Do Skilled Workers Have Decent Jobs?

Transcription

1 Commentary Do Skilled Workers Have Decent Jobs? Abhinav Narayanan 1 Emon Nandi 2 Indian Journal of Human Development 11(1) Institute for Human Development SAGE Publications sagepub.in/home.nav DOI: / Abstract Skill is an important attribute that makes a worker employable in a decent job. In India, successive governments have recognized this fact and have, over the years, taken up a number of investments and initiatives with regards to skill development of the workforce. The National Skill Development Mission introduced in the year s budget is based on the underlying positive relationship between skill and employability. But do the skilled workers in India have decent jobs? This article shows that a majority of the skilled workers are employed as informal workers with no employment benefits. We discuss two important reasons that may have contributed to the ineffectiveness of skill development programmes in creating decent job opportunities for workers. Keywords Skill development, informal employment, decent jobs, technical education, vocational training Introduction The Union Budget, laid special emphasis on development of skills in India. The budget document has a separate section titled Skill India which recognizes the fact that only 5 per cent of the workforce in India undergoes formal skill training to become employable. In order to address this skill deficit, the document proposes to launch a National Skill Development Mission to be spread across different ministries. The rest of the Skill India section covers some specific programmes that the government plans to implement with regards to skill development. In this context, however, we would like to address the following question: Do the skilled workers have decent jobs in India? By decent jobs, we mean the jobs that offer a written contract and in which the workers are eligible for social security benefits and paid leaves. Social security benefits include both employer financed and contributory schemes such as the provident fund, pension, gratuity, health and maternity benefits, etc. These benefits provide a safety net to the workers against negative economic shocks. They also provide the workers with job 1 Research Position, Reserve Bank of India, Mumbai. 2 Doctoral Candidate, Jawaharlal Nehru University, New Delhi. Corresponding author: Abhinav Narayanan, Strategic Research Unit, 8th Floor, Central Office Building, Reserve Bank of India, Shahid Bhagat Singh Marg, Mumbai abhinav.narayanan@gmail.com

2 Narayanan and Nandi 125 security and basic human rights protection. The jobs that offer all these benefits to the workers are called formal jobs (formal jobs and decent jobs are used interchangeably in the text) and the jobs that offer neither of these benefits are called informal jobs. The workers in the formal and informal jobs are known as formal and informal workers, respectively. In this article, we use the NSSO 68th Round data on Employment and Unemployment to show that the skilled workers, although a very small portion of the entire workforce, do not necessarily end up having decent jobs as a majority of them are employed as informal workers with no employment benefits. The next section provides a descriptive analysis of the distribution of skilled and unskilled workers into formal and informal employment. We focus on two parameters that distinguish a worker as skilled and unskilled: technical education and vocational training. The third section presents a discussion on government spending on skill development missions. The fourth and the fifth sections discuss the two possible reasons that may explain the ineffectiveness of the skill development policies and the way forward. 1 Skill and Decent Jobs Figure 1 shows the distribution of workers into formal employment, informal employment, unemployed workers and workers not in the labour force. In , the share of informal employment in India was 85 per cent of the total labour force. 2 One important aspect of informalization in India is the increasing share of informal employment in the formal sector. In , the share of informal employment in the formal sector was 54.1 per cent that increased to 67 per cent in (IAMR, 2014; estimates). Thus, a majority of the jobs that the formal sector has created over the years have been in the form of informal employment. But do formal and informal workers sound synonymous to skilled workers and unskilled workers, respectively? In other words, are there any reasons to believe that skilled workers are the ones who get formal or decent jobs and the low-paying informal jobs are left for the unskilled workers? In order to answer this question, first let us consider workers who have some technical Figure 1. Distribution of Workers by Type of Employment (Percentage) Source: Authors calculation based on NSSO 68th Round data.

3 126 Indian Journal of Human Development 11(1) education (skilled) 3 and with no technical education (unskilled). Figure 2 shows that 18 per cent of the formal workers are skilled, while only 4 per cent of the informal workers are skilled. This figure may give the reader a wrong impression that the skilled workers have a higher chance of getting into formal employment because the share of skilled to unskilled workers is higher in formal employment. But this is not true because Figure 2 shows us the relative share of skilled workers with respect to unskilled workers in each type of employment. To overcome this fallacious observation, we look at the distribution of skilled workers and unskilled workers into different types of employment. Figure 3 shows that 48 per cent of the skilled workers are employed as informal workers, while only 28 per cent of the skilled workers are formally employed. Thus, a majority of the skilled workers do not have jobs that give them access to employment benefits such as a written job contract, social security benefits and paid leaves even after acquiring some sort of technical education. Another means of imparting skill into the workforce is through vocational training. In India, there are two types of vocational training: formal and informal. Figure 4 shows the distribution of workers with formal vocational training, informal vocational training and no vocational training across the different types of employment. As can be seen, from the middle panel of Figure 4, 53.2 per cent of the workers with formal vocational training are informally employed, while 19 per cent of the same set of workers is formally employed. 4 Thus, the two means of education that makes a worker skilled (technical education and vocational training) do not necessarily make the workers employable as formal workers who have access to employment benefits. There could be many reasons why skill level of the workers has not been effective enough to produce decent jobs. One reason could be the quality of technical and vocational education. The other reason could be demand-side issues that induce the firms to employ workers informally regardless of their skill level. But before we discuss the reasons why skill development has been ineffective in Figure 2. Distribution of Skilled/Unskilled Workers (Technical Education) Across Types of Employment (Percentage) Source: Authors calculation based on NSSO 68th Round data.

4 Narayanan and Nandi 127 Figure 3. Distribution of the Types of Employment Across Skilled and Unskilled Workers (Technical Education) (Percentage) Source: Authors calculation based on NSSO 68th Round data. producing decent jobs, let us look at the government s investments and initiatives over the years with regards to skill development. Skill Development: Initiatives and Outcomes The government has been very proactive in the area of skill development as can be inferred from the successive annual budgets. The annual budget by the Government of India, for example, saw many new programmes and initiatives with regards to skill development. Most notably, a separate ministry called the Ministry of Skill Development and Entrepreneurship had been created to focus on the sole objective of skill development. The Deen Dayal Upadhyay Grameen Kaushalya Yojana was reemphasized that works towards making the rural youth employable. Like every year, funds have also been allocated towards the upgradation of Industrial Training Institutes (ITIs) and various employment training programmes. Figure 5 shows the trend of spending on employment and training and technical education. Spending on both technical education and employment training has been increasing during the period of with mild fluctuations during There has also been a significant increase in the number of ITIs and in the total seating capacity (see Figure 6) in these institutes during the period of In addition to this, there has been a huge increase in the number of private engineering colleges and technical institutes over the years. This increase in the number of private players undoubtedly increases the access to skill development for the workforce.

5 128 Indian Journal of Human Development 11(1) Figure 4. Distribution of the Types of Employment Across Skilled and Unskilled Workers (Vocational Training) (Percentage) Source: Authors calculation based on NSSO 68th Round data. Figure 5. Spending on Technical Education and Employment and Training Source: Annual Budget Documents, Ministry of Finance, Government of India. Thus, there has been a discernible improvement in the access to vocational and technical education. But whether these skill development initiatives have proven to be beneficial to the workers in getting decent jobs is an empirical question. As shown in the previous section, a skilled worker does not necessarily have a decent job. In the next section, we argue that the low quality of education in the technical and vocational training institutes produces low quality of skilled workers. Hence, even though the workers become skilled, their low quality makes them unemployable in decent jobs.

6 Narayanan and Nandi 129 Figure 6. Number of ITIs (Government + Private) and Total Seating Capacity Source: Ministry of Labor and Employment, Government of India. The Quality of Technical/Vocational Education The combination of the three factors, knowledge, skill and personal traits, is very crucial for determining employability. According to Yorke and Knight (2003), employability is a set of achievements skills, understandings and personal attributes that make the students more likely to find a decent employment. Poor quality institutions would invariably fail to inculcate these three types of achievements among its students, and a decent employment would remain an unattainable goal for long. Higher education in general is expected to increase the cognitive and productive capacity of a person as argued in the human capital theories proposed by Schultz (1961) and Becker (1975). But here we focus only on the role of technical education and vocational training for imparting skills among Indian youths and ensuring them a decent job. In India, the institutional framework of technical education and vocational training includes mainly two types of institutions. First, the degree-providing institutions such as the Indian Institutes of Technology (IITs) and other undergraduate engineering colleges, and second, the diploma-providing institutions such as the vocational training institutes and the Industrial Training Institutes (ITIs). An expansion in the framework of skill development means an expansion in both these types of institutions; this is evident from the increasing investments and initiatives of the government, as discussed in the previous section. However, the most difficult challenge that lies before an educational sector is to expand without compromising with quality. The increase in the number of private players, as mentioned earlier, has increased the access to technical education. In the process of expanding the quantity, however, the quality has been compromised. In fact, some studies have cited this issue of low quality of technical education as the main cause for poor employability of engineering graduates. NASSCOM and McKinsey (2005, 2009) reports found that only 26 per cent of the engineering graduates are employable. Blom and Saeki (2010) reported the lack of satisfaction among the employers, regarding the poor quality of the Indian graduates. The Report of Working Group on Engineering Education (2008) appointed by the National Knowledge Commission and the National Higher Education Mission or the Rashtriya Uchchatar Shiksha Abhiyan, (Ministry of Human Resource Development: In association with Tata Institute of

7 130 Indian Journal of Human Development 11(1) Social Sciences, 2013) has also expressed concern about the poor performance of the technical education sector in India. The quality of vocational training has experienced the same fate in the process of expanding its access to the workforce. The publicly funded vocational training institutes are possibly of poor quality with lack of infrastructure, poor teacher quality, and lack of motivation and obsolete skills among the trainers. Improvement of infrastructure, training the trainers on a regular basis, updating the curriculum according to the needs of the industry are some of the prerequisites for a meaningful expansion of technical and vocational education. The government has roped in the private players to upgrade the ITIs through the Public Private Partnership (PPP) mode. But, malpractices and subversion of norms can be the possible threats to the quality of education and training, if a proper regulatory framework is not maintained. The compromise of quality that took place after the increase of private players in technical education should serve the government as a reference point, when roping in the private players for the upgradation of the ITIs. It must be remembered that the quality of a technical or vocational institute depends on the ability of the institution to impart knowledge among its students and make them skilled. The skill level of the worker should help him find a decent job, which has not been the case in India. The failure to ensure a decent employment for skilled workers in India (as shown in previous sections) can partly be explained by the poor quality of education and training in the technical and vocational institutes. However, the rest can only be explained through labour market imperfections. Ul-Haq and Ul-Haq (1998) and King (2012) argued that in India and its neighbourhood, there is a tendency among the employers to hire casual unskilled workers instead of skilled ones. The industry prefers to recruit unskilled or semi-skilled workers, without offering them any job security and pay little or no wages to them. They eventually train some of these workers through the on-the-job training programmes, and offer decent contracts to a very few of those workers who suit their requirements. The rest, remain as permanent casuals a term coined by King (2012). Therefore, skill development may not necessarily lead to decent employment, if the demand-side players (employers) are non-responsive. The main thrust of recent policy documents on skill development in India reiterates the need to make technical and vocational education sector to be demand driven. But, if the demand coming from industry is adequately small, then the expansion of skill development mission will not be meaningful. In the next section, we briefly discuss the demand-side issues and its effects on creating decent job opportunities. Demand-side Issues and their Effect on Decent Jobs The demand side of the labour market is comprised of the formal and the informal sector firms. As we have noted earlier in this article, the formal sector employs 67 per cent of the workers informally without paying them any employment benefits. The fact that the formal sector employs a majority of its workers informally can be explained by the two main constraints that the firms may face in the labour market. Firstly, it is commonly argued that the strict labour laws constrain the firms to create formal jobs. 6 Paradoxically however, the labour laws that are meant to provide protection to the workers rights cover only a small percentage of the workers. The Economic Survey (Ministry of Finance, Government of India, 2013) points out that India may suffer from strict worker protection without protecting most of the workers. This is evident from the fact that 85 per cent of the total workers in India are employed as informal workers. Thus, there are clear avenues of reforms in the labour laws, whereby more of the workers are brought under the purview of the labour regulations.

8 Narayanan and Nandi 131 Secondly, there are monetary costs associated with formal jobs, as the firms have to pay for the employee s benefits. These associated costs could constrain the firms to increase formal jobs and resort to contractual employment instead. So, changing the labour laws alone will not increase formal jobs, if the firms do not change their behaviour. In this respect, the government and the regulatory bodies must undertake proactive measures to spread awareness on the benefits of formal employment. As a matter of fact, the formal workers are much more productive than the informal workers. The Economic Survey roughly estimates that within the formal sector, formal workers are 10 times more productive than the informal workers. Although, it may be argued that the informal workers have lesser skills compared to their formal counterparts that may explain these difference in productivity. But in this article, we have shown that a majority of the skilled workers are employed as informal workers. Thus, it is obvious that formal workers are much more productive than the informal workers even with the same set of skills. Apart from the economic benefits, formal jobs with employment benefits have enormous societal benefits related to the workers health, standard of living and overall well-being. Maternity leaves and health insurance, for example, may improve the situation of women and public health, in general. If these social benefits of formal employment are added to the private economic benefits, then the total benefits of employing formal workers are more likely to outweigh the costs. The Unorganised Workers Social Security Act, 2008 (UWSS) covers a large fraction of the informal workers employed in the informal sector. This programme on paper covers the informal workers in the formal sector as well. However, it must be noted that extension of the UWSS to the informal workers in the formal sector could dissuade the formal sector firms to increase formal jobs. This is because the UWSS would anyway cover the informal workers in the formal sector, so the firms will not have any incentive to increase formal jobs. Thus, extension of the UWSS to the informal workers in the formal sector should be seen as a temporary measure. The permanent solution should be a combination of reforms in the labour laws and an awareness initiative, whereby the firms are made aware of the benefits of formal employment. Conclusion In this article, we show that a majority of the workers, in spite of having technical education and vocational training, are employed as informal workers who receive no employment benefits. We cite two main reasons that may explain why skilled workers are unable to find decent jobs. First, the low quality of technical education and vocational training produce low-skilled workers, who remain unemployable even after obtaining technical and vocational training. Second, there are demand-side bottlenecks that can be addressed through reforms in the existing labour laws and educating the firms on the benefits of formal jobs. Notes 1. The views and opinions expressed in this article are personal. 2. Authors estimates based on the 68th round NSSO data on Employment and Unemployment. The sample is restricted to the primary working age of males in the years age group in the non-agricultural sector. Figures 1 4 are based on this sample. The term total workforce excludes the persons who are not in the labour force. The IAMR (2014) estimates informal employment to be 92.5 per cent of the total workforce, which is higher than our estimates. The difference is due to the inclusion of the agricultural sector in the IAMR study. 3. A person has some sort of technical education, if he holds a degree, diploma or certificate in engineering and technology, agriculture, medicine and all other technical fields.

9 132 Indian Journal of Human Development 11(1) 4. It must be noted here that only 5.3 per cent of the labour force have received formal vocational training, per cent received informal vocational training and the rest, which is the majority, have not received any vocational training. 5. The figures for technical education cover the central plan outlays for technical education. The figures for employment and training cover the total expenditure on employment and training as reported by the annual budget documents. 6. Besley and Burgess (2004) and Bhattacharjea (2006) are the two most cited papers that deal with the effects of labour regulations on economic activities. References Becker, G. S. (1975 [1964]). Human capital: A theoretical analysis with special reference to education. New York, NY: Columbia University Press. Besley, T., & Burgess, R. (2004). Can labor regulation hinder economic performance? Evidence from India. Quarterly Journal of Economics, 119(1), Bhattacharjea, A. (2006). Labour market regulation and industrial performance in India: A critical review of the empirical evidence. Indian Journal of Labour Economics, 49(2), Blom, A., & Saeki, H. (2010). Employability and skill set of newly graduated engineers in India. Retrieved 12 July 2017 from, set%20of%20newly%20graduated%20engineers%20in%20india.pdf IAMR. (2014). Why a jobs turnout despite slowing growth? (IAMR Occasional paper no. 1/2014). Planning Commission, Government of India. King, K. (2012). The geopolitics and meanings of India s massive skills development ambitions. International Journal of Educational Development, 32(5), Ministry of Human Resource Development: In association with Tata Institute of Social Sciences. (2013). Rashtriya Uchchatar Shiksha Abhiyan/National Higher Education Mission. New Delhi: RUSA Resource Centre. Ministry of Finance. (2013). Economic survey of India New Delhi: Government of India.. (2015). Budget highlights New Delhi: Government of India. Nasscom-McKinsey Report. (2005). Extending India s leadership of the global IT and BPO industries. New Delhi: Nasscom in collaboration with McKinsey & Company. Nasscom- McKinsey Report. (2009). Perspective 2020: Transform business, transform India. New Delhi: Nasscom in collaboration with McKinsey & Company. Report of Working Group on Engineering Education. (2008). National Knowledge Commission. India. Retrieved 12 July 2017 from, Schultz, T. W. (1961). Investment in human capital. The American Economic Review, 51(1), Ul-Haq, M., & Ul-Haq, K. (Eds.). (1998). Human development report in South Asia. Islamabad: Human Development Centre & Karachi: Oxford University Press. Yorke, M., & Knight, P. (2003). Employability in higher education. Learning and employability series. ESECT: LTSN Generic Centre.