation? ESIC data unclear

Data potentially suggest that wages of existing employees grew faster than the rate of addition of new jobs or formalisation of informal ones

The payroll count provided by the Employees’ State Insurance Corporation (ESIC) last week failed to show any conclusive trend on job creation in the formal sector due to duplication band and various other discrepancies in the dataset.

For the first time ever, last Wednesday ESIC, along with Employees’ Provident Fund Organisation (EPFO) and the Pension Fund Regulatory and Development Authority (PFRDA), released data on provisional estimates of payroll based on its subscriptions.

While EPFO was able to paint a clearer picture of the payroll stock with Aadhaar being the unique identifier for its subscribers, the ESIC data carries with it a high probability of duplication as employees had different registration numbers for multiple jobs.

The monthly age-wise payroll data showed that the stock of employees getting insurance under ESIC in India reduced from 29 million in September 2017 to 27 million in February 2018. The ESIC argued that the stock of existing employees paying contributions for a given month is provisional for up to at least six months because of delayed filing of contribution by the employers.

The payroll data threw up some peculiar trends – on average, about 1.5 million employees ceased to be contributors to the ESIC every month between September 2017 and February 2018, while 1.17 million new contributors joined every month. On a cumulative basis, while about 7 million workers became fresh members of ESIC, 9 million workers exited from the scheme in six months.

The ESIC scheme applies to all factories and establishments, including shops, hotels, restaurants, cinemas, and road transport undertakings, employing at least 10 workers.

Workers drawing a monthly salary of up to Rs 21,000 are entitled to medical benefits under the scheme.

At the face value, let us consider that the exiting cohort left due to crossing over the monthly income ceiling of Rs 21,000 per month, and not due to the loss of a job. 

Then, data shows that the number of employees who got new jobs or joined the formal workforce (7 million) is less than the number of employees whose salaries went past the ceiling (9 million).

Put another way, the data potentially suggests that wages of existing employees grew faster than the rate of addition of new jobs or formalisation of jobs. On the other hand, there is a possibility that some of the 9 million members who exited the scheme in six months might have left jobs as well.

Among age brackets, the highest addition to the ESIC domain as well as the highest exit is seen in the age group 22 to 25. This suggests that new jobs are added or existing jobs are formalised to the greatest extent in this age group, while salary increases as well as job losses to some extent, too, appear in the same age bracket.

Owing to insufficiencies in the released data and possible duplication in entries, there could be multiple interpretations, say experts.

“Analysing and interpreting this data is fraught with challenges. It is difficult to understand what amount of change in the stock pertains to people crossing the Rs 21,000 monthly salary ceiling, making it difficult to get an estimate of the count of formal jobs,” says Radhicka Kapoor, senior fellow, Indian Council for Research on International Economic Relations.

The ESIC released month-wise data showing the number of employees who contributed premium, number of employees registered, and employees who ceased to be a member during that month.

But ESIC officials themselves pointed out that there could be an employee who falls in the exiting cohort in September 2017 but be among the new joiners and contributors in October 2017 leading to high chances of double counting.

“While the EPFO data has been cleaned to a good extent, ESIC data has not yet been. The reduction in the stock of contributors could be due to de-duplication of previously contributing accounts which have become dormant now,” TCA Anant, economist and former chief statistician of India told Business Standard.

Anant will soon be leading a panel to decide whether the monthly payroll data released by EPFO, ESIC and PRFDA can replace the quarterly enterprises-based survey on job creation by the Labour Bureau, according to a recent decision taken by the Prime Minister’s Office.

The government, too, has admitted to some inconsistencies in the ESIC data. Apart from the possibility that one person might have two IP numbers (insured person, as defined in the ESIC Act) because of a job switch, many employees and employers could have delayed their contributions towards ESIC by at least six months.

“In absence of Aadhaar linkage, one cannot draw any inference from existing data, especially when return-filing by employers is still going on, and the data remains provisional,” a senior ESIC official said, requesting anonymity. This remains the biggest inconsistency in the released data.

“The ESIC data also mirrors the payroll growth shown in the other two sets of data from EPFO and PFRDA. Since ESIC data is not Aadhaar-seeded, there is scope for further modification,” Niti Aayog admitted in an official statement on April 26.

About 900,000 employers are registered in ESIC, with 27 million employees contributing and 124 million ultimate social security beneficiaries (all household members).