George Bernard Shaw once said that youth is wasted on the young. But India’s skill system and labour laws are wasting our young. I work for a people supply chain company that has hired somebody every 5 minutes for the last 5 years but only hired 5 per cent of the kids who came for a job.
But a less obvious change lies in our open positions — we have more than 10,000 open jobs a day that need filling — where the number of jobs that are open to fresh graduates has come down from 75 per cent of total positions in 2005 to 25 per cent now. Why? And what can we do about it?
Why so wary?There are three reasons driving employers away from hiring freshers. The first reason is economic: 94 per cent of our labour force working in low productivity and low informal employment means you can get somebody with two years’ informal experience at the same salary as you are expected to pay a fresher in the formal market. Informal sector workers not only have hands-on experience but are more realistic about the workplace.
The second reason is the low signalling value of education: degrees aren’t what they used to be. Not only could they be fake but they often impart bookish knowledge that is irrelevant to the workplace. We recently interviewed an MA English candidate who kept answering our questions in Hindi. We told him that English was a prized vocational skill but he said, “
The third reason is our labour laws: an employment contract that is the equivalent of marriage without divorce means employers are not willing to take chances with a permanent headcount at the bottom of the pyramid.
This economic insanity is amplified by a regressive benefits regime that mandates a 45 per cent salary deduction for employees with the lowest wages; exactly the point of entry for 10 lakh kids into the labour force every month. Increasing fresher hiring needs four policy interventions. The first and highest impact intervention is expanding the number of apprentices.
This solution is hardly new; it was the 20th point in Indira Gandhi’s 20-point programme in 1975. Yet India only has 3 lakh apprentices between the ministry of HRD’s four Boards of Apprentice Training (BOAT) and the ministry of labour’s five Regional Directorates of Apprenticeship Training (RDAT).
Policy interventionsA recent amendment makes non-engineering graduates eligible for apprenticeships but we need to ‘massify’ our apprentice regime by setting a target of reaching 10 million apprentices by 2020. Reaching this target needs performance management at BOATs and RDATs, scaling up and replicating state-run sectoral programmes like Hunar Se Rozgar for tourism, and encourage public private programmes such as the National Employability through Apprenticeship Programme that bring together the government, an industry body (CII), and a university.
The second intervention is amending central regulation to allow for academic credit apprentices. Massive Open Online Courses (MOOCS) have been a disappointment because of learner motivation but marrying online learning with apprentice programmes that not only pay the unskilled minimum wage but put kids in a qualification corridor between certificates, diplomas and degrees can prove to be just the killer app that scaling our system needs.
The third intervention is expanding and accelerating the labour reforms begun so we can target formal employment reaching 30 per cent of total employment by 2020. The most important labour reform is not enabling hire-and-fire, but giving employees three choices in how their salary is paid: an option to pay the 12 per cent Employee Provident Fund; an option to pay their 12 per cent Employer Provident Fund Contribution to EPFO or NPS; and an option to pay their 6.50 per cent ESI Contribution to ESI Corporation or use it to buy any IRDA regulated health insurance plan.
The fourth intervention is further decentralisation to States. States such as Rajasthan, Madhya Pradesh and Maharashtra are making many moves to make the environment fertile for job creation, and it can be argued that 29 chief ministers are more important than one Prime Minister. There is no such thing as an ‘Indian’ labour or apprenticeship market; States should form apprentice corporations that provide the necessary matching and repair infrastructure for their youth. These corporations would work with State skill universities in granting academic credit for apprentices. Germany has 2.7 per cent of its labour force in apprentices; reaching that will take time but these four policy interventions could set us on that path.
Tricky questionWe began our obsession with apprentices a few years ago at a job fair in Jaipur. More than 35,000 kids showed up at 7 am and by 2 pm we were tired we said that we could only meet applicants with work experience. Many kids were disappointed and left but one of them said he was not going to leave, I will stand right here. Asked why, his magnificent answer was: “Everybody says they will not give me a job without work experience but how do I get work experience without a job?”
Obviously we hired him but episodic interventions can only go so far. Freshers bear the brunt of India’s dysfunctional labour laws and education system but apprenticeships create the infrastructure of opportunity that will rupture this low level equilibrium. Any takers?
The writer is a senior vice president and co-founder of Teamlease