Some of us have long felt that India’s poverty industry and poor people lived on different planets. But the poverty industry’s reaction to new data from Employees’ Provident Fund Organisation (EPFO)/Employees’ State Insurance (ESI)/National Pension System (NPS) confirms they don’t live on different planets but a different gamma quadrant. Job seekers —mostly young and poor —know that a formal job is better than an informal job (higher wages) and an informal job is better than no job (wages higher than zero). Yet, the poverty industry’s predictable and patronizing reaction to the massive increase in formal jobs implies that a new formal job is not a job. I’d like to make the case that jobs are yesterday’s war; India’s tryst with destiny lies in formal jobs.
Voltaire said doctors prescribe medicines of which they know little, to cure diseases of which they know less, in human beings of whom they know nothing. Intellectual humility in diagnosis is key to be an effective writer of prescriptions. The current debate about jobs demonstrates that the poverty industry’s diagnosis for India is jobs, yet most of our youth know they can get “a” job but struggle to find a formal job that pays them the wages they need or want. India’s youth —there were 100 million new voters in the last election and there will be 100 million new ones in 2019 —has raised its aspiration from subsistence wages to living wages. And the way to meet these aspirations is not yesterday’s stale thinking (throw money from helicopters, mandate a three-day workweek, take away their shovels and give them spoons) but raising the productivity of our firms and workers. This needs formalization, financialization, urbanization, industrialization, and human capital.
American politician Daniel Moynihan said, “You can have your own opinions but not your own facts”. The notion that the new EPFO/ESI/NPS data is not true, important or positive is delusional. The data is truer than survey data; it represents actual cash being deposited into an individual account linked to Aadhaar. The data is important because it gives researchers, policy makers and employers new data across time, ages and regions. And the data is positive because any increase in formalization whatever the source (GST, demonetization, better enforcement, amnesty, rediscovered morality, etc.) improves the lot of Indian workers and puts our economy on a trajectory of higher productivity. India must have diverse opinions about manufacturing vs service jobs, impact of automation on employment elasticity of growth, the diminishing role of capital in job creation, whether the only way to help farmers is to have less of them, etc. But we must unpack opinion and fact. There are four sources of employment data: household surveys, enterprise surveys, administrative data, and data from government schemes. Both survey and administrative data are needed to keep each other honest but the notion that survey data is superior is unfair (29% of Indians in our household survey say they work for an enterprise with more than 9 employees but only 1.5% of enterprises say they have more than 9 employees in our enterprise survey).
The original sin in labour market data and strategy comes from the National Commission for Enterprises in the Unorganized Sector (Arjun Sengupta report) that not only created confusion between informal enterprises and informal employment data but surrendered by treating informality as undefeatable. To reuse a wonderful metaphor of Avinash Dixit of Princeton, informality is not like cancer but obesity. We must not think of informality as cancer, insisting that every malignant cell must be removed or will not come back. Instead, informality should be compared to being overweight or obese. The fight against obesity is hard and slow; victories are partial, sometimes you regress. But keeping up the fight by all methods and at all times can mitigate obesity. Eventually the diet and exercise will become a way of life and a healthier body will yield tangible benefits.
Informal employment is the slavery of the 21st century and arises from our sense of humour about the rule of law. This sense of humour shows up in transmission losses between how labour laws are written, interpreted, practised and enforced. Why do only 1.2 million of our 63 million enterprises pay EPFO or ESI? But it is becoming tougher for enterprises to hide; the 50% increase in GST registered enterprises to 11.5 million means that EPFO payers should be closer to that number than a tenth of it. By holding our bad employers accountable, we stop handicapping our good employers. The task of formalization is far from over; we need to amend all labour laws to adopt the IndiaStack (paperless, presenceless, cashless), replace our 25+ numbers with a unique enterprise number, and move forward on a single labour code (instead of the proposed 3 or 5). Our current labour laws need overhauling because they choose the old over our young.
India’s poverty industry draws inspiration from Karl Marx but clearly doesn’t take his advice, “You can describe the world in thousands of ways. The point, however, is to change it”. India’s labour market has new data and many new formal jobs. Now, that is change we haven’t seen in a long time.
Authored Article by Manish Sabharwal and Ashok Reddy
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