EMPLOYMENT GROWTH RATES FELL AFTER 2011-12: PROWESS DATABASE

Indian companies, particularly listed companies, are required to disclose copious amounts of information in their annual reports. Often, the quantum of data required to be disclosed compensates for the poor quality of disclosures. In all the progress we have made on improving company disclosures, we have failed to mandate that all companies must report the number of persons they employ.

Traditionally, information on persons employed was limited to public sector companies, banks and the larger IT companies. This changed in 201415 when MCA mandated that all listed companies must disclose details on employment such as total employment and its breakup by permanent and contractual employees.

Thanks to this, the number of companies disclosing the number of employees increased. For 2016-17, CMIE’s Prowess database contains employment data for 3,441 companies. This is a big improvement over the 1,443 companies that provided such information for 2013-14.

In 2016-17, the 3,441 companies provided employment to 8.4 million persons. In 2013-14, the 1,443 companies provided employment to 6.7 million persons. This shows the diminishing returns to increasing the sample to compute total employment by companies. Nevertheless, there is an improvement.

Employment by companies has apparently grown, but to measure growth correctly we must ensure that the same set of companies are included in the base year and the year of computation. We achieve this by creating a two-year common-sample series. Each year’s growth is computed using only those companies that have information in the current and the preceding years.

Of the 3,441 companies that provided employment data in 2016-17, we find 3,054 companies provided data for both, 2016-17 and 2015-16. So, growth is computed using the 3,054 companies.

The number of companies for which growth rates can be computed has increased from less than 200 till 1999-00 to over a thousand by 200708. Between 2010-11 and 2014-15, the average number of companies providing employment data for two consecutive years rose to 1,250. Then, the number jumped to 2,886 in 2015-16 and 3,054 in 2016-17.

We restrict our observations to 2003-04 to 2016-17. We begin from 2003-04 because that sample is relatively larger — upwards of 900. We end in 2016-17 because the availability of annual reports for 2017-18 is inadequate.

Employment growth was poor during 2003-04 and 2004-05. Thereafter, till 2011-12 we see a robust four per cent growth.

The slowdown begins in 2012-13 when employment growth drops to 0.9 per cent. It picks up in 2013-14 to 3.3 per cent but then there is a sharp fall in 2014-15 followed by tepid growth rates in 2015-16 and 2016-17. During the five years from 2012-13 through 2016-17, the average increase in employment was a measly 0.75 per cent per annum.

The fall in employment growth based on annual reports of companies from 2012-13 is in line with all other economic indicators. But the fall in 2014-15 is odd. The economy had not shrunk or even slowed down to warrant that fall.

But several companies reported a fall in employment during the year. Of the 1,283 companies that provided data for 2014-15 and 2013-14, 516 reported an increase in employment, but 684 reported a fall. The remaining 83 did not show any change. Fifty three per cent of the companies reported a fall compared to an average of 43 per cent for the period since 2003-04.

Eight companies shed more than 10,000 jobs each in 2014-15. Vedanta shed 49,741 jobs, SAIL shed 30,413, Fortis Healthcare shed 18,000, Aegis shed 13,631, BSNL shed 12,765, IOC shed 11,924, Firstsource Solutions shed 10,539 and Tech Mahindra shed 10,470.

In 2015-16, the economy grew by 8.2 per cent, but employment by large listed companies grew by an anaemic 0.4 per cent. There was no recovery from the poor performance of the previous year. A much larger sample of 2,886 companies in 2015-16 did not help in showing better employment growth estimates.

In 2015-16, 43 per cent of the companies expanded employment but a larger 45 per cent shed jobs. L&T led the fall with the axing of 111,020 jobs. Future Enterprises knocked out 23,449 jobs and SAIL knocked out another 18,603 jobs. Yet, the net addition to jobs was positive albeit by a whisker. Employment grew by 0.4 per cent.

There is some recovery of jobs in the corporate sector in 2016-17. Employment grew by 2.7 per cent. This is much better than the record of the preceding two years but is a pale shadow of the four per cent average growth seen during the six years from 2005-06 to 2011-12. Relatively high employment growth coincides with the period that saw high GDP growth. Ergo, to bring back employment growth we must bring back the higher levels of GDP growth seen during 2005-06 through 2011-12.