SBI Research: Economy added 16.9 lakh less employment in FY21

According to an SBI Research examination of EPFO payroll data, net employment creation in the economy declined by 16.9 lakh in FY21 compared to the previous year. However, the FY21 statistics are higher than the net job creation figures for FY20, which fell by 28.9 lakh, reinforcing the impression that the economy is not producing new jobs.

According to the most recent EPFO statistics, net new EPF subscribers totaled 94.5 lakh in FY21, with NPS adding 5.82 lakh, bringing the total net increase to 100.4 lakh, down from 102.3 lakh in FY20. Meanwhile, Soumya Kanti Ghosh, SBI’s group chief economic adviser states, “this does not represent the correct picture as the data include the number of exited members who re-joined and re-subscribed, and thus not fresh job creation. An estimate of the actual net new payroll (first job) adjusted for re-joined/re-subscribed members and formalization (based on ECR data), shows the actual net new payroll is only 44 lakh is FY21, which is 16.9 lakh less than the net new payroll generated in FY20, when the new payroll declined by almost 28.9 lakh”. Ghosh further stated that the majority of the 44 lakh new jobs are of low quality.

In FY21, the second job increased by 17.9 lakh. However, compared to a 1.5 lakh rise in FY20, the number of new members decreased by 6.9 lakh in FY21. This shows that fewer people have left the labour market in pursuit of better opportunities.

According to the EPFO payrolls, 41.2 lakh jobs were produced through second jobs, 44 lakh jobs were produced through first jobs, and 9.3 lakh jobs were produced via formalisation. Ghosh highlighted that the official figures did not account for a 16.9 lakh drop in first-time jobs in FY21, despite a 17.9 lakh increase in second-time jobs or individuals who rejoined the payroll.

Because of the interruptions in the MSME sector, the pace of formalisation fell by 1.2 lakh. “Cumulatively, total payroll generation of EPFO and NPS was almost 19 lakh less than the previous fiscal,”  he adds, adding that the majority of employment losses in the private sector were in small firms.

According to the most recent World Bank data, the labour force has shrunk from 495 million in 2019 to 472 million in 2020, owing mostly to the pandemic’s first wave. According to CMIE statistics, the economy lost 75 lakh jobs in April 2021 during the second wave of the pandemic.

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