The big jobs challenge - replace informal occupations with formal jobs

by Mahesh Vyas

According to the Economic Review of the Directorate General of Employment and Training, Ministry of Labour, the total number of people employed in the organised sector was 29.6 million in 2011-12. In the same year, using the the National Sample Survey Organisation’s Employment and Unemployment survey in India and the Census 2011 data, we estimate that the total persons employed was 303.5 million.

If less than 30 million were employed in the organised sectors then the rest, ie 274 million, were employed in the unorganised sectors or on their own. Nobody is happy with these numbers. Not even the government. Government data on employment / unemployment is not only woefully dated but is also terribly inadequate.

CMIE’s Consumer Pyramids Household Survey (CPHS) captures the employment/unemployment status of adults and provides several answers that the government is looking for. Here are some facts based on the CPHS.

According to the CPHS, an estimated 404.7 million persons were employed during January-April 2017.

Of these, only 21 per cent were employed in what can be called as jobs in a proper sense. These are white collar workers, industrial workers, support staff in factories and offices, managers, etc. There were 86 million people with such jobs.

These are the jobs that people aspire for. When a government or a political party promises or resolves to provide jobs, it is these jobs that we imagine would be provided. The BJP had resolved to provide 20 million jobs. Nobody thought that those jobs were of agricultural labourers or construction-site daily wage workers. The implied jobs were those in factories and offices.

If India took several decades to provide 86 million formal jobs then it was anyways a tall order to provide another 20 million in just five years. But, that is the need at the very least. Because, for every one person doing a respectable formal job there are two who are "employed" without a job. These are small traders, agricultural labourers and daily-wage labourers. This segment "employed" 165 million people during January-April 2017.

These 165 million "employed" people need to move to better, regular jobs. This is the bigger jobs challenge. The local vegetable vendor needs to find a job in a large mall or set up a formal store; and the local plumber needs to given a job in a large professional service company. In fact, this is India’s growth challenge. If these 165 million languish in low productivity, India simply cannot progress.

People take on these low-productivity engagements because there is a serious dearth of formal jobs and people cannot afford to remain unemployed for long. It is easy to get these informal jobs but, it is equally easy to lose them.

Between September-December 2016 and January-April 2017, while the number of farmers who owned land increased by 3.7 million, the number of agricultural labourers declined by 5.6 million. In hard times, farmers preferred to rely less on external labour. Agricultural labourers have no job protection of any kind.

The number of daily wage earners (non-agricultural) dropped by 5 million during the same period. These are big hits to the poorest sections on society. It is possible that some of them shifted to becoming small traders. There is substantial mobility between people being agricultural labourers to being daily wage labourers to being small traders.

Usually, these occupations do swell because the new workforce that does not find jobs settles for these informal occupations (they cannot be called jobs, in the true sense of the term as we understand it). In the earlier surveys we saw their numbers grow by about 9.5 million. This is roughly the same number that were lost in January-April 2017.

The challenge is to grow formal jobs. But, these have been declining. During January-April 2016, there were 93 million such jobs. This fell to 89 million in May-August 2016 and then to 86 million in September-December 2016. They remained at 86 million in January-April 2017. Compared to a year ago, these formal jobs have fallen by about 7 million.

Only a large household survey can provide data on the informal sector along with the formal sector. This is because the size of the informal sector is very large. The government would do well to focus on fast-frequency household surveys to estimate both employment/unemployment and job creation. India is not ready yet, for an enterprise survey to estimate job creation like in the developed countries.

First Published in Business Standard Link

Unemployment Rate
Per cent
4.8 +0.1
Consumer Sentiments Index
Base September-December 2015
92.2 -0.4
Consumer Expectations Index
Base September-December 2015
90.5 -0.3
Current Economic Conditions Index
Base September-December 2015
95.0 -0.5
Quarterly CapeEx Aggregates
(Rs.trillion) Dec 16 Mar 17 Jun 17 Sep 17
New projects 2.32 3.77 2.02 0.88
Completed projects 1.00 1.91 1.13 0.70
Stalled projects 1.13 0.70 2.66 0.64
Revived projects 0.18 0.67 0.29 0.14
Implementation stalled projects 0.82 0.33 0.67 0.50
Updated on: 19 Oct 2017 4:20PM
Quarterly Financials of Listed Companies
(% change) Sep 16 Dec 16 Mar 17 Jun 17
All listed Companies
 Income 2.1 6.2 10.2 10.2
 Expenses 1.9 6.3 11.9 10.5
 Net profit 14.6 40.3 16.8 -18.9
 PAT margin (%) 6.9 6.1 6.1 5.4
 Count of Cos. 4,503 4,503 4,427 4,257
Non-financial Companies
 Income 0.6 5.9 11.8 10.9
 Expenses -0.2 7.2 15.5 11.1
 Net profit 26.7 24.6 -1.1 -24.3
 PAT margin (%) 6.9 6.2 6.3 5.3
 Net fixed assets -9.2 7.5
 Current assets 8.1 2.1
 Current liabilities 11.7 8.5
 Borrowings 3.1 4.9
 Reserves & surplus 8.4 6.5
 Count of Cos. 3,476 3,482 3,432 3,324
Numbers are net of P&E
Updated on: 19 Oct 2017 4:30PM
Annual Financials of All Companies
(% change) FY13 FY14 FY15 FY16
All Companies
 Income 12.6 10.0 5.0 1.0
 Expenses 12.8 9.9 5.1 1.2
 Net profit 1.0 -2.2 1.1 -15.2
 PAT margin (%) 3.5 3.2 3.2 3.0
 Assets 14.3 12.3 9.4 8.8
 Net worth 9.6 9.6 8.8 7.7
 RONW (%) 6.8 6.2 6.1 5.3
 Count of Cos. 25,932 23,621 23,131 19,375
Non-financial Companies
 Income 11.9 9.7 4.1 0.0
 Expenses 12.3 9.3 4.3 -0.6
 Net profit -8.4 -2.4 -6.3 6.5
 PAT margin (%) 2.4 2.2 2.1 2.7
 Net fixed assets 12.9 11.6 13.1 13.9
 Net worth 7.9 8.2 7.3 7.0
 RONW (%) 5.5 5.1 4.9 5.6
 Debt / Equity (times) 1.1 1.1 1.1 1.0
 Interest cover (times) 2.1 2.0 1.9 2.0
 Net working capital cycle (days) 72 69 67 67
 Count of Cos. 20,312 18,893 18,620 15,945
Numbers are net of P&E
Updated on: 21 Sep 2017 10:15AM

Time-series available since 2007-08