A study of skill gaps in the informal sector.

AuthorSodhi, J.S.
PositionBy Invitation


Skill gaps in industry are identified as lack of qualified trained persons as per the perspective of the employer. They could be due to inadequacy in general education levels and or due to inadequacy of technical skills. Most of the developed and the developing countries have been experiencing skills gaps as perceived by the employers. While general education has been the norm in most countries, vocational education has assumed much greater importance now as it plays a central role in building competencies of those entering the job market along with those who are already employed. In that sense, it is the main factor contributing to the efficiency and economic growth of a nation.

While many developed economies have given primacy to vocational education to develop competencies, an OECD study (www.org/edu/learningfor jobs) found that it has tended to remain separated from the markets, except in Germany, and has created in the past more gaps between the needs and the available skilled workforce. UK, in particular, followed a model in which primacy was given to general education as a means of imparting technical education. General education and vocational education in UK have also followed separate trajectories where as in Germany these two have been highly integrated. The UK and the German models led to higher proportion of youths with higher levels of general education in the former and those with higher skills in the latter.

In view of the fast paced technological advancements since the 90s, UK as well as some of the other European countries have overhauled their vocational training structure since 2000 to meet the emerging needs of skills in their respective countries

How much has been the role of the government in vocational education has been a matter of debate impacting the outcomes of technical training (Greinert, 1998; Green, 1995; Nelson, 2007; Niemeyer, 2007 as in Pilz, 2012). The available models have been categorized in to the state led model and the market model. The latter has been seen to be an impediment to providing the desired vocational training as the companies train only as per their needs. The state led model has mixed results. While Germany offers the best example of the state led model in which it provides the legal framework, it involves the companies and the power to provide training is devolved to them. In company vocational training on the one hand and the wholly school system, on the other is the hallmark of the German dual system of vocational training (Sussane & Pilz, 2009). France's vocational education system is also state dominated but rooted in schools and colleges. UK's new revamped system provides vocational education in separate vocational institutes.

Australia provided vocational education both by the government funded institutes as well as the private operators although the number and quantum of youths trained in the former have been declining over the years. The private operators have to follow the national learning framework consisting of Australian training framework, Australian qualification framework and industry training packages. The content of vocational training framework is theoretically decided by industry and not by the government or the training providers. Australia also has Industry Skill Councils and the package is owned by one of the councils.

Despite persistent efforts, most of the developed economies of the world and Europe are experiencing both the quantitative and the qualitative mismatches. There are fewer workers available on the one hand and their skills do not match with those required in the market on the other.

Skills Landscape in India

The working-age population in India is 700 million out of the total population of 1.2 billion (as in 2012). Of these 700 million, only 200 million are graduates. 58% of the population is below the age of 30 years.

India has a long history of providing vocational education. Craftsmen Training Scheme was initiated in 1950 by establishing government owned Industrial Training Institutes (ITIs) for imparting skills in various vocational trades to meet the skilled manpower requirements. The set up was supplemented by the privately owned Industrial Training Centers (ITCs) and the Craftsmen Training in schools. As of 2012, there were 4647 ITIs and ITCs in the country. These schemes have been under the jurisdiction of Ministry of Labor and Employment. Additionally, the Ministry of Human Resource Development provides vocational education in schools to standard VIII and above students. Over the years, vocational education has been supplemented by a host of other ministries and today there are 17 ministries providing vocational education in various trades. Until about four years back, the schemes remained government led as it formulated the policy, laid down standards and other parameters of vocational education.

While this set up of vocational education has been in operation since the fifties, questions began to be raised about its efficacy to meet the demands of industry. During the last decade, labor market imperfections emerged as India witnessed a near zero employment growth with high rates of GDP growth. It emerged that there are huge skill gaps among those trained in the vocational training institutes and those required by the employers.

The Ministry of Labor commissioned a study by ILO (Gusskov, 2003) to find out the efficiency of vocational education in India. The study which was conducted in three Indian states of Andhra Pradesh, Orissa and Maharashtra found that the efficiency of the systems has been hampered by the fact that these institutes have been imparting training in accordance with the industrialization pattern of the country which in view of the inward looking policies of the government did not put pressures on industry. ITCs, which were larger in numbers, were covering even lesser number of trades than the governments run ITIs. While India adopted the export oriented industrialization since the 1990s, there was very little change in the number of trades or the quality of training being imparted in these institutes. The study also found that there was a lack of demand by the students as well as the employers to hire those trained in these institutes. About 41%, 35% and 16% of passed out students from the technical training institutes were not able to get any type of employment in Andhra Pradesh, Orissa and Maharashtra respectively.

Some other prominent issues of vocational education and skill development are as follows:

* The total current capacity in skill development under various government schemes is not more than about 5 million per annum. The market requirement is 6 times more but the government's efforts are not sufficient to bridge neither the existing the skill gap nor the 12.8 million per annum entrants to the workforce.

* It is estimated that by 2022, India would have a skill gap of almost 250 million across the 21 key sectors. Of the 550 million people under the age of 25 years, only 11% are enrolled in tertiary institutions.

* The Sengupta Committee (2009) report had highlighted that only 2.5% of the informal sector workers have received any kind of formal training while 12.5 percent had received nonformal training. The report had proposed a scheme of skill formation and social assurance which may provide entitlements to all registered youth in the unorganized sector to receive training through placements.

* Overall, only 11% amongst the workforce have received...

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