Private Sector and Skills (Country Case Study)October 28, 2015
(C) Wadhwani Foundation 2014
About Wadhwani Foundation
• Nominated by President Obama to become Trustee of Kennedy Center
• Forbes 400 richest American
• Member of the Gates Buffet Giving Pledge; Committed to donating 80% of his wealth through philanthropy
• Chairman, Wadhwani Foundation which he started in 2000
• CEO Symphony Technology Group which he built from startup to $3 billion in less than 10 years
Enable large scale job creation through entrepreneurship
Accelerate employability through skill development
Empower the educated disabled
Impact policies to accelerate economic activity
Promote world class research and innovation
Accelerating economic development in emerging economies - creating and fulfilling millions of jobs
India’s Demographic DividendChange in working age population (2025 less 2015)
• India will account for 20% world’s working age population• Only 7% of India’s population has vocational education.
Source: Global Demographics, Macquarie, September 2015
Status of Skill Development in India
Education, Quality and not the Quantity that matters
• %age of secondary completed population: 40% (vs 23% in 2005)• 7% vocationally trained, but only 3% underwent formal training.• Right to Education Introduced in 2009.• Learning Outcomes remains low
Productivity - lot of scope for improvement
Employment: Female participation rate key to drive productivity and growth• Employment propensity for females is 28% (vs. 82% for males)• Attributed to cultural attitudes and social norms about women in workplace.
Weaknesses in existing Vocational Education System
Mismatch between demand and supply
Weak Industry and Job Linkages
Out-dated courses and inadequate curriculum
Lack of practical orientation and apprenticeship
Stigma/ Lack of Motivation
Financial constraints
Dead End – Certificates and DiplomasAspirational links to Higher Education and better jobs unfulfilled
Education Profile of India’s Population (15+ age group)
Source: Global Demographics, Macquarie, September 2015
• India’s workforce is much less educated than its peers.• Impacts productivity and propensity to be employed.
College and High School Graduates Ill-Equipped for Industry
Skilling needs to align with the Economic Growth
• Most of vocational education focused on Manufacturing industry• 58% of India’s GDP now comes from Services Sector Distribution of Work Force
Initial Inroads by Private Sector in Skilling: Case Study - NIIT
• Started in 1982 – Bringing People and Computers together…Successfully
• Model: Industry driven, placement led, student paid, for-profit, high quality, aspirational
• Objective: Help nascent IT industry grow
• Introduced franchising in training• Many more for-profit IT training
organizations started• Became engine for provide trained
people to India’s IT industry• Got listed in the stock exchange in
1994• Has impacted 35 Million learners
across 40 countries
Lesson: Make Training Aspirational, Industry Led
Initial Inroads by Private Sector in Skilling: Case Study
Skill Training expanded in areas like• Air Hostess Training Schools• Sales Training Schools• Fashion Designing• Pilot training
But did not expand to Blue collar jobs!• Informal training continued to dominate• Guru….Chela
In-house training by companies• IT industry took the lead• Hospitality, Large Auto manufacturer’s ….
Government / PSU jobs remained aspirational• Coaching for recruitment exams continued to expand
2007-2012 Journey – National Skills Mission 2009
National Skill Development Corporation (NSDC) set up in 2010.• 51% private sector and 49% public
National Skill Development Fund (NSDF)• Primarily funded from General Tax Revenues
Target to skill 500 Mn during 2010-2022
Main growth in Skilling Capacity• Increasing private sector ITIs.• ~250 Private VTPs – Financed by NSDC• Skilled about 3.3 Mn people till Mar’15
Release of National Skills Qualifications Framework (NSQF) in 2012
• National Occupational Standards released for ~1300 Job Roles• Skill Training being aligned to NSQF – Work in Progress
37 Sector Skill Councils set up (Industry bodies, NSDC facilitated)
• Create National Occupational Standards• Set up Assessment and Certification ecosystem
Mainstreaming skills for Employment
ITI Program
Year1
NSQF Diploma
Class12Pass
Year2
NSQFAdv. Dip.
Year3
High SchoolIX | X | XI | XII
IndustryEmployment
NSQF L2 L3 L4
School Program Community College Program
L1NSQF B.Voc.
National
Skills
Qualifications
Framework
National Policy for Skill Development and Entrepreneurship - 2015
110 Mn additional skilled manpower required across 24 key sectors by 2022
25% high schools to integrate skilling with formal education over next 5 years.
3-tier structure for Skill Development Mission
Key Paradigms• Aspiration & advocacy, Capacity, Quality, Synergy,
Mobilization & Engagement, Promotion of skilling among women, Global Partnerships, Outreach, ICT enablement, Trainers & Assessors, Inclusivity
Financing Mechanisms to scale Skill DevelopmentSupply Demand Issues
Supply Side• Moral Hazard• Skilled people as "Public Goods"
Demand Side: Effective demand needed from Youth• Information Asymmetry• Ability to pay
• Final cost of training• Opportunity cost of not being in job
Financing Mechanisms to scale Skill DevelopmentWho Should Pay
Costs Benefits
Individual • Financial cost of training• Opportunity cost (may earn
more being an unskilled labour)
• Flexibility and mobility to move vertically and horizontally across jobs
• Higher Salary
Employer • Mistakes by inexperienced trainees
• Learning curve Lower productivity
• Training Materials etc.
• Higher efficiency – Larger profits• Solving supply side shortage of
skilled workers
Government • Subsidies to training firms• Vouchers, loans• Financial concession to
employers
• Lower cost of supporting people as higher wages would mean higher standard of living
• Inclusive growth• Increase in income tax from higher
earnings
Source: Realising the Demographic Dividend – Santosh Mehrotra
Financing Mechanisms to scale Skill DevelopmentSolution
Supply Side• Moral Hazard• Skilled people as "Public Goods"
Demand Side: Effective demand needed from Youth• information Asymmetry• Ability to pay
• Final cost of training• Opportunity cost of not being in job
Solution• Financing through a dedicated training Fund• Labour Management Information System
National Policy for Skill Development and EntrepreneurshipFinancing
National Skill Development Fund (NSDF)• Receptacle for all contributions from Government, Private sector and individuals
CSR• Companies encouraged to spend 25% of CSR money for skilling
Govt. schemes • Encouraged to spend 10% of scheme budgets for skilling
End User Funding• Basic fee paying model by trainees• Grant of Scholarships, rewards and Skill Vouchers by Government
National Credit Guarantee Fund• Provide loans for skilling
Questions ?
Thank You