Is India's Job Market Struggling Due to a Growing Gap Between Skills Demand and Workforce Readiness

Recent UNESCO report highlighted that only about 12 per cent of Indian students in the age category of 10–16 years are proficient in basic mathematics

The Indian economy over the last few years has seen the phenomenon of an ever-increasing divide between the availability of jobs and the skills needed to do those jobs.

With increasing role of technology in jobs - whether in manufacturing or services – organisations need higher levels of skills from employees than our educational or training infrastructure is seemingly able to churn. Consequently while there is ample availability of labour in the economy, genuine talent remains in short supply.

This is not a static problem – it is progressively getting accentuated both from the demand and supply side. On the demand side of the equation, technology adoption is leading to greater structural change in workforce requirements – both in numbers as well as in nature of skills.

On the supply side, the participation in education and training as well as the quality of the training imparted have both not moved in line with market requirements.

Gross Enrolment Ratios across all levels of education has improved over the last few years – but only marginally over the last five years. Similarly the median number of years spent in education has remained broadly the same (approximately 7.52 years in Urban India and in rural India it remains below 52 years).

Similarly quality of education remains an area of concern – a recent UNESCO report highlighted that only about 12 per cent of Indian students in the age category of 10 – 16 years are proficient in basic mathematics.

It is important to remind ourselves that these issues do not just impact the demand or supply of jobs but have enormous downstream impact on quality of Indian manufacturing and services industries and in turn India’s overall global standing as an economic and trade power. In a world where knowledge and technology are increasingly the main sources of competitive advantage, capability gaps can potentially be our biggest challenge.

Along with the role of government in helping skill development, employers also have a significant role to play in helping develop capability levels. However, given the largest segment of employment in India is generated by small and medium enterprises, the focus and investments in skilling remains low or event absent.

The PLFS surveys point to the fact that less than 16 per cent of organizations provide any form of structured skill training. The responsibility therefore shifts even more to larger employers who have the scale to be able to invest in capability development – for such organizations skill building is not just about improving the quality of their manpower, but also a source of competitive advantage.

One trend that has been prevalent for many years now is the role that large employers have played in driving effective skill development not only within their organization but also going upstream into improving curriculum and training within higher education institutes etc.

Certain industry groups have now taken progressive steps towards collaborating in capability building initiatives. These collaborations are resulting in co-creating industry relevant curriculum, investing in training infrastructure, faculty etc. The Sector Skill Councils under the aegis of National Skill Development Council are also supporting these initiatives thereby increasing reach for employees beyond just the larger organizations in any sector.

Indian companies can be encouraged by the government in this endeavor by providing increased tax breaks for skill development. Currently certain skill development expenses and investments (outside of the organization) qualify as Corporate Social Responsibility expenses – however increasing the remit of this and allowing organizations further tax incentives to invest in skill development could go a long way in encouraging companies to drive capability building.

As an example, industry level skilling initiatives would hugely benefit if companies are given incentives and tax benefits for contributing not just financially, but also donating machinery and faculty / trainer time etc. Beyond active and increasing government investments in capability development through education and training infrastructures, supporting companies through taxation and related incentives will go a long way in driving participation of larger Indian companies.

Long term competitive advantage for the Indian economy would come from stronger institution building in education, but while those investments will take time to bear fruit, more immediate solutions will come from enabling and encouraging companies lead the charge.

(The author is Anandorup Ghose, Partner & CHRO Programme Leader, Consulting, Deloitte India)

(The views belong solely to the author)

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