Who will pay for a skilled workforce?

The National Skill Development Mission is an ambitious project of skilling 500 million youth and making them employable by 2022. The recent STAR scheme launched by the National Skill Development Corporation (NSDC), under the Union Government has earmarked ₹10,000 as the expected cost of a single skill intervention. If we juxtapose these facts, India needs to find and invest ₹5 lakh crore to meet the skill needs of its economy and fulfil the aspirations of its youth. Where will this massive investment come from? Who will foot the bill?

Different needs Consider Ajita, aged 22, who has just graduated with an engineering degree from a second-tier private college. Her heart is firmly set on working in one of the shiny glass towers at an IT SEZ. Unfortunately, neither her engineering nor communications skills are adequate to penetrate the selection barrier set up by software firms. After failing at yet another job interview, she has realised the need to join a paid professional skill development course that will make her competent enough to secure the job of her dreams.

Then there is Suresh, 18, who dropped out of Class 10 a few years ago because he disliked going to the government school in his village. After helping his father on the farm for a few years, he is now looking for a steady income; the only option at the moment is working in a small retail store in the town nearby. He is unable to secure any other employment because of poor interpersonal skills and lack of basic knowledge in operating computers. Nor does he have the financial resources to pay for a skills training course. The experiences of Ajita and Suresh clearly indicate that skill development does not lend itself to a one-size-fits-all solution. Understanding the segments in this market is essential to decide who should foot the national skill bill.

The economy may offer jobs at various levels of academic accomplishment, but job-seekers greet them with a wide range of psychological responses. This creates a hierarchy of desire, a pyramid, where jobs at the top tend to be highly aspirational for job-seekers, while those at the bottom are not sought after at all.

The top of the pyramid is populated by the likes of Ajita who have high qualifications and aspirations. The idea of plush offices, elite peer groups, and upward social mobility greatly excites this segment, and an inherent willingness exists to do whatever it takes to secure these jobs. As an increasing number of colleges and universities fail to impart employability skills through their curricula, these job-seekers are waking up to the prospect of their irrelevance in the job market.

The power of aspiration makes the market price-inelastic to an extent. Consequently, such job-seekers are willing to pay to become employable, either through on-campus courses during their college years or through off-campus programmes after graduation. Retail skill loan providers have also emerged to assist such job seekers. Progressive colleges too are stepping up to a greater moral and financial accountability in making their graduates job-ready.

Role of employers The bottom of the pyramid is a study in contrast. School dropouts like Suresh are reluctant to accept jobs readily available to them in the unorganised sector, citing tough working conditions, low social status and lack of job security. Many employers do not even value skilled workers; hence skill certifications today do not necessarily result in a wage premium. There lie our skill development challenges, complicated by the need to change mindsets. While job seekers have to be counselled to accept and respect the jobs available, employers also have to pay a premium for skilled labour.

The State must play the role of an anchor to address this massive socio-economic challenge. Through well-designed voucher programmes and training reimbursement schemes, the State must incentivise those at the bottom of the pyramid to acquire useful skill certifications.

The middle of the pyramid is a mix of services and manufacturing jobs that will require greater participation of employers. The services sector, especially in field sales, may not offer dream jobs, but employers still need to have an efficient workforce to survive in a super-competitive environment. Employers in manufacturing sectors face significant risk if expensive machinery is handled by an unskilled workforce.

In such situations, the industry has much to gain with the deployment of skilled resources. But that will need investments from employers to create and nurture a talent pool, though the State too may have a role to play. For example, it may offer schemes that incentivise employers to engage in industry-oriented talent development.

In summary, if ₹5 lakh cror must be spent to train 500 million youth, there is no reason why it should be the burden of the State alone. Smart market segmentation suggests that job-seekers and academic institutions will readily pay for skill development that leads to high-end, aspirational jobs, and they should be actively encouraged to do so.

In the same vein, wherever and whenever industrial employers have a lot to gain or lose depending on the talent they recruit and train, employers must fund skill development out of their own self-interest.

Last but not the least, the State must play an active role in creating a skill-rich ecosystem at the bottom-end of the job spectrum, a space that neither excites job seekers nor attracts enlightened employers today. As is the case with many profound questions, the answer to who should really pay for skills is simple. It depends!

(Choudhury is co-founder of Milaap and Paul is co-founder and CEO of TalentSprint. Milaap and TalentSprint are training partners of NSDC)

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