PM mixes up existing employees with new employment

“Don't fall for the propaganda: Around 6 lakh jobs are being created in a month in formal sector in the Financial Year 2017-18, reveals first institutional study on jobs based on EPFO and NPS,” tweeted Bhupender Yadav, MP and national general secretary of the BJP on January 18.

The very next day Prime Minister Narendra Modi referred to the numbers and the study “authored by SBI group Chief Economic Advisor Soumya Kanti Ghosh and Pulak Ghosh, a professor with the Indian Institute of Management, Bangalore,” who calculated the number of jobs in enterprises from the membership of Employees' Provident Fund Organisation (EPFO), Employees' State Insurance Corporation, General Provident Fund and National Pension System(NPS).

Both Yadav and the Prime Minister gave the impression that in the last one year between 8 to 10 million “new jobs” were created in the formal sector. This was used by both to debunk claims of jobless growth and job losses due to demonetisation and the GST.

But as is becoming familiar by now, there is always a twist in the tale projected by the Government. While the number of employees or members of EPFO ( Employees Provident Fund Organisation) undoubtedly went up by 9-10 million during the year 2017, they were apparently not ‘new’ employees but merely existing employees who were not receiving the benefit of PF and the social security net.

The following circular issued by the EPFO makes it clear that the EPFO actually offered a bail out to defaulting employers by offering an unprecedented amnesty. While the EPF Act has stringent punishment including penalty, fine and imprisonment for defaulting on payment of PF contributions, the EPFO launched a ‘ enrolment scheme’ for employees left out between 2009 April to 2016 December. What is more, the employers were offered amnesty from prosecution following payment of a token one Rupee ‘per annum’ . The circular itself is not clear whether it is one Rupee per year per employer or per employee.

Business Standard in fact quoted the central PF Commissioner V P Joy as saying, “ the EPFO subscriber base might only be showing a formalisation of the workforce, not an addition to the job numbers…as a result of this (our move), workers who earlier were out of the social protection coverage will now get these benefits

The scheme was initially offered for three months till March, 2017 and thereafter extended till June last year. Thus the EPFO managed to increase the number of employees covered by the organisation. Most of the increase is reported to have come from urban areas such as Mumbai, Delhi and Bengaluru — Mumbai has added the highest number of subscribers, at 1,287,500.

While employers have escaped prosecution by this scheme, it remains to be seen whether they continue to contribute to the scheme and, if so, for how many of their employees and for how long.

What is, however, clear is that the study is no proof of employment ‘generation’.