Govt should work towards closing the skills gap

Globalisation and the Fourth Industrial Revolution have increased the pace of change in labour markets, putting a premium on right skills and adaptability. Public policies should now shift to empowering and enabling workers to cope with transition, via income support, and also support incentives and opportunities for deskilling and upgrading skills. This is critical for addressing job displacement. Unemployment is a global problem with more than 73 million youth unemployed worldwide. In India, the unemployment rate among youth is almost 13 per cent (compared to 4.9 per cent overall). Underemployment is even higher. Given the kind of opportunities available in the country, it is disheartening to note these dismal figures. The missing link here is skill development, which is the key ingredient to robust economic growth. With the dilutions of the old “iron bowl” of employment protection the idea of lifelong secure employment has now been shattered.

Until 1980s, about 70 per cent of income went to labour income and 30 per cent to capital income. But, since then, the share of income going to labour has half of this decline is the result of cheaper information technology, which has enabled firms to replace workers with computers. Education and skills are what normally comprise human capital. While educational qualifications are essential for entering the labour market, it is the skills that will finally determine one’s employability quotient. Young people desperately search for entry-level jobs while employers, ironically, are unable to find people with the right skills. Retooling education for the modern economy will require the involvement of every sector of society.

The imperative for skilling young people is well-recognised and has been flagged as a national priority for almost a decade, with significant initiatives being launched by the government. The sad part is that only 10 per cent of the total workforce in the country receives some kind of skill training. For instance, 4.69 per cent of India’s workforce is formally skilled, as against 52 per cent in the US, 68 per cent in the UK, 75 per cent in Germany, 80 per cent in Japan and 96 per cent in South Korea. In fellow emerging economy like China, skilled workers account for 24 per cent of the workforce.

India is poised to become the youngest country in the world by 2020, with an average age of 29 years. Its 869 million strong workforce accounts for around 28 per cent of the world’s workforce. Although India’s huge demographic dividend is considered to be one of its strengths, our optimism needs to be moderated. If the youth are not skilled and face unemployment challenges, it might turn out to be a liability rather than an asset.

India faces a huge skill development challenge. It is estimated that around 50 to 70 million jobs will be created in India over the next five years and about 75 to 90 per cent of these will require some vocational training. For India’s demographic transformation to be considered a “dividend”, the youth will need to acquire necessary knowledge and skills to contribute towards nation-building or else it will turn into a demographic disaster.

Skill development will help prospective employees get easier access to the formal job market where they can bargain for higher incomes, work under more congenial labour conditions, have greater job security and better access to healthcare and medical facilities. Considering the fact that the academic curriculum is more or less similar across universities and colleges, graduates from Tier II and Tier III towns typically lose out due to a severe lack of exposure and soft skills in the race for employment.

By deploying its corporate and social responsibility (CSR) capital on skill development projects, the private sector also stands to benefit enormously from the availability of a large skilled and disciplined workforce. This can parlay into better levels of customer service, increased productivity and efficiency, reduced absenteeism and employee turnover, along with lower wages and recruitment costs.

The results of several such programmes have, however, been mixed. Programmes have reported high dropout rates, low employment percentages and continued attrition post-placement, leading to dissatisfied employers as well as frustrated youth. Providing “skill-training and certification” alone cannot be a solution to the problem. There is clearly a case for going back to the drawing board.

Adopting a lifecycle approach to skilling will make sure the kind of skills imparted to trainees are marketable and linked to the available jobs. A lifecycle approach looks at all aspects of skilling, from the aspirations of people before training to counselling and following up with beneficiaries during their employment. Skill development programmes incorporating these principles will ensure that the training guarantees livelihoods and contributes to the economic well-being of communities.

It is also important to ensure that specific skills are not scaled across multiple areas in the same region as it saturates the market with limited opportunities for those who are trained. If everyone is trained in becoming a blacksmith, there will be too many blacksmiths and not enough jobs. Imparting locally relevant skill sets like repairing bicycles or motorised two-wheelers, solar lamps, mobiles and running a poultry unit or small animal husbandry and the like makes families self-sustaining.

To this end, governments should boost investment in life-long learning to retrain, retool and deskill. For example, governments could use individual skill accounts to provide training grants throughout people’s working lives, conditional on stronger private sector involvement in training and skills development. Governments should also reinforce the supply of skills by strengthening incentives for educational institutions to harness the power of digital technology and new business models.

Four lessons stand out from experience with skill development programmes, which redefine the economics of skilling. First, investment for skilling needs to be comprehensive; covering not only the training itself but also screening, matching and mentoring. Learning from those who have been “through the grind” ensures that insights are better. Second, programmes need to have measurable outcomes for the person seeking a job that will encourage other young people to get involved. Third, there should be a close link between skilling and business profitability that should stimulate employers to hire skilled people and finally, they should shift the measure for the efficacy of skilling from cost (and occasionally placement rates) to a broader metric, measuring social return on this investment. It may not have direct tangible benefits but the employers can leverage them for boosting their brand, and thereby enhance market penetration.

In an age of skyrocketing unemployment, it is integral to incorporate skills within the education system. A system that integrates skills and education can go a long way in ensuring that the youth are better equipped to handle a challenging employment market. Employers need to interact with education providers. Both can benefit from strong reciprocal relations, with employers advising educators what skills they need (and even assisting in designing curricula and extending faculty support) and educators providing students with practical training and hands-on learning. There are compelling economic benefits of rebalancing the labour market; the human costs of failing to do will be enormous.

There are hundreds of organisations and agencies engaged in honing vocational skills and promoting entrepreneurship. While these successful efforts demonstrate the critical roles that employers and social sector actors play in the development of a healthy workforce, they are not able to achieve system-wide change. Businesses, educators, governments and young people need to adopt a collective approach and synergise their latent strengths. Closing the skills gap requires that educators and employers work together more closely.

We require a more coordinated, collective impact approach from the various stakeholders if we want to enlarge the network of training programmess, and ensure that training is closely aligned with specific demands of the industry. It would require developing a clear common agenda around the entire ecosystem of workforce training.

The writer is a well-known banker, author and Islamic researcher. He can be reached at moinqazi123@gmail.com