Creating a high-skills ambience in
India (The Hindu)
Mains Paper 3: Economy
Prelims level: Schemes related to formal skilling
Mains level: Skilling unemployed youth
Context
• The small and informal sector is the backbone of the Indian workforce.
• Over 82 per cent of the workforce is engaged in the informal sector which,
by definition, comprises small enterprises. Nearly 40 per cent of these informal
workers are also single, own-account workers.
• As we move ahead, the small and informal sector will continue to be the
primary source of employment and entrepreneurship. At the same time, despite
engaging such a large proportion of the workforce, the productivity of such
enterprises remains low.
• Despite the massive workforce, the informal sector contributes to only
about 50 per cent of India’s GDP.
• Improving access to formal skills can be a transformative lever for the
informal sector.
• It can also help create mass entrepreneurs who are not single,
subsistence-driven, but have the capacity to be job creators and help the
workforce transition steadily from the informal to formal.
Limited awareness in formal skilling
• Small and informal business owners often see limited benefit of formally
skilled workers due to a lack of awareness of the productivity and income gains
that can accrue because of skilling.
• This problem also extends to parts of the formal sector, which is
experiencing increased ‘contractualisation of labour’.
• These formal employers might not see any incentive to invest in training,
given the temporal nature of the occupation and high attrition rate for the
‘contract employees’.
Cost and time of training:
• Around half of the workers employed in the non-agriculture sector work in
enterprises that employ less than two people on an average. This low number
increases the opportunity cost of training per worker and discourages small and
informal enterprise owners from investing in training.
• Entrepreneurs also find it difficult to upskill themselves as they already
face time and financial constraints in their business. Finally, potential
workers who do get formally skilled, demand a wage premium that small
enterprises are unable to afford.
Lack of alignment
• Small enterprises often depend on workers who perform multiple tasks and
thus need their employees to be trained in multiple skills.
• The current formal skilling programmes are often not designed for this and
tend to be specific to a job role.
• The current programmes also provide full-time and non-local solutions while
firms need flexible, hyper-local models. This combination limits the
effectiveness of the initiatives.
Boosting demand
Provide incentives and increase awareness to drive demand for formal
skills training:
• Giving financial and non-financial incentives to enterprises in the
informal sector has the potential to mitigate the cost and time pressures of
engaging workers in formal training and increasing uptake of skilling programmes.
• Further, as small firms experience the productivity gains from investments
in skill building, the demand for skilling of their workforce will increase. For
example, Kenya launched the Jua Kali Skill Voucher Program to catalyse adoption
of skill training programmes among micro and small enterprises (MSEs) through
demonstration effect.
• After experiencing more than double the average sales, the MSEs increased
their permanent training resources and staff. However, it is important to note
that a detailed impact study showed that the programme was a high cost one and
could not sustain without external funding support.
• Any incentives, therefore, must be designed with the goal of
sustainability, with firms eventually transitioning to skilling their workforce
without needing external support.
Foster tailored models of skill provision:
• There is a significant need to create an enabling environment and dedicate
resources to support testing of new models across the sector.
• The ‘micro-training’ provider model in Rwanda is a case in point. It is a
hyper-local and flexible training model operated by small enterprises that
engage in production and sale of goods and services and provide training as a
parallel service.
• Introduction of this model resulted in an enrolment rate of twice as many
trainees, compared to formal public training systems.
Recognise skills
• It required through traditional apprenticeships or other non-formal
channels.
• Workers and entrepreneurs in the informal sector often get trained by
observing or working under master crafts persons or owners of small businesses.
• Since they might not have any record of their training, developing
mechanisms for formal recognition of an informal worker’s existing skills can
benefit them tremendously.
• Some platform aggregators, such as UrbanClap, are already supporting formal
recognition and upskilling efforts in India.
• The indicative of a rising trend. It helps formalise the service provider’s
informally-acquired skill by providing a short-term up-skilling course and
offering a certificate for the training.
Conclusion
• Efforts in the skilling ecosystem so far have mostly focussed on serving
the existing demand effectively.
• If we want India to transition to a high-skills equilibrium, it will be
crucial to exponentially increase the demand for skilling.
• A concerted focus on the small and informal sector, will be the first step
to achieving this.