India has 63 million enterprises but doesn’t need that many — the US economy is eight times our size but only has 22 million enterprises.

More importantly, 12 million of our enterprises don’t have an address, 12 million work from home, only 7 million were registered for indirect taxes pre-GST, and only 1.2 million pay into the mandatory employer social security program.

This massive informality is not only dangerous for its sense of humour about the rule of law but is painful because of the huge drag on productivity that murders the wage premium and formal wage employment. And we must be careful about positioning the gig economy in the world, but this is also the only reconciliation of our 4.9% unemployment with 40% of our labour force being working poor (they make enough money to live but not enough money to pull out of poverty). India does not have a jobs problem but a wage problem, and the only way to make self-employment viable is to increase the productivity of our enterprises.

Improving the productivity of our enterprises needs policy to push five things: formalisation, urbanisation, industrialisation, financialisation, and human capital.

Formalisation because formal enterprises have access to credit, human capital, technology, etc that give them the productivity to pay the wage premium (the 50% increase in the number of registered enterprises post-GST is an important early outcome).

Urbanisation because there is a massive divergence between real and nominal wages in our big cities that is blunting migration (we only have 52 cities with more than a million people compared with China’s 375).

Industrialisation because the only way to help farmers is to have less of them, and that needs massive non-farm job creation (50% of our labour force in agriculture only produces 14% of our GDP). Financialisation because financial savings and digital payments create access, credit, and track records (the 0.1 million transactions per month on UPI have gone to 126 million this month and will touch a billion in one year). Human capital because enterprises can’t manufacture their own employees, and our school, skill, and college system is not producing employable output. Enterprises cannot substitute for the state, and the biggest gift to entrepreneurs is a state that does less so it can do more in the areas that make India a fertile habitat for job creation.

Formal, private job creation — as evidenced by Provident Fund and ESI payers — has grown by more than 20 million over the last few years.

These may not be jobs, but there are new formal jobs. And recent reforms — demonetisation, GST, RERA, the Bankruptcy Act, shell company evisceration, ease of doing business, Aadhaar, UPI, etc.—are starting to reinforce each to create an entrepreneurial ecosystem that creates babies (small formal companies that grow) rather than dwarfs (small informal companies that stay small). Economists have often used the words informal, unorganised, and small interchangeably.

Informal is illegal, but there is nothing wrong with small. India will create many honest, small and formal enterprises over the next decade. Some of these enterprises will be self-employment. Some of them will stay small. But many will grow to offer the productive wage employment that India’s youth need.

Featured in Economic Times

Focus on technology is a dire need of the hour, but not knowing how to use it will simply replace black boards with smart boards, registers with Excel sheets, and manual attendance registers to biometrics. This increases productivity and frees time, but not knowing how to use the time can be detrimental to our education system. The Internet has a place in school, but kids in elementary level can live without it. We have experienced how children can adapt to technology very fast.

There is a consistent feedback from the industry which says they are not looking for technology skills, which can be taught very quickly, but for skills in writing and reasoning, work habits, ability to concentrate, and ability to have face to face communication. The children of today need to know something about the problem before they use technology to solve the problem. Most education systems across the world, India being no exception, are built around the concept of industrial production system. They fail to realise that education is an organic process akin to agriculture. The prime task of the teacher is to prime students with curiosity and inquisitiveness, and learning would naturally happen.

It is not an easy task to solve India’s education problem. Usage of technology and the government’s initiatives to spend money behind it are laudable. It needs a lot more work, though.

India’ trinity of problems in education include solving issues of cost, scale, and quality, which is not easy for any solution to fulfil, be it technology or policy. There is a dire need to re-look at curriculum, classroom environment, and the entire pedagogical processes. Finally, it has to lead to unlocking the imagination, creativity, and critical thinking of the child. And last but not the least, the teacher is central to good education. If education has to improve, there is no way it is going to happen unless the teaching improves.

The current policy changes are a signal in the right direction, and investment in technology is surely a badly needed step; necessary but not sufficient.

The original sin in labour market data and strategy comes from the National Commission for Enterprises in the Unorganised Sector (Arjun Sengupta report) that not only created confusion between informal enterprises and informal employment data but also surrendered by treating informality as undefeatable. To reuse a wonderful metaphor of Avinash Dixit of Princeton, informality is not like cancer but obesity. We must not think of informality as cancer, insisting that every malignant cell must be removed or will not come back. Instead, informality should be compared to being overweight or obese. The fight against obesity is hard and slow; victories are partial, and sometimes you regress. But keeping up the fight by all methods and at all times can mitigate obesity. Eventually the diet and exercise will become a way of life, and a healthier body will yield tangible benefits.

Informal employment is the slavery of the 21st century and arises from our sense of humour about the rule of law. This sense of humour shows up in transmission losses between how labour laws are written, interpreted, practiced, and enforced. Why do only 1.2 million of our 63 million enterprises pay EPFO or ESI? But it is becoming tougher for enterprises to hide; the 50% increase in GST-registered enterprises to 11.5 million means that EPFO payers should be closer to that number than a tenth of it. By holding our bad employers accountable, we stop handicapping our good employers. The task of formalisation is far from over; we need to amend all labour laws to adopt the IndiaStack (paperless, presenceless, cashless), replace our 25+ numbers with a unique enterprise number, and move forward on a single labour code (instead of the proposed 3 or 5). Our current labour laws need overhauling because they choose the old over our young.

India’s poverty industry draws inspiration from Karl Marx but clearly doesn’t take his advice: “You can describe the world in thousands of ways. The point, however, is to change it.” India’s labour market has new data and many new formal jobs. Now, that is change we haven’t seen in a long time.

Indian IT companies have gracefully transitioned three S-curves—mainframe, client-server, and internet—but their ability to reinvent themselves over the next 10 years depends on a massive re-imagining of their people supply chain. Training will need to be shorter and more online. Organisational structures need to morph from cylinders to pyramids on their way to Eiffel Towers. This means sharper performance management that may include a replication of the Colonel Threshold of the Army (if you are not shortlisted for promotion at this stage, you retire early). Committing to campus hires a year ahead with no clarity in demand has led to postponed or unhonoured offers that are bad for brands; fresher hiring will need to move to an apprenticeship model that creates learning-by-doing and learning-while-earning but allows employers to take students for a test-drive. Employers will also need to explore, prepare, match, and deploy partnerships with universities for just-time supply. And employee costs needing to be more variable than fixed, which means that a larger proportion of the workforce will have to be on fixed-term contracts. Finally, delivery models where groups of people from various horizontals worked in an inefficient linear workflow need to be reconfigured into a collection of full-stack development with industry expertise.

With the employment in IT shifting from a lifetime contract to a taxicab relationship, employees will have to think about their personal brands, continuously upgrade technical skills, and nurture soft skills. Upskilling is key to the wage premium; a programmer with Java /C #/Python skills can become more relevant in three weeks along with database skills in Mysql/Oracle/MS-SQL. An 8-10% wage premium comes from three weeks of investment in HTML/JS /CSS. A 15% wage premium comes from a four-week investment in server-side programming skills like servlets/JSP/Struts/Spring/Hibernate with familiarity of frameworks such as EJB that starts the journey into becoming a full-stack developer. Another 20% wage premium comes from four months of intense learning of more server-side programming using the Groovy/Grails/Django framework and learning niche front-end development skills like Angular JS/React JS. At this point, the programmer should choose an industry vertical and spend another 2 months becoming MEAN by picking up skills like Mongo DB, Node.js, and Express.js. The rest of the year can be spent picking up Python, R, Hadoop, and AWS/Azure. Extending interactions with colleagues in Infra will help relate to server management and the impact of code on the performance of applications. The employee, at the end of three years, should hence aim at having a set of keys that opens any doors to the web at a premium she commands. Employers will be increasingly frugal with training budgets, but employees have options that include external certifications, MOOCs, building applications for fun alongside a community to practice, code challenges, and hackathons.

There are important upsides and downsides for education policy makers. The downside is that the huge wage premium in IT meant that annual engineering capacity expanded from 3 lakh to 15 lakh over the last 15 years, but the demand-side for 3 lakh freshers per year will not change soon. This means excess capacity will need to go off the market, or its hardware and software will have to be rejigged for other vocations. But the upside is that engineers will finally be available to other professions; this synchronises with the surge in India’s spending and hiring for domestic consumption and infrastructure. This shift—if supported by regulatory change—could greatly expand vocational universities, apprenticeships, and online learning. The notion that India’s IT employment will decline is delusional; the future is bright but is different from the past. But the future does lie in IT companies making their brittle people supply chains more flexible.

The first step is policy makers accepting that the future of jobs is unknowable. The 50+ reports by various countries predicting where jobs will be in the future have the efficacy of palm reading or astrology (more than 50% of the jobs created in the US in every decade since the 1960s did not exist in the decade before that). Universities traditionally delivered a wage premium because a) the Gross Enrollment ratio – the percentage of kids in college – was small and thus signalling value was high; most honest alumni will agree that IIT is a good place to be at but a better place to be from, and b) Economies and companies were more stable and predictable before the advent of globalisation, digitisation, and automation (the average life expectancy of a Fortune 500 company has come down from 65 years to 15 years in the last 68 years). Does the future lie in jobs that are blue-collar (machine-facing), pink-collar (computer-facing), or white-collar (people-facing)? Nobody knows, and as change to the world of work accelerates, the job of education policy makers is not to predict the future but to make the system self-healing.

The second step is policy makers accepting that the future of university education is unknowable. Is it Physical classrooms or Online classrooms? Text or Multimedia? Degrees or Apprenticeships? Study before working or continue education? Or creative combinations? We recognise that our vision of a future of university education – on-the-go, always-on, on-the-job, on-site, on-demand, crowd-sourced, and gamified – will probably horrify traditional university academics. But nobody knows who is right. Unfortunately, traditional academics have captured regulators with their definition of a university that confuses university buildings with building universities. India needs policy space for innovation—allowing a number of statistically independent and genetically diverse life forms in higher education – that is impossible with the current mindset of prohibited till permitted.

These two steps lead to the third: a bold policy agenda that destroys the regulatory cholesterol in the next budget. The legal context of universities must be revamped by separating the policymaker, regulator, and service provider. Policy must recognise that large universities that pray to the one god of employers can coexist with small universities that focus on research and knowledge. This means equivalence for learning delivered on-the-job, on-site, online, and on-campus. And it involves lifting the ban on online education for all Indian universities (state or central, private or public, young or old). The role of policy is not to set things on fire (decide what higher education looks like or pick winners and losers) but to create the conditions for spontaneous combustion. Our regulatory cholesterol has not only hindered innovation but also created an adverse selection in higher education in both the private and public sectors; the hugely prescriptive, subjective, and hardware-obsessed norms mean that most higher education entrepreneurs are either criminals, politicians, or land sharks. And the lack of autonomy for public institutions means that there is no fear of falling or hope or rising for teachers or leaders.

An MHRD report last week suggests huge progress in quantity; we have 35 million students in higher education in our 51,000 colleges and 864 universities. Our three-year goal should be 50 million students. But everybody must be employable and pay lower fees. This is impossible without online delivery and vocationalization.

Source: First Published in Business Standard, 19 January 2018

Public cautioned

“We came to know that some agents are collecting bio-data promising jobs in Enayam port,” said a port trust official.

Nor is this an isolated case: virtually everyday, companies and banks put out advertisments cautioning the public against such fraudulence.

All preliminary work related to the establishment of a major commercial port at Enayam is being dealt with by a cell formed with VOC Port Trust employees.

The recruitment of permanent employees will begin only after incorporating a company/Trust; all such recruitments will be made by the port authority based on government guidelines after duly advertising such positions, the official said.

Fake offers galore

Kunal Sen, senior vice-president of TeamLease Services, a recruitment agency, said fake job offers peak in June-August, when companies make campus offers.
Recently, the Delhi Police registered an FIR following a complaint by the Tata group. Police say there are over 50 fake call centres in Delhi-NCR duping job seekers by collecting money with promises of jobs in MNCs.

According to Rituparna Chakraborty, President, the Indian Staffing Federation, fraudsters hoodwink the youth through fake advertisements, emails, and SMSes. They demand upfront payment from candidates as a registration fee, which is a sure-shot indicator of fakery.

Youngsters from small towns fall victim and even give away personal details about themselves, which can be misused, she said.

This article was published in Hindu Business Line.

An article in Hindu Business Line talks about employment scenario in the country; along with inputs from Rituparna Chakraborty.

Low private investments, rigid labour markets feed rising unemployment

The nationwide strike on Friday called by Central trade unions underscores the seething resentment among organised labour, which is accentuated by the poor rate of job creation despite headline GDP growth in excess of 7 per cent.

Economists and analysts acknowledge job generation is dismal, and blame it on weak recovery in private investments, uncertain external demand and inflexible labour laws. It’s not quite “jobless growth”, they claim, but more the inability to create employment for the 70 lakh new entrants to the workforce annually.

“It is wrong to call it jobless growth,” said Rituparna Chakraborty, Co-Founder and Senior Vice President, TeamLease Services.

“Jobs are being added, but not at the pace at which new entrants are joining the workforce,” she added.

“The government promised two crore new jobs per year. But unemployment is rising. Urban rate is 11.24 per cent,” tweeted CPI (M) leader Sitaram Yechury.

There are no official statistics to either validate or contest these numbers; the National Sample Survey Organisation (NSSO) collects data on employment every five years.

However, according to data on unemployment and consumer sentiments gathered by the BSE and CMIE, unemployment rate rose to 9.84 per cent in August 2016, against 8.65 per cent in July and 8.84 per cent in June.

The increase in unemployment in August was spread across urban and rural regions. Urban India continued to face higher unemployment rates compared to rural regions, perhaps owing to a slowdown in hiring in key sectors, including IT and e-commerce.

Dismal outlook on IT hiring

According to Nasscom, hiring by the IT industry in 2016-17 will be slightly lower than last year due to increased automation and pressure on margins. “Last year, the IT industry hired nearly two lakh employees. This year, we expect it to be lower,” said Nasscom President R Chandrashekhar.

Ashishkumar Chauhan, MD & CEO, BSE said, “The rise in unemployment in urban India poses a challenge. It is apparently an outcome of low capacity utilisation… and low investment activity.” The most recent GDP data reveals that gross fixed capital formation, which denotes investment, shrunk by 3.1 per cent in the first quarter of the fiscal.

Mahesh Vyas, MD & CEO, CMIE said the sharp rise in unemployment points to a possible slowdown in rural economic activity. Intense rains and flooding in parts of the country may have impacted agricultural labourers and non-agricultural rural daily wage-earners, he reckoned.

Worse than NSSO estimates

The BSE-CMIE data indicates that the employment situation “may be worse than what is depicted in the NSSO survey,” said Amitabh Kundu, Professor, Institute for Human Development. The most recent NSSO survey, in 2011-12, recorded that workforce grew to 47.41 crore persons from 46.55 crore persons in 2009-10.

The Labour Bureau’s most recent quarterly survey, conducted in September 2015, however, revealed that job creation in eight labour-intensive sectors had dipped to a six-year low: only 1.55 lakh new jobs were created in the first nine months of 2015, against 3.04 lakh jobs in the corresponding period in 2014.

According to Kundu, the data underline the government’s need to focus on campaigns such as Make in India and Skill India, and to address the low level of women’s participation in the workforce in rural areas. Rigid labour markets also don’t give employers much flexibility to hire, he noted.

A number of labour reforms proposed by the NDA government are stuck owing to opposition from the trade unions. Even the recent decision to hike minimum wages will add to the inflexibility in labour markets, experts say.

The International Labour Organisation has repeatedly voiced its concerns over the lack of adequate employment generation and the absence of quality jobs. “Most new jobs in the organised sector are informal,” it said in its Labour Market update for July 2016 for India.

High job growth possible

But it noted that the fundamentals to sustain high rates of growth in the longer term are in place in India, including favourable demographics, high savings and investment rates, and increased resources for infrastructure and skills development.

“The challenge is to ensure that these drivers of growth are associated with the creation of more decent jobs that are accessible to youth, women and social groups across the country, particularly in rural areas,” it said.

According to Santosh Mehrotra, Professor of Economics, JNU, there could be some recovery in employment generation in the next six months with the government’s focus on highway construction as well as its campaigns for Swachh Bharat, rural housing and roads.

This article was published in Hindu Business Line

Still, don’t parents and caretakers carry out even a semblance of due diligence before shelling out their hard-earned money on little-known institutes with high-decibel claims?

However, the lies must get called out some day – even if after a while – and further course of action could be initiated by the parents / caretakers? Apparently, they and their wards get fooled by not knowing what to expect from an MBA course and an excessive focus on latching on to the hopes of a degree. “An MBA course is popularly perceived to be more about broad-brush business awareness and personality development. And, even if these abilities have to be imparted, by parading a fluffy approach to doing so institutes get away with low-cost superficiality”, A professor at a mid-tier MBA institute says. He did a brief stint at a dubious institute before getting to know about its reality and quitting. “Some even project internships as an extremely crucial element of the course and try to put the responsibility of securing an internship on the students.”  This way, the institute can cut back on facilities, overheads and faculty.

But is there a stage when the unmentionables hit the fan? At least with a few victims acting on late realization? The legal route is a long-winded option for already embattled parents who wish they could get back the fee amount at the very least. This, the institutes foresee and extract the maximum possible money right at the outset.

As the number of the unscrupulous dwindle, the ones remaining still manage to victimise the gullible. Separating fools and their monies is an art that does not require having an MBA, but selling one – a fake one.

The wilful defaulter definition needs review; it’s a flawed application of the legal concept of mens rea (meaning intention or state-of-mind and implies differentiating between murder and death by car accident) because loan taking and giving is by definition risk taking with a range of outcomes including default, restructuring, and repayment. We need one definition of default, SEBI’s smart proposal for listed company defaults must be reinstated, and IBBI’s information utility activated. China’s solutions are unacceptable; being listed on the government website of defaulters last week means that Jia Yueting, the founder of $3 billion consumer electronics firm LeEco, can be restricted from using luxury hotels, private schools, golf courses, and airlines. But India’s status quo of even a loan classified as bad often not being known outside the bilateral relationship needs change.

India’s Rs 10 lakh crore bad loans are also a child of the breathless bank loan expansion from Rs 18 lakh crore to Rs 52 lakh crore in the six years before 2014. The decisive actions by the current RBI management team on bad loans break with its immediate institutional past by shifting from a personality cult to institutional solutions.

The over-intellectualisation and running academic commentary masked years of inaction on bad loans that deserve Poet Akbar Allahabadi’s quip: “Platoen ki awaaz bahut der se aa rahi he, lekin khaana nahin aa raha he (The sound of plates has been coming for a long time, but the food is not coming)”. A banking system that recovers its loans is an important part of India’s infrastructure of opportunity. The contours of this system are emerging.

Featured in Indian Express .

Social Media Policy : Invite employees to cocreate a social media policy which meets the organisational goals yet doesn’t deny employees a platform of expression. Through extensive brainstorming and weighing all pros and cons a company wide policy of the do’s and don’t’s can be articulated. The same can be relooked at reasonable periodic intervals. Co-creation shall improve the chances of its acceptance and also make employees responsible for its usage.

Use Social Media for Internal & External Communications – If you cant stop them, its probably better to join them, where they are. Organisations around the world are struggling how to ensure that corporate vision and sense of purpose gets percolated down to every indvidual contributor within the company and in today’s time social media is probably the best platform to choose to achieve this objective. It is easy to relate to and use. It also helps them participate and share actively which enhances their sense of belonging and loyalty to the organisation.

Employees as brand ambassadors on social media – Empower employees to be social media ambassadors of the brand and one can without any doubt expect them to be responsible in its usage and the kind of communication that go out. Inspired by Enid Blyton’s popular “Naughtiest girl is a Monitor” wouldn’t be such a bad idea to make the most errant cases the ambassadors. It has its risks however the upside can be potentially mammoth.

If there is one thing to take away from this, it is the fact that social media is simply just a new medium for an old dialogue. There is no denying the fact that the biggest social media risk is actually in not involving your employees. Statistics reveal that socially engaged employees feel more optimistic about their association with the company and are overall viewed as the most credible voices on a company’s work culture and ethics, innovation and business practices. Employers should focus on fostering employee social conversations, cultivate employee advocacy within the organization and empower employees to shoulder the responsibility of being the voice of the organization. In Margaret Heffernan’s words for good ideas and true innovation, you need human interaction, conflict, argument, debate. Safe to say this is one debate which shall remain inconclusive.

Investment competition between states is increasing even as opportunities for offering investment tax incentives are diminishing. States are left with three levers for differentiation — ease of doing business, infrastructure and the skills of their labour force. Apprenticeships are a non-fiscal alternative to dead-end sub-sidy schemes such as the National Rural Employment Guarantee Scheme (NREGS) but don’t get the attention of state governments because of real and imagined reasons: central government in the driver’s seat, employer reluctance, student unwillingness, low social sig-nalling value, etc. But the natural learn-ing-by-doing and learning-while-earn-ing make apprenticeship more sustain-able, scalable and self-healing than other skill programmes.

We suggest that each state set up a State Apprenticeship Corporation (SAC) as a public-private partnership co-chaired by the chief secretary and the chairman of one of the state’s largest private employ-er. SACs will anchor programmes on state strengths such as tourism in Rajasthan, information technology in Karnataka and manufacturing in Tamil Nadu; target employers with different strategies for companies headquartered and those operating in the state; make employers volunteers by simplifying procedures and recognising perform-ance; create matching infrastructure, and enable higher education linkages.

SACs can work with the Board of Apprenticeship Training under the Ministry of Human Resource Development and the Regional Directorates of Apprenticeship Training of the Ministry of Skill Development and Entrepreneurship to open state offices. SACs could operate from an employment exchange in a state capital and slowly add apprenticeship offerings to employment exchanges across the state. SACs would create an interface suite (website, mobile app, and call centre in multiple languages) for employers, industrial training institutes, polytechnic colleges, private colleges, and students to match demand and supply. Most importantly, SACs would facilitate academic credit for apprentices by partnering with universities within and outside the state. India’s education system is imbalanced—we have 20 million people in physical college classrooms, three million in distance-learning classrooms, but only 300,000 in apprenticeship classrooms—even though we should be indifferent to the mode of delivery. Degrees and apprenticeships complement each other: one has social signalling value, the other employability signalling value, so states can inno-vate in their convergence. Over time, SACs could work with school dropouts by mobilising subsidy money (NREGS, etc) to subsidise apprenticeship stipends, but this should be done in phase two and only after putting in place appropriate processes and plumbing to avoid fraud.

Nobel Laureate Daniel Kahneman says, “Most successful pundits are selected for being opinionated because it’s interesting and the penalties for incorrect predictions are negligible. You can make any predictions you want, and later people won’t remember them.” Policymakers can try but will rarely predict where jobs are created. Apprentices can make the system self-healing — the global experience in this regard is positive. Germany has Europe’s lowest unemployment rate because of apprenticeships, and UK has found that employers gain 26 times their investments on apprenticeship stipends. Recent amendments to the Apprenticeship Act of 1961 create the space for innovation, scale, and higher education linkages for state governments. If they don’t take advantage, then who will? And if not now, then when?

Cities are complicated organizations all over the world but Indian cities suffer the friendly fire of being policy orphans for three reasons. Firstly, State Chief Ministers are unwilling to cut the tree they are sitting on (Bangalore maybe 60% of the GDP of Karnataka). Secondly, cities don’t have the plumbing or mandate to generate their own resources from property taxes. Finally, and probably most importantly, city leadership is either unelected (bureaucrats officers serving as development authority or municipality heads) or impotent (elected politicians city that win elections but don’t wield power). I understand the argument against bureaucrats protecting cities against venal politicians playing a one innings game but the only sustainable solution in a democracy is “real” Mayors. It has taken us 70 years to get power from Delhi to state governments – there has been a massive devolution of funds, functions and functionaries in the last three years – but hopefully the process of getting power from state governments to cities will be accelerated. This needs enlightened state government leadership to look beyond self-interest; this is a big ask from any human but particularly a big ask from ambitious politicians. Politicians at the state and centre face two big human capital decisions over the next decade; civil service reform and the creation of elected and empowered city leadership. Essentially they will give up power with all the costs that entails but they will receive the undying duas of our youth and farmers who can find productive jobs in urban areas.

India’s farm to non-farm and rural to urban transitions are not accelerating because of the bad urbanization that is largely a child of the Constituent assembly where 299 remarkable people between 1946 and 1949 who wrote our constitution missed city governance in their design. We are confident that if the constituent assembly could review their design with the hindsight that this miss is sabotaging their directive principles of education and employment, they would change the laws, structure and design that make cities policy orphans. Why don’t we?

(Manish Sabharwal and Ashok Reddy. The writers are co-founders of Teamlease Services)