Monday, August 05, 2013

Skilling You Softly

By all accounts, India is sitting right now on a "once in a life-time" opportunity. For the next twenty years it will have the largest working-age population in the world. Most of them would be moving out of agriculture to seek jobs in construction, manufacturing or services.

The economists have a fancy term for this phenomenon - "demographic dividend". What this simply means is that the country stands to gain (dividends) if this transition takes place smoothly. That is, if farm-workers are able to learn new skills; If they are able to find better paying jobs, then we will all become prosperous and live happily ever after.

The problem with "if" is that it continues to remain in the realm of possibility unless we do something about it. So what has government of India done so far? A National Skill Development Corporation (NSDC) has been set up; Targets have been set for various ministries, to ensure that millions of jobs are created, at least on paper.

NSDC works with about 85 private-sector partners to provide skill-based training in 21 sectors, across the country. Most of this 'skilling' is for youngsters moving into the manufacturing sector.

However, as Megnad Desai pointed out recently (FE 5 Aug), merely liberalizing manufacturing will not help. The devil lies in the details and in this case, the details of the labor laws. "India has made its cheap labor expensive by saddling itself with scores of laws, which interfere with manufacturing and make the creation of large units uneconomical. So 90% of the labour force in the informal sector has no rights and has to work in small manufacturing units as contract labour or rot in the countryside in low-paid rural jobs or suffer NREGA".

We have tied ourselves in knots with so many labor-related laws that entrepreneurs are just not willing to expand capacity and create new jobs. In India there we have 45 laws at the national level and close to 200 the level of state governments that monitor the functioning of labour markets. Under the Industrial Disputes Act, 1947, firms employing more than 100 workers cannot fire workers without the government's permission!

So it is hardly surprising that as per the Economic Census 2005, India had 42 million enterprises with an average of less than three employees! In contrast, thanks to our labor laws, even today, we have less than a million registered companies (2012).

So now is a good time to wonder: Which is worse - to be unskilled and jobless or to be skilled and jobless?

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LINKS

* Mishra, Neelkanth (2013): THE HIDDEN GROWTH, IE 6 Aug 2013 --- http://www.indianexpress.com/news/the-hidden-growth/1151479/

* Desai, Megnad (2013): GETTING NOWHERE FAST, FE, 5Aug13 -- http://www.financialexpress.com/news/getting-nowhere-fast/1151155
- India has made its cheap labour expensive by saddling itself with scores of laws, which interfere with manufacturing and make the creation of large units uneconomical.
- So 90% of the labour force in the informal sector has no rights and has to work in small manufacturing units as contract labour or rot in the countryside in low-paid rural jobs or suffer NREGA.
-  Public money appears to the politicians and, hence, to all who work in the public sector as limitless and costless. This is why schemes come pouring out of the NAC and UPA to spend even more money. If you cannot solve a problem, spend money to smother it.

* National Skill Development Corporation (NSDC) -- http://www.nsdcindia.org/faq/about-nsdc.aspx#ac

* Srivastava, Mehul (2011): Why India Is Rethinking Its Labor Laws --http://www.businessweek.com/magazine/content/11_04/b4212013616117.htm
- Companies must keep 6 attendance logs and 10 separate accounts for overtime wages, and file 5 types of annual returns. There are at least 11 definitions of the word "wage."
- The success of the Software Technologies Parks of India Act—and of special economic zones in China—has spurred the revival of a 45-year-old plan that creates special enclaves with more infrastructure and fewer labor laws.

* Basu, Kaushik (2006): Why India's labour laws are a problem -- BBC -- http://news.bbc.co.uk/2/hi/south_asia/4984256.stm
- In India there are 45 laws at the national level and close to four times that at the level of state governments that monitor the functioning of labour markets.
- Industrial Disputes Act, 1947:  Formal sector employing more than 100 workers cannot fire workers
- Data from the Ministry of Labour reveal that in the year 2000 there were 533,038 disputes pending in India's labour courts; and of these 28,864 had been pending for over 10 years.
* Tokyo - largest zoomable photo - http://io9.com/the-largest-photo-ever-taken-of-tokyo-is-zoomable-and-975127382

- no worker can be made to work beyond 75 hours of overtime a quarter.
- a report by McKinsey, the consulting firm, estimated that if India overhauled its labor laws, its manufacturing exports could grow from $40 billion in 2002 to $300 billion by 2015.


3 comments:

nivonto asomoy said...

Its really unfortunate and untrue to find out, or, rather point out the 'labour laws' as culprit for sleepy growth of manufacturing sector !! One should enquire and state what percent of manufacturing cost is due to payment of workers before making such statements.

Dinakarr said...
This comment has been removed by the author.
Dinakarr said...

Hi Nivonto, It will be worthwhile to count the golden eggs only if we keep the proverbial goose alive. Even the cheapest toys & household goods are now imported from China because most of our toy industry is simply not competitive enough...our entrepreneurs will venture into manufacturing and employ workers only if they have a chance to earn a living themselves!