Improving employment data: Task force suggestion will take years to execute

Earlier this month, on January 2, I wrote in this column that the government could be employing about 23 million people. This was an estimate based on some simple projections of the number of people employed in state governments, quasi governments and local government bodies.

Last week, Dr. Pulak Ghosh of IIM, Bangalore and Dr. Soumya Kanti Ghosh, Group Economist at State Bank of India (Ghosh and Ghosh) released results of their work that, among many other things, said that a conservative estimate of employment in government is 17 million.

Ghosh and Ghosh make their estimate using one set of assumptions and I have made the estimate using another set of assumptions. None of us need to do our respective statistical gymnastics and leave an unexplained gap of 6 million. The government can end this confusion by releasing data that it has in its own records. To get an estimate of this greatest employer in the country, the government, there is no need for any expert committee or any survey with challenges of having a sampling frame or setting up a high-tech execution machinery. It can be done almost immediately with an executive order without any ado.

The Task Force on Improving Employment Data was remiss in not mentioning this low-hanging fruit. All its suggestions will take years to execute. But, making the government release data on its employment takes little time and effort.

If the government provides jobs to about 20 million people, any change in this number would be large enough to help us understand changes in the organised labour markets. Factory employment is of the order of 13 million; unregistered manufacturing establishments hire another 13 million. Ergo, government employment is almost as large as the people hired in the entire organised and unorganised manufacturing sector in the country.

It would be a great step forward if the government immediately starts releasing monthly data on its own employment.

The main story presented by Ghosh and Ghosh is that about 7 million new jobs were created in 2017-18. Their estimate is based on crunching data sourced from Employees' Provident Fund Organisation, Employee State Insurance Scheme and National Pension Scheme. Ghosh and Ghosh seem to have had privileged access to this rich database as this data is not available publicly.

All this data is primarily available with the government. There is no need of a sampling frame or a complex execution machinery in deploying this database.

Apparently, Ghosh and Ghosh have overcome several known problems in using data from the EPFO, ESIC and NPS. The problems are duplication of accounts within a database and across databases; weeding out of inactive accounts and differentiating between new jobs and change in job when we see an addition of an account. Ghosh and Ghosh make several assumptions in crunching the massive database. Their assumptions seem primitive but, this is a beginning. A lot more can be done by the government with expert help from the Ghosh duo to deploy this awesome database to tell us what is happening to the formal jobs sector as reflected in payrolls. Progress made by the authors should be consolidated and built upon further.

Household surveys such as the ones done by NSSO or CMIE provide a comprehensive estimate of employment and unemployment, but they do not provide us an estimate of the jobs that people want. People want sarkari jobs above any other form of earning. And, they would like to get a "permanent" job in the organised sector that offers sufficient social security. Such jobs are reflected in the databases of EPFO, ESIC and NPS. The importance of measuring these cannot be overstated.

One limitation of the estimates put out by Ghosh and Ghosh is that there is no base-line estimate to judge the growth in employment. The estimate of 7 million formal jobs being added during 2017-18 is an impressively large number. But, how do we compare this to the stock of such jobs?

According to the BSE-CMIE initiative, total employment during 2017 was of the order of 405 million. An addition of 7 million implies a growth of 1.7 per cent. That's not much but, if organised employment is about 40 million (20 million in government and 20 million in the formal non-government sectors according to the QES) then 7 million implies a 17.4 per cent growth. That's a very big growth in meaningful jobs. Is this growth incredible or incredulous?

Ghosh and Ghosh have whetted our appetite. The government needs to pick up the baton from here, as the authors suggest.

 

Every Tuesday, Business Standard brings you CMIE’s Consumer Sentiments Index and Unemployment Rate, the only weekly estimates of such data. The sample size is bigger than that surveyed by the National Sample Survey Organisation. To read earlier reports on the weekly numbers, click on the dates:

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Methodology

Consumer sentiment indices and unemployment rate are generated from CMIE's Consumer Pyramids survey machinery. The weekly estimates are based on a sample size of about 6,500 households and about 17,000 individuals who are more than 14 years of age. The sample changes every week but repeats after 16 weeks with a scheduled replenishment and enhancement every year. The overall sample size run over a wave of 16 weeks is 158,624 households. The sample design is of multi-stratrification to select primary sampling units and simple random selection of the ultimate sampling units, which are the households.

The Consumer Sentiment index is based on responses to five questions on the lines of the Surveys of Consumers conducted by University of Michigan in the US. The five questions seek a household's views on its well-being compared to a year earlier, its expectation of its well-being a year later, its view regarding the economic conditions in the coming one year, its view regarding the general trend of the economy over the next five years, and finally its view whether this is a good time to buy consumer durables.

The unemployment rate is computed on a current daily basis. A person is considered unemployed if she states that she is unemployed, is willing to work and is actively looking for a job. Labour force is the sum of all unemployed and employed persons above the age of 14 years. The unemployment rate is the ratio of the unemployed to the total labour force.

All estimations are made using Thomas Lumley's R package, survey. For full details on methodology, please visit CMIE India Unemployment data and CMIE India Consumer Sentiment.

The creation of these indices and their public dissemination is supported by BSE. University of Michigan is a partner in the creation of the consumer sentiment indices.