Sit-Stand-Go Model to assess job creation

Sit-Stand-Go Model to assess job creation

ASK Wealth Advisors tries to estimate jobs using a completely new methodology -- the Sit-Stand-Go model, which relies on proxies (and some surveys) to come up with the number of about 5 million non-farm jobs being created annually in India.

The jobs debate in India is unlikely to settle down anytime soon. Prime Minister Narendra Modi and his ministers have time and again said that India does not have a job creation problem, it has a jobs data problem. In other words, the country is creating enough jobs, it is simply that we do not have the right surveys that capture the jobs being created. The opposition of course begs to differ.

The jobs debate has also sharply divided economists and economic analysts. Pulok Ghosh of IIM Bangalore and Soumya Kanti Ghosh of SBI used Employee Provident Fund Data (EPFO) and other indices to try and estimate the number of formal sector jobs created. Their conclusion was that job creation in the formal sector was pretty robust and there was no need to worry. Surjit Bhalla also wrote a column which estimated that jobs were being created all round and that carping critics were just trying to run down the government. He came up with an estimate of almost 15 million jobs created in 2017, using two sets of data -- one from CMIE and one from the EPFO.

Meanwhile, other economists have been far more pessimistic. Quite a few have pointed to flaws in the Ghosh & Ghosh methodology, which could lead to overestimating formal jobs. Mahesh Vyas, chief of CMIE, which conducts a fairly comprehensive household survey has pointed out flaws in both the Ghosh & Ghosh calculations as well as Surjit Bhalla's analysis. His conclusion from the CMIE surveys was that very few jobs were being created.

Now a new estimate has come out - ASK Wealth Advisors have come out with a report which tries to estimate jobs using a completely new methodology -- the Sit-Stand-Go model. The report is authored by Somnath Mukherjee, managing partner, and Dipankar Mitra, associate director, Research. Their methodology relies on proxies (and some surveys) to come up with the number of about 5 million non-farm jobs being created annually in India, which is neither as pessimistic as Mahesh Vyas' estimates nor as optimistic as Ghosh & Ghosh or Surjit Bhalla. It falls, in fact, somewhere in the middle of those two contrasting estimates.

The ASK methodology is interesting because it first breaks non-farm jobs into three clear categories and tries to estimate each. The first is the number of office jobs created (or Sit jobs), which they calculate using data on commercial office space created and leased out, and estimating the number of employees that would be required for this sort of office space. The conclusion is that roughly 1 million jobs have been created if their estimates are correct.  (They say they are conservative in their estimates).

The second category of jobs belong to what they dub as the "stand" jobs - jobs created in factories, construction,  retail spaces, hospitality and educational and medical facilities or the FRESHH sectors. The report estimates that this created the largest number of jobs - about 2-3 million jobs annually. The calculation here is derived largely from the Quantitative Employment Scenario(QES) of the Labour Bureau mostly and extrapolating from there.

Finally, there are the "On the Go" jobs -- those created in logistics, transportation, etc. Here the report depends on surveys and estimates provided by these sectors after accounting for a certain number of desk or sitting jobs created in this sector. The estimate here is roughly 1 million jobs annually.

The authors point out that there are problems in some of the data, especially in the QES as it is a fairly new indicator. But then, as the government itself pointed out and this column has pointed out earlier, there is good agreement on what kind of surveys need to be done for reliable job statistics - only the government is not moving quickly enough on it.

In the absence of those, this method is no worse than the others, and it at least provides a fresh look at how to get job creation estimates.