Editorial. Skilling sops useful, but education is key

The Budget makes a creditable attempt to address the twin problems of labour productivity and unemployment among the educated youth. It has unveiled three schemes that will subsidise the training of largely new entrants into the workforce by paying for provident fund contributions over a period.

In a recent interaction with this newspaper, Finance Secretary TV Somanathan explains that the incentives should not be viewed as dramatic exercises in job creation, but more in the nature of a nudge ‘at the margin’ to employ more skilled workers instead of machines — a modest effort that could actually translate into major macro gains in employment of new recruits who otherwise struggle for openings. These steps are aimed at lifting both the quality and quantity of jobs — whereas the experience of India’s labour market since 2019, borne out by Periodic Labour Force Surveys, has been that jobs have risen but not productivity and wages, because the workforce has gone back to agriculture and low productivity occupations such as construction and self-employment options. It is also a positive that the Centre is keen about expanding the Employees’ Provident Fund outreach and has made EPFO participation by firms a prerequisite for availing these incentives. The schemes are expected to create about 30 million additional jobs over the next four years or so, which could take care of the annual rise in new entrants into the workforce over this period. An incentive to train workers could help manufacturing and services industries that are struggling to get workers with the right skillsets.

However, there can be no getting away from the fact that the skills crisis in India’s young (15-29 years) reflects a failure of the education system — and the best skilling efforts cannot make up for this lack. The better educated are not equipped for skilled jobs in a growing economy. Industry may well opt for automation instead, and a subsidy cannot alter this choice if the workforce cannot be easily trained. The India Employment Report notes that the “unemployment rate among youth was six times greater than among persons with a secondary or higher level of education and nine times greater among graduates than for persons who cannot read and write.” An education system where middle or high school students cannot comprehend primary grade textbooks cannot bolster India’s productivity and competitiveness. The ministries of human resource development and skills development must work together to address a looming crisis.

The Budget proposal must steer clear of a few pitfalls. First, it should not impede employers’ basic freedom to hire workers of their choice. The guidelines should be clear about this. Second, it should not lead to a pesky inspector raj that suspects enrolment of dummy candidates to avail subsidies. With better KYC technologies such frauds can be avoided. Besides, no subsidy scheme will work in a desirable way if it impairs ease of doing business.