ith a target of skilling 500 mn by 2022, an estimated

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2 W ith a target of skilling 500 mn by 2022, an estimated 12.8 mn (Planning Commission) entering the workforce annually, around 94 per cent of the workforce operating in the informal economy and current vocational training capacity of somewhere between an estimated 1.5 to optimistic 5 mn, we have our work cut out on skill development in India. The Government has laid out a plan with the National Policy on Skill Development, 2009, and backed it up with several investments in identifying employer needs, expanding training capacity, building a unifying framework for vocational training vis-à-vis other existing options of secondary and higher education, etc. Skill development is of key importance in stimulating a sustainable development process and can make a contribution in facilitating the transition from an informal to formal economy. Bhuvana Anand Director, Development & Communication D Subhalakshmi Senior Manager, Advocacy Dr. Parth J Shah President, Centre for Civil Society, New Delhi But the magnitude and complexity of the problem demand that other innovative ways of solving the skilling problem also need to be deployed. In fact the National Policy on Skill Development, 2009, emphasizes the need to fund candidates rather than institutions to create choice in the provision of skill development services. As part of this move towards increasing choice and creating opportunities for the private sector to provide vocational training, one of the refor ms suggested is the use of skill vouchers, an idea that has also found favor with the Planning Commission. T his ar ticle analyzes the key challenges in the skill development market, describes the potential that vouchers hold in catalyzing reform in this market, and shares details of international experience with the use of vouchers before concluding with a brief outline of why vouchers will be useful for both Government and Corporates to use in skill development. Current Challenges in Skill Development A simple reading of the challenges in skill development today point to the inability of the market to match the demands of key stakeholders with supply that meets the same. The two key stakeholders are Employers, with their demand for skilled manpower who delivers higher productivity on the job and Students, with their demand for training which can help them realise their employment potential in terms of their skills, interests, aspirations and earnings. In the ideal state, Skilling Institutes serve as the link between these two stakeholders by offering training courses which meet employer and student demand in an effective and efficient manner. However there has been a collective market failure on several fronts as listed below: 1. Low clarity on skills required by industry 2. Low awareness among students of the value of skilling, choice of courses etc., and challenges in their access to and ability to pay for courses 3. Failures in Effectiveness of training from Institutes resulting in further failures a) For employers poor quality of trained manpower being supplied - resulting in high new hire training cost and unwillingness to pay a salary premium for certification b) For students poor placement post certification, resulting in unemployment and further erosion of credibility of skilling 4. Lack of focus on Efficiencies in training i.e., cost per trainee April 2013 The Global ANALYST / 19

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5 Cover Story Austria: In certain provinces of Austria a voucher-like mechanism known as the Upper Austrian Bildungskonto was introduced to improve skills and qualifications of certain target groups such as employees wanting to upgrade their skills, unemployed persons, women on maternity leave, etc. At the outset the individual desirous of availing training services had to pay for the training himself. Subject to such individual meeting and certain pre-defined attendance or certification criteria, the government reimbursed all or part of the training costs. An evaluation of the scheme has shown that the vouchers were successful in terms of stimulating demand for training, albeit with substitution of public for private fund in a larg e proportion of cases. for a broad range of training and o t h e r b u s i n e s s d e ve l o p m e n t services, by catalyzing the demand for such services rather than through supply-side interventions. MSEs could purchase vouchers which entitled them to get training for their owners or workers at per cent of the value of the voucher. The vouchers could be redeemed in order to obtain training from any of the registered training providers. An important role was played by allocation agencies who were Jua Kali associations, NGOs and others who coordinated with the players in the MSE sector and facilitated implementation of the scheme. The role of these allocation agencies was: Kenya: One of the most welldocumented skill voucher programs is the Jua Kali Voucher Program in Kenya. The main objectives of this program were: upgrading skills of 10 per cent of the micro and small enterprise ( MSE ) manufacturing sector (amounting to around 32,000 enterprises), increasing access of MSEs to t e c h n o l o g y, m a r k e t i n g information and infrastructure, Improving the policy and institutional environment. The program was patterned on a similar one r un by the InterAmerican Development Bank in Paraguay and was directed at two categories of enterprises (I). Micro enterprises that employ between 110 workers, and are run by women or demonstrate potential for growth, and (ii). Small enterprises that employ workers. The program was aimed at expanding the market 22 / The Global ANALYST April 2013 to publicize the scheme amongst potential beneficiaries, to assist MSEs in filling in the voucher applications, to provide counsel to MSEs in selecting the most suitable and relevant type of training. In compensation for these services, the allocation agencies received 3 per cent of the voucher value. The pilot phase of the voucher scheme took place in the cities of Nairobi and Machakos, and covered the following sectors: textiles, woodworking, m eta l wo rki n g, m o to r veh i cl e mechanics and food processing. A tracer study of the pilot phase was carried out in August-September 1997, whose main findings were: The study found that while the MSEs in the control group saw the mean of their sales decrease by 2 per cent, which could be attributed to the deteriorating economic situation, the MSEs which participated in the training voucher program saw the mean of their sales increase by more than double: from KSh. 8,342 to KSh. 18,235 per month. The study showed that the beneficiaries performed better than the control group on almost all variables. Positive impact was noted in the training providers in the form of i n c r e a s e d i n c o m e s, b e t t e r networking, development of new training programs, and an increase in training resources and staff. Outlook The Government has initiated laudable steps in engaging the private sector far more than ever before, in addressing the skilling challenges in India. However, the potential that Vouchers hold to catalyze reform in this sector is unexplored. Vouchers will allow the Government to move away from the role of service provider to one of financier and free up bandwidth to focus on the other pressing challenges of quality of certification, addressing social perceptions of vocational training, etc. Vouchers can equally be used by corporates who seek to contribute to the vocational training space. The big benefit of vouchers over scholarships being the performance linkage; unlike scholarships which work on a onetime payment with perhaps requirements from students on performance, vouchers will involve institutes in taking responsibility for certification/ placement thereby resulting in industry-level benefits. In summary, Vouchers have the unique potential to transform the sector while also benefiting individuals directly. It is therefore imperative that we leverage this powerful tool in building the robust skilling sector that India needs to achieve its development goals! TGA