What ails India's young and skilled workforce?

Till the jobs come and wages improve, India’s aspirational young certificate holders have learnt that their degrees come with no guarantees, feels Aman Sethi.

At 3:30 am, the house is dark, the kitchen quiet.

K wakes up tired, washes her face clear of the dreams of last night, rinses dishes, and cooks for the family.

Two hours later, she nods off in the company cab speeding along the broad highways of this industrial township on Delhi’s outskirts.

The A shift begins at 6 am, K is unrecognisable in a lint-free uniform, full-face mask, hairnet, gloves and boots, as she makes intravenous solutions for Baxter International, an American health care giant that employs 49,700 employees across the globe.

For the next 15 years, a million young Indians will join the workforce every month, a vast majority of whom will work in the informal and services sector.

Historical precedent suggests, and most economists agree, the sustained growth necessary to absorb these young workers and hasten the transformation of a persistently agricultural economy will most likely stem from manufacturing jobs like the ones at Baxter.

In 2009, the Indian government set a target of imparting vocational and technical skills to 500 million workers by 2022 to smoothen this transition, and Prime Minister Narendra Modi has made it clear that the revival of manufacturing is of prime importance to his new government.

Success could herald a spell of manufacturing-led growth in a period when rising wages in China, the world’s factory, could push global manufacturing elsewhere.

Failure would result in a vast unskilled legion trapped in low-paid dead-end jobs.

Worker unrest roiling through India’s industrial belts suggests that skills training in its present form will not defuse this demographic time bomb.

Rather, the policy might have unwittingly sown the seeds of discord as ambitious graduates of these programmes struggle to find meaningful employment at a time of anemic growth and stagnant real wages.

A fortnight ago K and co-workers occupied the Baxter factory and forced a shutdown, on hearing that security guards had assaulted a worker in the human resource department in the most recent skirmish of a protracted struggle for better wages and working conditions.

The unrest continued this week as production faltered. Workers have demanded management raise wages and allow the formation of a workers union.

A Baxter spokesperson disputed the workers’ version of the incident, and said the worker injured himself when he deliberately broke a glass pane, “Baxter is deeply concerned about the recent sit-in and is currently looking into this matter,” she said of the sit-in, subsequently, “Some employees violated the code of conduct, which resulted in a significant reduction in productivity.

"We strive to be an excellent employer, focused on the combined interests of our employees, our business, and our financial stability.”

Six years ago, K said, she made about Rs 5,000 in hand each month; she now earns about Rs 7,000 for eight hours of factory work. It’s a permanent job in an economy characterised by contract labour, but her wages evoke a bafflement mirrored by thousands of young factory workers.

“I am an educated person - I did 12 years of school and a degree at an ITI [Industrial Training Institute],” she said, “Then, why do I make as little as a daily wage construction worker in Delhi?”

In the broadest sense, international studies indicate that better education does lead to better wages; yet, the waters muddy from there on.

In India in 2010, those with a college degree earned an average of 36 per cent more than those with a high school degree, according to a recent World Bank study.

Those with vocational skills didn’t fare as well: Skilled machine operators -- broadly representative of the industrial class -- earned only 14 per cent more than an unskilled worker.

Further, the labour market is significantly skewed towards non-technical work at the entry level.

In the automobile industry, for instance, the average monthly gross salary of a machine operator in Delhi is Rs 7,700, while a receptionist earns Rs 11,700, or about 50 per cent more, according to data compiled by TeamLease, one of India’s largest labour contracting firms.

At such low salaries, mandatory deductions account for 35-49 per cent of gross salaries, implying that a young, ITI-educated, factory worker in Delhi is probably living on Rs 4,000 a month.

After eight years of on-job experience, a machinist can hope for a 72 per cent increment, while a receptionist can expect a 110 per cent hike.

“Industry doesn’t seem to put a premium on skilling and mostly hires at minimum wage,” said a labour analyst, “Which is why the new skilling policy focuses on working closely with industry to evolve appropriate training standards.”

“The skills gap is most pronounced as you move up the value chain.

"At the entry level, more than 60 per cent of jobs don’t require academic qualifications beyond 12th standard,” said R C M Reddy, Chairman of the Ficci Skills Forum, “From supervisors upwards, there is a serious skills gap.” This could explain why workers in India rarely rise beyond the shop floor.

“I’m not sure there is a single best way to prepare youth for future employment.

"Clearly, an emphasis on quality education throughout is needed, including early child education, primary and secondary, technical and vocational,” said John Blomquist, lead economist for social protection and labour for South Asia at the World Bank, ”For youth in the 15-25 age group, international evidence suggests that training must be aligned with labour demand and combining it with job search and placement can be effective.”

The task of skilling India’s workforce has been divided between a government initiative focused on training 350 million people by upgrading the country’s ITIs, and the National Skills Development Council, an industry-led initiative that has funded private institutes that have trained two million of their 150 million target so far.

The private institutes, NSDC officials said, identify vacant job positions and train their students accordingly to ensure job placements.

A majority of training and placement has occurred in services rather than manufacturing.

In the manufacturing oriented, state-run, Industrial Training Institutes, the link between training and employment is tenuous, at best.

“If you can give a certificate but not a job, that is a liability.

"Most of our students are poor, some study by day and work the night shift,” said Sunil Katyal, Chairman of the H J Bhabha ITI in East Delhi, “But not a single ITI in India has a full-time placement officer.” Till four years ago, Katyal said, most ITI’s didn’t even have a placement cell.

This has led to a mismatch between training and employment, and lower wages.

At Baxter’s Manesar plant, many of the women workers studied fashion technology at ITIs across the country, but on recruitment were trained to make plastic medical equipment using radio frequency welders.

Only 20 per cent of Indian firms provide formal on-job training, compared to 87 per cent of Chinese firms.

The deeper lesson from China’s rapid industrial expansion, and the now-routine emigration of Indian labour to Africa and West Asia, is that industrial growth and on-site training tends to create a skilled workforce rather than the other way around.

Till the jobs come and wages improve, India’s aspirational young certificate holders have learnt that their degrees come with no guarantees.

“I’ve been lying to my parents and my wife,” said a young worker at Baxter, who joined the company after resisting familial pressure to work on the ancestral farm, “I’ve told them I earn Rs 10,000 a month.

"If they know I get only about Rs 6,000 in hand, they’ll force me to come back home.”