Non-fiscal interventions for formal employment

Allow low-wage employees (people with less than Rs 20,000 per month salary) to choose mandatory salary confiscation: Today, low-wage employees only receive 55% of their salary because 45% goes to statutory deductions like EPFO, EPS, ESI, LWF, EDLI, etc. Low-wage employees do not have a 45% savings rate and prefer informal employment, where haath waali (in-hand) salary equals chitthi waali (on-paper) salary;

Aadhaar for employers: The proposal to adopt PAN as the universal enterprise number across all central government agencies has been stuck because of a ministry of labour demand for an establishment number. This is irrational;

Adopt paperless, presence-less, and cashless labour law compliance.

This article was published in Financial Express

GST and demonetisation have real economic risks like skill hysteresis, demand deferring, and informal employment cratering. But thankfully, demonetisation’s biggest human risks are unrealised; there’s been no change in food prices at the 100 largest mandis or the 22,500 people that die every day. Report cards either way are premature; pundits must remember the wise “It’s too early to tell” quip of Chinese Premier Chou Enlai to Henry Kissinger’s question in 1970 about the impact of the French revolution of 1789. More importantly, the true risks of failure of big decisions in complex systems need to be underestimated; economist Albert Hirschman called this underestimation of failure the hiding hand necessary for entrepreneurship and progress.

Ricardo Hausmann of Harvard suggests the only way to improve air traffic safety is having plane crashes since everything known about air traffic safety is already built in. The country’s honourable patience with demonetisation not only has lessons for the GST transition but suggests three immediate policy actions; civil service reform, taxation recalibration, and lower regulatory cholesterol. The first is obvious.

Though necessary secrecy cramped style, some demonetisation pain came from government plumbing not keeping up with the cognitive, technical and specialised demands of India-scale. The generalist civil service needs rebooting with lateral entry, specialisation, performance management, adopting the early retirement army colonel threshold, etc. Second, the next budget should lower tax rates and raise the individual exemption limit to Rs 5 lakh. Finally, higher formal employment needs lower regulatory cholesterol; three low hanging fruit are a Universal Enterprise Number (instead of the 25 plus numbers every enterprise has today), going PPC (paperless, presenceless and cashless for all compliance), and salary choice (employee flexibility in mandatory salary confiscation of 45 per cent).

Globally, voters are forcing politicians to blur neat boundaries between the left and right and conservative and liberal. It was always simplistic to assume that business people don’t care about people and politicians hate fiscal discipline or can’t get re-elected once they do the right thing. Instead of misunderstanding Keynes’s quip “in the long run we are all dead” as foolishness in planting trees you won’t sit under, an entrepreneurial state knows the best time to plant a tree was 20 years ago but the second best time is now. Indians must lose our sense of humour about the rule of law by moving from deals to rules; it’s economically corrosive for an Indian who follows a rule to feel she has missed a deal.

On my first trip to Patna this month a wise man said it has been Bihar’s misfortune that imaandaari (honesty) is equated with bewakoofi (stupidity). This isn’t a moral or spiritual insight; formal jobs are a rare — if not extinct — species in Bihar. The stories a society tells itself are unacknowledged legislation; India’s new story about formalisation, enforced laws, and lower costs of imaandaari will create new role models in business, politics and bureaucracy. Risk-taking could change the perception of government from “meddling, ungrateful, arrogant, dishonest, jealous, and surly” to a force for good. It’s the state that lays the foundation of equality; our biggest romance of policy was universal franchise at birth (previous democracies progressed through the landed, rich, and educated before reaching women).

Obviously, risks, like romance, can end badly and demonetisation could translate to political punishment in 2019. But it could translate to higher tax revenues for redistribution, a beginning of the end for informality, and a fairer India. A magnificent case for the romance of risk was Tagore’s quip that life should not be the infinite elongation of a straight line; the risks of GST and demonetisation are real but we won’t get a modern state until we have an entrepreneurial one.

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This article was published in Indian Express

2. Creating future workforce: building human capital is a long term investment. Like any investment, there are initial costs. For on-the-job training, these costs include the time devoted by the worker and co-workers to learning skills; and the cost of any equipment and material required to teach these skills. Like any investment, the returns to these expenditures occur in future periods.

3. Enhanced productivity: return on investment in human capital is measured by the increased productivity of the workers during subsequent periods of employment. Research suggests in the US that for a dollar spent on apprenticeships, return is as high as 3 dollars, accounted for by improved safety, elimination of rework and increased productivity of the craft worker.

4. Socio-economicupliftment: India ranks 105 in the human capital index released by World Economic Forum. The index measures countries ability to nurture, develop and deploy talent for economic growth. Apprenticeship is the best technique to do so. It teaches how to fish rather thanprovide fish. A society which is built on subsidy and grants can’t contribute to its own and nation’s development. The best way to grow the country is to enrich its human capital with craft to do, earn and create wealth.

World Bank Enterprise survey suggests that only 34% Indian employers engage into any formal training, where as in China it is as high as 80%. Comparison between China’s 20 million apprentices against ours less than 3 lac speaks volumes about our engagement with apprenticeships. Though Apprentices Act has undergone a massive amendment in December, 2014 from being policing to enabling employers to develop talent for themselves. Launch of NEEM scheme by MHRD has further made it conducive for employers to engage with traineeship with wider coverage of industries and functional areas. The choice employers need to make now is to sulk or to skill to bridge the gap.

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This article was published in World HR Diary

Do remember the following while writing your CV:

Your CV should ideally be under two pages. It should not become a booklet with multiple case studies, stories etc.
Understand the job role and company you are applying for and make changes to your CV accordingly. Customise your CV to fit in with the role

Information on your CV should be concise and to the point.
Never ever include false information in your CV. If you get caught during the interview or background verification stage, you may face dire consequences.

All information should be laid out clearly. Do not cramp it to put all possible information at one go. Chances of the latter being trashed is higher.
Make your CV modular. Use short paragraphs, bullet points and simple language to convey your message. No paragraphs please!
Be positive, put yourself confidently and highlight your strengths.
Pay attention to the font size and layout of your CV. You need to use the same font across the document, and do make use of highlighters, bold, italics etc to emphasis on the points you want the recruiter to focus.
If you are sending your CV by post or by e-mail, remember to send it along with a covering letter.

Remember, this document is a trailer and if you do get called for an interview, you will have all the time to detail your skills.

A great CV should relay to the interviewer that you are the right person for the job in few minutes. Having said that, a reviewer spends less than six seconds on your CV before he considers or trashes it.

So your CV should get straight to the point.

An authored article of Vikrant Pande (Provost, TeamLease Skills University) in DNA talks about how the teaching methodology in technical education is based on a faulty assumption.

A recent article talking of nearly 2 lakh engineers applying for 368 peon posts in UP state is a clear example of engineering colleges being on the wrong track. Since the IT revolution of the ’90s, engineering colleges were sitting pretty, getting 100 per cent placements and generally not bothered about what they taught. Today many of them are closing down due to the inability to place students. The less than industry-relevant curriculum is the effect, not the cause, of what ails colleges.

Teaching methodology is based on the faulty assumption that engineering is an academic discipline like chemistry or physics. In fact, engineering is applied science and is a profession, akin to medicine, law or chartered accountancy. The distinction between a profession and an academic discipline is crucial. When the Industrial Training Institutes (ITI) were formed, in the ’50s, the objective was to create a ‘trade’ school which conducted practicals more than theory. That was a useful, but hardly a comprehensive and professional education. The engineering colleges were supposed to fulfil the gap of offering ‘theoretical’ inputs. No curricular reforms will work until we start considering engineering as applied science. Today, the pedagogy in engineering colleges is only about teaching dozens of subjects with little or almost nil effort on practical exposure. Going back to the trade school paradigm would be a disaster. It is thus imperative to strike a new balance between pure theory and practical relevance.

Creating an entirely new set of universities like a skills universities offer many solutions to the problem. How is a skills university different from others? The basic DNA is about praying to the one god of employer. The curriculum is set by industry and not academicians. In engineering colleges we find that professors have no exposure to industry and they are far detached from real life applications of engineering. A skills university balances theory and practise. Theory in itself is not bad but focus on theory alone is disastrous. Law schools expect faculty members to be first-rate scholars; in fact, articles published in law reviews are often cited in trials. But these institutions also value professors’ ability to teach. Similarly, medical schools carry on advanced biological research, but most members of the teaching faculty are also practicing doctors. Our engineering colleges are full of professors with PhDs in their subjects. The regulator too mandates this without demanding for any industry experience.

The impact of this loss is clearly on employability of the graduates. Employers are frustrated that fresh engineering graduates lack practical exposure but have a vast and, most often, irrelevant theoretical knowledge. College professors have never seen the inside of a factory in their life!

The government needs to revamp distance education and allow local universities to offer massive open online courses. The regulator is stuck in a mindset that uses land, buildings and hardware as a proxy for intent. Hardware demonstrates the ability to spend money but is weakly correlated to quality or outcomes.

In India, we have to solve the impossible problem of getting things at the lowest cost, biggest scale and best quality. Getting two of three right in one institution is easy but government policy should encourage biodiversity; a number of genetically diverse but statistically independent tries that innovate in delivery models. IITs and IIMs have their place but they are a child of West with focus on quality for countries with small populations that grew rich before they grew old. We need an urgent solution to solve the problem of a million unemployed youth joining the market each month.

Let a hundred skills universities bloom.

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This article was published in DNA

Students at Christ University and New Horizon College of Engineering did not expect that they had to fly drone-like, remote-controlled inflated balloons. That was how USbased digital marketing fir m Epsilon kick-started its campus recruitment. “The intention was to bring an element of surprise,“ said Seema Padman, senior director (hum a n re s o u rc e s ) at E p s i l o n .“Campus hiring is all about brand awareness. Students are well-informed and choosy . So the first step is to get their attention.“

US-based technology firm ThoughtWorks has a code-pairing round where a candidate works with a panelist on a live project. “There’s much more to students than asking them to just write tests,“ said Shipra Shandilya, ThoughtWorks campus lead India.

Very few graduates have a clear line of vision on where they want to go after studying a four-year engineering course, according to Neeti Sharma, senior vice president (learning services) at staffing firm TeamLease. “A lot companies are now doing behavioural assessment to find out where a candidate is best suited to work. It’s also because quality of output is going down with so many engineering colleges that have come up.“

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This article was published in Economic Times

An article in Greater Kashmir talks a meeting conducted by JK Government to discuss about various aspects of the state’s skill development mission, including skill mapping, infrastructure, capacity building, skill upgradation and courses for employability and entrepreneurship; Manish Sabharwal was invited to this meeting to understand JK’s needs and prepare a vision and mission document to suggest what is needed in relation to skill development in the state.
For capacity building, skill upgradation and employability of the youth, J-K Government is mulling to establish skill development universities in the state, an official statement said.

According to the statement, the issue was discussed in a meeting held between Minister for Information Technology, Technical Education and Youth Services and Sports, Imran Raza Ansari and consultant J&K Skill Development Mission, Manish Sabharwal, called on the Minister for Information Technology, Technical Education and Youth Services and Sports, Imran Raza Ansari here on Sunday.

The meeting also discussed the issues pertaining to skill development in the state.

On his first visit to the state, Sabharwal, who is also Chairman and Founder, Team Lease Services India Ltd, was here to understand JK’s needs and prepare a vision and mission document to suggest what is needed in relation to skill development in the state, the statement said.

The meeting discussed various aspects of the state’s skill development mission, including skill mapping, infrastructure, capacity building, skill upgradation and courses for employability and entrepreneurship.

The meeting also discussed the need for further initiatives in relation to skill development such as setting up skill development universities in the state. Secretary Technical Education, Mohammad Saleem Shishgar was also present at the meeting.

Sabharwal also held extensive deliberations with the Chief Minister, Mehbooba Mufti; Finance Minister, Haseeb Drabu, and administrative secretaries of various departments associated with skill development.

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This article was published in Greater Kashmir

Finally, a relentless focus on governance—the allocation of decision rights—is crucial to building enduring institutions. The relative role of government, founders, funders, faculty, alumni and regulators needs to be continuously renegotiated. In the current Indian context needs a radical reboot because the most visible impact of good governance is institutional culture and values which are often hard to set with the regulatory drive towards standardisation. It is also clear that governance will be most effective is we unpack the role of the government as a regulator, service provider and policy maker. Regulators making policy not only stifles risk taking and innovation but creates a culture of differential standards.

The acceleration of creative destruction in corporate India since 1991 (companies with 80% of the market cap then are now less than 20%) has been wonderful for India’s growth, productivity, social mobility, and economic complexity. Without hindering competition, we need to recognise that universities that are world-class are almost always universities that are old. So, we need to figure out how to blunt bad ageing and amplify good ageing. Policy-makers need to slow down and take the long view because the best universities echo the wisdom of poet Robert Browning: “Grow old with me for the best is yet to be”.

This article was published in Financial Express

The enterprises have hailed the move to tackle black money circulation in the economy and expect that it will provide benefits to the sector in the long run. If their current problems last just a few weeks, they will recover. If the problems continue for longer, the damage will be substantial.

Many of these will not be wilful defaulters. They are willing to pay but cannot because of bungled demonetization. One top transport finance company says that only 60% of normal payments are coming in. Some of the smallest micro-finance loans, entailing a weekly repayment of a few hundred rupees, are being repaid because the women borrowers are able to garner notes worth Rs 300-400. But larger borrowers who need to repay instalments of over Rs 1,000 say they cannot find the currency notes to do so.

The RBI lays down strict rules for finance companies, which have to classify loans overdue beyond a point as dubious or bad loans, and set aside money to cover the gap. The RBI can relax its rules for financial provisioning, and create ample space and time for small businesses and small finance to recover. What look like defaults should be formally recognized as exceptional events arising out of demonetization, not as inability to pay?

Long term Impact

In the long term sense, the war on black money has hugely positive implications for India’s formal jobs because 100% of net job creation in the last two decades has happened in small, low-productivity enterprises; of India’s 6.3 crore enterprises, 2.4 crore do not have an office or address, only 85 lac have any form of tax registration, only 15 lac pay the mandatory Provident Fund, and only 18,000 companies have a paid-up-capital of more than 10 crores, only 45000 companies have ever posted a job on any job portal in the country

Most of our enterprises remain small and informal, 85% of our manufacturing is done in companies with less than 50 employees. This poses huge productivity challenges, if you rank manufacturing companies by size, firms at the 90th percentile and 10th percentile have a 22 times difference in productivity; firms that are not productive cannot pay the wage premium. Productivity comes from the access to talent and credit that comes from formalization. Over the next decade it is anticipated that the number of India’s enterprises will decline by over 50% ending the self-employment that is self-exploitation and low-productivity informal firms that operate in cash. The US economy is more than 7 times our size yet has 1/3rd the number of our enterprises because informal enterprises find it very hard to exist and exploit workers.

Entrepreneurs can create two kinds of companies– a baby or a dwarf. Both start small but one is going to grow. The difference between a baby and a dwarf finally comes down to not more food or money but their DNA. India has remained a country of corporate dwarfs.

Analysts suggest that many small businesses will not be viable in the white economy because their survival depends on tax or labour law arbitrage. A reduction in the number of enterprises may be welcome; the destruction of low productivity informal enterprises that don’t pay minimum wages or provide safe working conditions and leave is welcome. Demonetization destroys past gains of informality; complementing this with infrastructure building and ease-of-doing business interventions that reduce regulatory cholesterol could raise formal employment from 10% of our workers to 50% in the next decade.

This article was published in World HR Diary: https://goo.gl/qzrexq

An article in Economic Times talks about the Report of GST Bill and Jobs by TeamLease; along with inputs from Rituparna Chakraborty.

The implementation of the Goods and Services Tax (GST) will lead to 11 per cent growth in hiring activities, says a report released today.

HR services provider TeamLease said that GST would not only have a positive impact on the ease of doing business but also propel formal job creation.

“Adoption of GST will lead to an 11 per cent growth in hiring across sectors. Further, from a region perspective though marginally South India will top the job generation chart,” it said.

Automobiles, logistics, home decor, e-commerce, media and entertainment, and cement sectors are projected to create 11-18 per cent additional jobs annually after implementation of GST.

In the case of IT/ITeS and BFSI segments, the growth rate has been pegged between 10 and 12.5 per cent.

According to TeamLease, around 10 to 13 per cent additional jobs are expected to be created every year by consumer durables, pharmaceuticals and telecommunications sectors.

“The uniformity and the reduction in the average tax burden offered by GST will provide a great impetus to employment creation,” TeamLease Services Co-Founder and Executive Vice President Rituparna Chakraborty said.

The report noted that the predictability of cost of products manufactured or services rendered across the country would improve enterprise productivity.

This would also trigger expansion of services, capacity and product ranges, resulting in a subsequent increase in manpower requirement, it added.

With GST, TeamLease said revenue collection from general sales tax would grow from the current level of 6.3 per cent to 11.49 per cent.

“Service tax, central excise and customs will also witness growth leading to greater funding towards workforce welfare and sustained job creation initiatives,” the report said.

The study, aimed at understanding the impact of GST on job creation, covers 11 industry verticals including BFSI (Banking, Financial Services and Insurance), automobile, telecommunication, pharma, IT/ITes and e-commerce.

This article was published in Economic Times

These faultlines murder high-paying formal private jobs and we need three regulatory interventions: Faster urbanisation, lower regulatory cholesterol, and broader human capital. Faster urbanisation means an increase to the number of Indian cities with more than a million people from 50 to 200; bad urbanisation is better than no urbanisation but high quality urbanisation like having real mayors, robust city finances, etc could create the virtuous cycle of higher formalisation, higher productivity and higher wages.

Making bribing a core capability for builders has been bad for formal job creation and labour migration and demonetisation will bring down land prices, accelerate construction, and raise labour mobility. Land was the most inefficient and unfair of the three factor markets of land, labour and capital and demonetisation is a wonderful intervention. Lower regulatory cholesterol for job creation is important because most of our workers work in low-productivity enterprises that are not productive enough to pay the wage premium; our 6.3 crore enterprises only translate to 18,000 companies with a paid-up capital of more than Rs 10 crore. Human capital is key; neglecting primary school education for decades after Independence is a mistake being amplified by the new world of work that disproportionately values reading, writing, arithmetic and soft skills.

As the long-term plans for formalisation, urbanisation and human capital yield results, it’s time for a time-bound monitoring on three overdue and impactful interventions in regulatory cholesterol by the ministry of labour. First, we must overrule its self-serving case for an Establishment Number and replace the 27 different numbers issued to every employer with a single Universal Enterprise Number. Second, we must set a date for 100 per cent paperless, presenceless, and cashless compliance for all state and Central labour laws. Second, we must end the shameful stonewalling of the ministry of labour of the provident fund and ESI reforms announced in the budget by making employee contribution to the provident fund voluntary and creating competition for ESI and EPFO by allowing employees to choose alternatives like NPS and health insurance.

Recent youth unrest — the idealisation of Burhan Wani by Kashmiris and the reservation agitations by Patels, Jats, Gujjars — have roots not in a job emergency but a formal job emergency. Gandhiji said the difference between what we do and what we are capable of doing would suffice to solve our problems. Time to remind the ministry of labour.

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This was published in Indian Express

The other the finalists of the Telstra Business Woman in Asia Award are: Anu Sheela Themudu from iGene (Malaysia), Beth Lui from APEC Schools (the Philippines), Gabrielle Costigan from Linfox International Group (Thailand), Kimberley Cole from Thomson Reuters (Hong Kong), Marion Fromm from Cambodian Harvest Dried Fruit Co., Ltd (Cambodia), and Shinta Witoyo Dhanuwardoyo from Bubu.com (Indonesia).

“As a member of the Telstra Business Women’s Awards Alumni myself it is my pleasure to welcome the Asia Award finalists to join the network of more than 2,000 women who have been award finalists over more than two decades. This is an amazing group and together we will continue to look for ways to inspire the next generation of business women and address barriers that stand in the way of their success,” said Whelan.

This article was published in businessworld.in