How to train your population

When it’s time to select a bridegroom for their daughter, parents “prefer an unemployed engineer over a skilled artisan”, says Manish Agarwal, Co-Founder of Orion Edutech, a skill training provider. That is just one of many reasons India has a growing mass of unskilled people in its population.

As a result, even though nearly 13 million people join the workforce every year, India Inc finds there are very few it can employ. This ever-widening chasm between the demand and supply of skilled labour is limiting the growth and productivity of Indian industry.

The problem of finding skilled workers is not restricted by sector or geography; it spans a wide spectrum of industries across India. An analysis by the National Skill Development Corporation (NSDC) shows that 22 high-growth sectors will require a total of 347 million trained workers by 2022 to sustain growth; another 150 million currently employed will need to upgrade their skills.

“Today, a mere 2 per cent of our workers are formally skilled,” says Dilip Chenoy, MD and CEO, NSDC. In contrast, the share of the trained workforce is 96 per cent in Korea and 80 per cent in Japan.

Currently, the bulk of the labour force in India — nearly 93 per cent — lacks formal training and works in the unorganised sector. Even in formal sectors, such as manufacturing, only 15 per cent of those employed receive any kind of on-the-job education. Nearly 90 per cent of the jobs that the 365 million entering the workforce over the next decade will seek are estimated to require vocational skills. Without these skills, the untrained millions are irrelevant to economic growth.

Part of the reason for this yawning gap is the changing nature of industry itself. Manufacturing has moved from manual operations to a higher level of automation. With CNC machines, for example, you require someone who is familiar with the electrical, mechanical and electronic aspects of a machine to operate and maintain it. In construction, skills have changed from bar-bending and brick-laying to using readymade structures that reduce construction time.

This gap could increase further given the big push towards local manufacturing. “There are Government directives in many sectors to use 50 per cent locally produced components in the finished product,” says Ambalavanan Ramachandran, Co-founder and COO of Employability Bridge, which works on industry-institute collaborations for student training and placements. In the services segment, the growth of organised retail is expected to bolster demand for employees trained in sales and marketing.

On the supply side, there are only about 5.5 million vocational training seats available in the nearly 11,000 public and private technical training institutes in India. The number of teaching institutes is woefully small, especially when you compare China’s figure, which the World Bank estimates at nearly 500,000. “We have lost track of the fact that behind every creative solution or technology change, there are humans and they have to be developed to sustain innovations,” says S Doraiswamy, Executive Director, Real Talent Engineering, a manufacturing company that is trying out a new skill development model.

There is also less emphasis on vocational training compared to a college degree. “In Europe, 80 per cent are trained in vocational education and the rest earn other degrees, but the ratio is flipped in India,” says Orion Edutech’s Agarwal.

Even if investment in physical capital increases, the lack of emphasis on human capital development will limit growth. “There are enough people willing to invest in infrastructure and equipment,” says Vivek Srivastava, Chief Executive Officer, Health Care at Home, a home-care provider, “but we have a serious gap of trained manpower to run the facilities”.

However, if one hires low-skilled people to pump up the top-line, the bottom-line may be hit. Ajit Kumar Chordia, President of CREDAI, Chennai, cites an example of how unskilled labour can increase costs. When bricks are laid incorrectly, he says, the wall surface is not straight and the angle has to be corrected by plastering. This adds to the cement cost, and time, besides reducing the floor area. The lower quality of the finish also erodes brand value. On the other hand, trained workers follow safety practices, greatly reducing operational risks, he says.

If the unskilled population is not employed due to low productivity, it may lead to larger social issues. “Discontent among the youth can lead to law and order problems” says Lt Gen. Rajender Singh of DLF Foundation, a non-profit working on skill training.

Gayathri Vasudevan, founder and CEO of LabourNet, a social enterprise that trains people in low-skill jobs, notes that white collar jobs, which are ‘aspirational’, may create under-employment. “Many people do not take a rational economic decision when it comes to careers,” she says, leading to feeling “restrained later in one’s life”.

However, what seems to be a challenge can be turned into a great opportunity. By 2020, the average age of Indians will be 29 years, compared to 37 years in China and the US. This “demographic dividend can be leveraged”, says Chenoy of NSDC. Equipping the youth with the right skills can surely lead the country along a high-growth trajectory.

Training providers and industry are also working to create social acceptance for skilled workers. Many are hopeful that soon, skills will be considered to be on par with degrees. “There will come a day,” believes Vishal Mehta, Co-founder and Partner at venture fund Lok Capital, “when vocational education is listed as an achievement in matrimonial sites like Shaadi.com.”

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