Description
This is a HRM research project on Labour Market in India and Higher Education.
HRM Research Paper on “Labour Market in India and
Higher Education”
Introduction
As the knowledge has become a key factor in economic development, there is a change in the nature of work, shifting away from occupations rooted in industrial production to occupations associated with knowledge and information. This transformation has both increased and updated the skills required in economy. It is now increasingly felt that the jobs of the future would necessarily require some kind of higher education qualifications. Growing enrolments in higher education and rising rates of return on it in not only advanced countries but also many developing countries tend to make a case for expanding higher education to reach larger number of people across the world. A consensus is now emerging that though primary and secondary education is important, it is the quality and size of the higher education that will differentiate a dynamic economy from a marginalized one. Source of competitiveness in the new knowledge economy being talent, it is felt that the countries that are able to nurture talent by pursuing progressive policies in higher education would be the winners. These and many more such arguments have brought focus on higher education in the developed and the developing countries alike. More and better higher education has become like ‘gospel’ – an article of faith for most countries. At the same time there is evidence of growing unemployment and underemployment of graduates across a wide range of countries. There are concerns that the higher education is not equipping students with skills and competences required in the global knowledge economy. As a result many countries face a paradox of mounting skill shortages co-existing with rising graduate unemployment and underemployment. This makes it necessary to understand the dynamics of the linkages between higher education and labour market seen in the context of globalization. Globalization is integrating the labour market for the skilled people. There is a rising wave of internationalization of higher education marked by increased flow students, programs and providers across national boundaries. In the above context, there have many interesting developments in India since early 1980s. These have impacted the dynamics of linkages between the higher education sector and the labour market for qualified people. With a large system of higher education, a vast pool of qualified manpower and an employment structure with small organized sector India’s experience in this regard would provide valuable insights for developing as well as developed countries. This paper
analyses the linkages between higher education and labour markets in India in the context of recent developments. Various sections in this paper have been organized as follows – an overview of recent developments; review of the higher education and training sector in India bringing out its salient characteristics; labour market, its structure and trends particularly as they relate to qualified people; new employment opportunities and perceived skill shortages; and finally evolving an action plan for better alignment of growth in higher education with changing labour market conditions in the country.
Recent Developments
To set the context, this paper outlines recent developments to improve understanding of the linkages of higher education / training with the labour markets. These developments relate to the changing occupational structure in the knowledge economy; different ways in which higher education relates to work at the individual level; clearing of demand and supply in higher education and labour markets. Experiences of the a few countries / regions and their concerns relating to higher education and labour market have been stated to set the overall context bringing out similarities and the differences amongst them. Changing occupational structure: Accompanied with growth and development, there has been a change in occupational structure resulting in better division of labour and shifting from manual at times hazardous occupations to intellectual work. This transformation is the outcome of changing nature of work impacted by computerization. The end result is the emergence of a global occupational structure with an increasingly integrated labour market. Change in nature of work: While much of the technical change during the early nineteenth century has been skill-replacing, the twentieth century is marked by skill-biased technical change. Rapid increase in the supply of skilled workers has induced the development of skill complementary technologies. The skill-biased technical change has altered work-environment. It has transformed the nature of work and its content. The changes are at individual as well as organizational level and this impacts employment structures and labour markets. At the individual level, there are two undeniable trends: the decrease of workers in industrial and manual jobs and a rise in tertiary employment. Tertiary employment requires large number of people who do intellectual work. Work content of jobs has changed leading to new demands in
terms of knowledge, skills and behavior. There is a demand for more abstract form of thought. It gives priority to analytical and problem solving ability, adaptability and capacity for innovation and written expression. In view of rapid technical changes, in many cases focus is now on attitudes and behavior of people rather than their technical capacities – that need to be renewed continually. At the organizational level influenced by new technologies, distributed work has become the dominant form of work organization. It overcomes the challenges of working across organizational boundaries in different time zones or flexi-time at different physical locations and often transcends national boundaries. Integration of job markets: Routine cognitive tasks, mostly services, were formerly almost nontraded across borders. These services required real-time communications and coordination and massive information flows. Revolutionary advances in telecommunications have lowered the costs of sending vast amounts of information rapidly and have improved coordination in realtime basis across continents. As a result of these changes, there has been an emergence of offshoring industries in a big way in the last few years. It is now clear that the dominant growing segment of the workforce will be the knowledge technologist in computers, manufacturing, and education.
Higher Education and Economic Growth Over the past few decades many theories have been propounded to explain economic growth of nations. Some of them distinguish between the growth due to inputs (more labour and capital) and growth by use of inputs in a “better” or more productive way. The later measure is commonly referred to as “Total Factor Productivity” or TFP, and is generally considered to be very closely linked to the way in which knowledge issued in production. Higher education has been seen principally as a form of investment that develops human capital (Schultz 1972) for many years, with new understanding of the decisive role of TFP strongly influenced by higher education has brought higher education to the centre stage in economic growth of nations.
Higher Education and Employment Developments over the past several decades – first marked by a wave of industrialization in one country after another and then with the emergence of knowledge economy endowed education explicitly with an economic value by forging both direct and indirect backward and forward links between education and economy. The evolution of economic purposes of education is seen as the single most important educational development of the twentieth century. With this, learning to do has become a vital function of education, particularly higher education that usually connects formal education to the world of work. There is a general belief that investment in education and training by people enhances their skills and capacities, an increase in their skills increases their productivity and the employers award such people with higher earnings. People therefore invest in education and training by making rationale estimates of returns of education. Education acts as a signaling device in the job market. Employers do not have much information about the potential employee’s quality; they use markets to judge quality: a higher education qualification is treated as an indicator of ability. The link between formal education and work is usually established through what is termed as qualification. This qualification could mean the skills required to do a job, the skills that a worker possesses (linked mainly to his or her education) and/ or the skills that are recognized in the labour market. The qualification could merely provide a signal in the job market. These concepts, not being identical, fail to establish any hard and fast correlation between education and employment. This makes it difficult to define the objective standards of qualification. As a result, it is not always possible to create a total fit between the supply of graduates from the higher education system and demand for graduates from the job markets.
Labour Markets and Higher Education Demand for higher education could either the private demand from students and parents or demand from the labour markets for particular kind skills and competencies or even social demand of need for educated people in society. There is often a dichotomy between various types of demand. Responding to the private demand and taking the plea of social demand, there
is often a bias towards expansion of higher education, despite poor labour market conditions for the educated people. This results in a situation where people with high qualifications are ready to accept inferior jobs which do not require those qualifications on the ground that some job is better than none. Public policy is concerned with creating a fit between supply of skills and competencies by the education system and the demand for skilled manpower from the Labour market and also with ensuring provision of adequate number of places in the higher education system to meet the aggregate of students demand for such places. The above requires coordination at two levels – between the demand for qualified manpower and places in higher education system on one hand and places in higher education and students demand on the other. Since, the link between in fields of study and occupational areas are relatively loose in most countries and the process of transition from higher education to employment has become more complex and protracted, it has its own dynamics of rising and dashing hopes (Gibbons 1998). The fact that the formal higher education does not necessarily equip students with skills required in the job markets creates a problem of unemployment on one hand and skill shortages on the other.
Higher Education and Training Sector There were 560 million literates in India in 2001 as compared to 359 million literates (excluding J&K) in 1991. As per 2001 Census literacy rate among the population of 7 years and above at the national level was 64.8 percent. Amongst the literates, 6.7 percent were graduates and above and only about 0.7 percent have technical diploma or certificate. Decadal trend in Figure 1 below for the period 1991-2001 show increase in population at all education levels in absolute terms. In percentage terms it is mainly at the higher levels because a large number of people with primary education go on for secondary education and those with secondary education go on for higher secondary education and so on. The figure shows stocks rather than enrolment levels that may be important to assess growth pattern in terms of education facilities. Number of people who were graduates and above in 2001 was 37.67 million that is around 6.7 percent of the literate population against 5.7 percent of literate population being graduate and above in 1991. The stock of graduates and above has increased both in absolute as well as percentage terms; although this increase is rather slow. Higher education and training sector in India comprises of large
university sector and a big and complex non-university sector. It involves both public and private institutions and formal and non-formal activities. In the Indian context the distinction between education and training is often blurred. It is therefore necessary to look at the higher education and training sector together to understand as to how this relates to labour market in India. Below we track the growth of higher education and training sector in the country to bring out its salient characteristics particularly those that relate to the emerging labour market for the qualified people in the country. Stock, Enrolment and Outturn: University sector in India has an enrolment of 10.4 million students with an outturn of 2.65 million each year as noted in Table 1 below. Nearly one third of the undergraduates go on for postgraduate programs or for second degree programs. Total stock of graduates in India is around 51.14 million. The university system comprised of 348 universities and 17,625 affiliated colleges4 in 2005. With eighty seven percent of enrolment in affiliated colleges, affiliating system defines the main academic arrangement in the higher education system in the country.
Growth Pattern: The foundation of modern higher education in India was laid by the British colonial regime prior to independence in the mid-19th century. While universities were examining bodies, teaching and learning took place in colleges. With a view to consolidate and maintain their dominance in the country, the British needed clerical staff that was well-versed in English. Therefore English was not only taught as a language but was also the medium of instruction in higher education. The curriculum and contents were biased in favor of languages and the humanities, and against science and technology. Post- independence, political freedom and rise in democracy resulted in a galloping demand for higher education. Until independence, higher education was the preserve of the elite class. Over the last fifty-five years since 1950, while the country’s population increased threefold, higher education enrolment rose 105 times. Possession of some kind higher education has become passport to a decent job. Now higher education has become a norm for the middle class. For those who want to stand out of the crowd, must ensure that their degree is awarded by prestigious university or college. Since there are not many of such institutions, the middle class insecurity has resulted in intense competition for limited seats.
Post-independence and till about 1980, expansion of higher education was with few exceptions was driven by the colonial mentality. Acquiring a degree – or several – became an end in itself. Higher education was neither job-oriented nor research oriented. It was confined to undergraduate programs in arts, science and commerce in the prevailing tradition of liberal education with little connection to the economic and social requirements of society. The notable exceptions were setting up of the Indian Institutes of Technology (IITs) and Regional Engineering Colleges (later renamed as National Institutes of Technology) for engineering education and the Indian Institutes of Management for management education. IITs and IIMs were set up with the help of foreign guest faculty from advanced countries. These institutions introduced a whole new academic culture. Unfortunately that culture remained confined to them and the academic standards have continued to deteriorate in the rest of the system. Though the number of these elite institutions and the enrolment in them has increased over time, they enroll only a tiny fraction of students. Occupying the top slot in the hierarchy of higher education institutions in the country, they are extremely selective in admissions. Several hundred thousand students do intense preparations to get through the high stake tests for admission into them. While this may have resulted in sudden spurt of coaching classes, but it spurred competition and self-directed learning and improved the knowledge base for a large pool of students. With economic growth there was a demand for higher education relevant to the needs of business and industry in the 1980s. It became evident that there was a huge capacity gap in the provision for professional higher education. Growing middle-class that could afford higher fees made the non-subsidized higher education a viable enterprise. Financial constraints had put a brake on the expansion of the government funded universities and colleges, even the existing ones faced financial difficulties. Under these circumstances private entrepreneurs saw an opportunity in the huge and growing unmet demand for professional education. Large number of private unaided institutions emerged initially in the southern and western part of the country and then all over the country. The state reluctantly allowed their entry. A large number of professional institutions – engineering, medicine, management, teacher education have come up in the private sector over the past two decades. The National Policy on Education (NPE), 1986 advocated a systematic and a well-planned program of vocational education. This was intended to be a distinct stream intended to prepare
students for identified occupations. In pursuance to this, a scheme for vocationalization of education at the university / college level was started in the year 1994-95 by the UGC. This was redesigned in the year 2003-04 to bring in greater flexibility. This now allows students to pursue both their regular programs and utility oriented certificate / diploma courses together. Since inception, 2769 colleges and 39 universities have been provided assistance amounting to Rs.2.44 billion. For want of any systematic study, the effectiveness of this initiative is not known. At the same time, its coverage is small. Overall the impact of this scheme has not been significant.
Labour Market: Structure and Trends
Status and dynamics of the labour market for the educated people in India has to be viewed within the context of the overall employment pattern and labour market trends in the country. Employment pattern has to be viewed in terms of the shift taking place between the economic sectors and formal and non-formal sector of economy. The education and skill profile of the workforce and labour market trends have to be analyzed. Employment Pattern: A vast majority of workforce is engaged in agriculture and allied activities marked with low productivity levels. Law levels of productivity and low wages dominate even in the non-agricultural activities. Nearly ninety percent of the workforce is in the informal sector most of them in poor working environment. Despite changes in economic structure over the years, the employment pattern has been resistant to change. Employment Pattern by Economic Sectors: As per Census 2001, 61.6 percent of all workers were engaged in agriculture, 17.2 percent in industry and 21.12 percent in services sectors. Data on workers as per industrial category as per 1991 and 2001 Census is given in Table 2 below. Census 2001 had recorded 402 million workers. This comprised of 313 million main workers and 89 million marginal workers and 626 million non-workers. The workers included 127 million cultivators and 106 million agricultural labourers. Decade 1991-2001 saw a decrease in the number of main workers in agriculture with a significant increase in the number of marginal workers. Agriculture sector that did not grow at the same pace as growth resulted in division of the available job opportunities causing marginalization of workforce in agriculture. The nonagricultural sectors (except mining and quarrying) saw growth in absolute as well as percentage terms and in both the main and marginal workers as seen in Figure 3 below. This suggests a shift in occupational pattern from agriculture to other sectors in the country, but the shift has not been
significant. India has followed a non-traditional pattern of development. This is evident from two facts. One - in recent years, growth in services has preceded growth in manufacturing and there is growth in skill intensive rather than labour-intensive manufacturing within manufacturing sector. Two - share of services in employment has grown much slower than its share in GDP. Services that account for over 57 percent of GDP now, contribute only about 28 percent of the employment. Many people have raised doubts about sustainability of this growth pattern. Services sector with its backward and forward linkages would induce growth in manufacturing and improve its productivity. It awes also pointed out that within the services, fast growth is confined to communication and business services sectors that absorb less labour compared to labour intensive construction and transport sectors resulted in relatively jobless growth. Education and Skill Profile of Workforce The educational and skill profile of existing workforce in India is very poor and primarily responsible for its low productivity. Though enrolments in academic institutions are significant, more than 90 percent in primary classes, around 60 percent in middle classes, more than 30 percent in higher secondary and above 10 percent in higher education, yet percentage of people having marketable skills is woefully low. As per National Sample Survey on employment and unemployment (1993-94), only 10.1 percent of male workers and 6.3 percent of female workers possessed specific marketable skills. The percentages were marginally higher in urban areas. The levels of vocational skills of labour force in India compare poorly with other countries. Only 5 percent of the Indian labour force in the age group 20-24 had vocational training compared to 96 percent in Korea and varying between 60-80 percent in industrial countries. This points out to the fact that education system in India is excessively oriented towards general academic education with little or no vocational orientation. Work participation rates by levels of education in Figure 4 shows that participation rate increases with the level of education. At the same time non-workers seeking work or available for work also increases by level of education. More graduates and people with technical diploma or certificates are seeking or available for work than those with below metric qualifications.
Labour Market Trends About 75 percent of the labour force is located in the rural areas with a vast majority of the same engaged in the low productivity agriculture sector. Many other jobs also have low productivity levels and low pay; 102 million (25 percent of the total) are low earning jobs. Ninety percent of the prime aged workers were in the informal sector jobs in 2004. Female labour force accounted for 114.2 million. In India, women are usually responsible for household activities (not classified as economic activities) and men work outside. Between 1993/94 to 1999/2000, rate of employment growth has slowed down from 2.1 percent to 1.6 percent per annum and is below the growth of labour supply which is around 2 percent per annum. During the 1990s, there has been a shift from low productivity sectors earlier to middle productivity sectors such as financial and business services category. After 2000, there appears to have been a surge in employment in IT and IT enabled services sector. It is seen that overall share of manufacturing in employment has not changed over the past two decades. Generous depreciation rate of 25 percent for investment in machinery and equipment for tax purposes and rigid labour laws encourages firms to be capita intensive. Employment within manufacturing and services sector show signs of dualism, with most jobs clustered at low productivity end and some growth taking place at high productivity ends. Indian manufacturing is marked by the concentration in very large scale and very small scale firms, leading to the problem of missing middle. International experience shows that this missing middle is the most dynamic in employment generation and entrepreneurship generation. As per NSSO 56th round and the Annual Survey of Industries, while in the year 2000-01 the gross value added by the organized sector is 75.24 percent, it employed only 13.85 percent of the workforce. Within the services sector growth has been in financial and business services sector (primarily in the IT and IT enabled services) creating high skilled jobs with high productivity level. Jobs have also been created in trade and transport and hotels and restaurants sectors marked with low productivity levels. The Directorate General of Employment and Training (DGET) collects data on employment in the public sector or in nonagricultural establishments employing more than 10 workers as organized sector employment. According to these estimates formal sector constitutes merely 7 percent of the total workforce. Other estimates put the figure somewhere between 11 and 14 percent. DGET data in Table 4 below shows that employment in organized sector has
remained stagnant since 1990. There has in fact been a fall in public sector employment since 2000, while employment in the organized private sector has marginally increased recent year.
New Employment Opportunities
Over the past few years, India has seen a healthy economic growth. India is emerging as the fourth largest market in the world with its GDP measured on the scale of purchasing point parity. Often referred to as “sleeping giant”, development in India has been its move from a “working power” based on supply of low-cost labour to a brain power comprising of skilled and educated workforce. The country has strong macro-economic fundamentals. The economists are now trying to find out the microeconomic phenomenon that is driving this change. With growing middle class with increasing aspirations, large consumption due to easy access to finance, powerful media and strong judiciary, somewhat muddled up democracy, Indian society is witnessing small order behavioral changes. These changes aggregated and over a period of time results in big and fundamental change. India is currently witnessing a virtuous cycle of growth. In the virtuous cycle of growth as Freidman (2005 p378) points out as the countries “begin to produce enough food for people to leave the land, the excess labour gets trained and educated, it begins working in services and industry; they leads to innovation and better education and universities, freer
market, economic growth and development, better infrastructure, fewer diseases, and slower population growth. It is that dynamic that is going on in parts of urban India, enabling people to compete on a level playing field and attracting large investments”. This has dramatically changed the face of employment opportunities in India. Till about mid1980s, it was employers’ market. There was little job-hopping; engineers, doctors and civil services were most coveted. After that, till about 1995, job opportunities expanded as multinational corporations came in; MBA became a middle-class dream degree. Between 1995 and 2000, there was a boom in the services sector; manufacturing shed jobs and the multinational corporations continued to be big hirers. After 2000, manufacturing has rebounded; exports are doing well and the services sector is continuing to boom. There is now a scramble for qualified people. A leading news weekly-India Today- in its cover story on March 7, 2005 identified ‘Top 10’ emerging job opportunities in India. These were - hospitality, biotech, education and training, animation, aviation, event management, research and development, fitness consultancy, fashion designing and the NGO sector. A recent CII Employment Potential Study for 36 sectors that an additional 2.5 million jobs would be created the automotive sector, while the financial sector could employ another 1.1 million people. The construction industry could employ 9.9 million more people, whereas the defense equipment sector sees the possibility of generating only 160,000 jobs. Employment potential in banking & financial services sector is 1.1 million jobs. Other important sectors where high employment is possible are oil & gas (2.3 million), gems & jewellery (3.16 million), healthcare (6.1 million), horticulture (2.6 million), khadi (1.9 million), media & entertainment (1.0 million), retail (9 million), tobacco & tobacco products (6.4 million), tourism (19.6 million), railways (1.9 million), state transport undertakings (2.3 million), and food (2.1 million). The Study makes a case for major initiatives to provide skilled manpower in these sectors failing which future growth may not be constrained. Integration of labour markets globally accompanied with technological changes offer an opportunity to India. The demographic differentials provide a distinct advantage to India due to the young profile of its workforce. Report of a High Level Strategic Group in 2003 that by 2020 India could possibly generate (direct or indirect) job opportunities for 10-24 million people by providing an increasing array of services to advanced countries that currently face skill shortages. An additional 10-48 million jobs could be created by servicing overseas consumers of services such as medical, tourism and education (AIMA 2003). The emerging global
occupational structure offers an opportunity for India to provide workforce for the knowledge economy beyond the national borders. Further, India also has opportunity by sending its people for work abroad. For a country like India with large population and huge capacity to generate skilled professionals at home and by education abroad, out-migration of professionals is now seen as an opportunity and not a threat. It is seen that advanced countries have a big appetite for skilled professionals. In a globalized economy countries compete for markets by creating and attracting technically skilled talent. A large part of such flow is through education abroad. In all, outlook for job opportunities for Indians looks good. India can become a magnet economy attracting high skilled and high waged investment capital from the MNCs, and offer high value added services to the rest of the world. This would require India to adopt an outward looking approach to reach out to the global markets and focus on sectors where it has resource advantage. This transformation is also reflects the emerging global occupational structure on the basis of a more efficient division of labour across nations. Technological changes, particularly rapid growth of new information and communication technologies is responsible for this. Two specific sectors, namely - IT/ITES sector, the manufacturing sector and the personal and community services sector are examined below further. IT / ITES sector: The services sector in India has been growing rapidly over the last few years. Within the services sector, other business services (which include IT/ITES) have seen phenomenal growth in recent years with a significant proportion of the same coming from exports. According to the World Bank (2004), India exhibits a strong revealed comparative advantage (RCA) in services, particularly software services as compared to goods. The country has leveraged its rich pool of human capital with quality educational institutions and large English speaking population. India is globally positioned in IT-ITES sector with a cumulative average growth rate (CAGR) of 35.3 per cent over the financial year FY-2000/05 amounting to US$ 17.9 billion in FY2004-05. India is now an international services hub. It commenced with IT-enabled services, both voice and data, and expanded to all knowledge sectors, such as pharmaceuticals, biotechnology, and engineering design. This sector directly employs 0.85 million people. Seventy two percent of them are engineers and other graduates. This number is likely to go up to 1.5 million in the next four years. Though the growth of IT / ITES sector would have a limited impact of the overall employment scenario in India, but its share in graduate
employment is significant. In addition, it has many multiplier effects on the Indian economy. It has created indirect employment opportunities for 1.15 million people in transport, catering, construction, security and housekeeping services. Large disposable income of a relatively young section of society has fueled consumer demand. There has been a surge in demand for cars, twowheelers, real estate, hotel and airline travel. Adding more than Rs.10 billion in direct tax revenue, the sector is contributing to rapid growth in consumer demand, hotel accommodation and air-traffic demand, and the demand for real estate both for offices and housing (NASSCOM 2005). Manufacturing sector: With increasing international competition, mass-production demanding a work-force with a low level of skills tends to gravitate towards low-wage countries. Also, automation would affect the most simple and most repetitive jobs. In the more complex manufacturing sector, greater modularity and disintegration in product design and related manufacture is expected. With increasing use of ICT in design and logistics, the services component of manufacturing activities is bound to increase and can be delivered from remote location. Skill-intensive products would require highly qualified and trained manpower. India is already on the way to become an important destination for off shoring engineering services. Further, whereas, manufacturing will continue to exploit economies of physical scale, speed and scope, with greater modularity, a lot of components can now be produced by a large number of small manufacturing units in the unorganized sector. Thus, through entrepreneurship and skill up-gradation, the Indian manufacturing sector can become competitive in specific areas. Such signs in some sectors such as automotive sector are already visible. In all, there are huge and diverse job opportunities available in India. According to CISCO Chairman, John Chambers, “the jobs are going to go where the best educated workforce is with the most competitive infrastructure and environment for creativity and supportive government. It is inevitable. And by definition those people will have the best standard of living. This may or may not be the countries who led the industrial revolution”. Education Economist of Stanford University argues that globalization “increases the pay-off to high level skills relative to low level skills….because interdependence between globalization and education presupposes competitiveness and efficiency which is achieved upon the latest technology or knowledge accessibility of the system”. Therefore, now the country has the opportunities, but to seize them requires an overhaul of the education and training system.
Towards an Action Plan
Though some unemployment and underemployment of graduates may be due to imperfections in labour market but high levels of the same coexisting with shortage of skills suggests problems with higher education and training system. Though quality and to some extent numbers may be an issue, but major problem concerning poor labour outcomes of graduates relate to relevance. Mismatch is the primary concern. To address this concern, there has to be focus on enhancing employability and aligning higher education with labour markets. New institutional arrangements may be required to enlarge the pipeline of quality graduates in the country. Aligning higher education and labour market In a changing economic environment with a dynamic labour market, it is necessary to enlarge adaptive capacity and flexibility of higher education system so that higher education continues to be aligned to the labour market. This is not only desirable to ensure that higher education institutions continue to be relevant, but essential step so that they continue enjoy greater autonomy within a framework of greater self-responsibility. Adaptability in higher education has to be nurtured both at the systemic level and the institutional level. While at the systemic level, policies for structural adaptation have to be pursued; at the institutional level it involves creating conditions so that curriculum and content are continuously updated as per changing needs. Promoting Entrepreneurship Education With limitation of the organized sector providing employment in large numbers, hope for creating jobs for a country like India lie in promotion of small firms and in self-employment. In this context, education system is not only faced with the problem of disseminating knowledge and technical skills, but even more with the problem of developing attitudes and patterns of behavior, particularly those that encourage self-confidence and spirit of initiative and help people to work independently. A special focus on promotion of entrepreneurship in mainstream education is, therefore, necessary. Promoting Life Skills Surveys of skills required in workforce across nations consistently show that the core characteristics employers are looking for, and not finding, include motivation and flexibility,
willingness to work and learn, confidence, appearance and good manners. In contrast, written communication, literacy skills and using numbers, although important, come much lower in priority. Education system is overly concerned with structures, with insufficient attention given to extra-curricular activities, sports and project work – the activities that help to develop interpersonal skills and emotional intelligence. Aligning curricula to take care of these needs is, therefore, necessary. National Mission for Skills Development The issue of skills development cuts across allocation of work of many line ministries at the centre. While some ministries are responsible for education and training, for others need adequate numbers of skilled people for growth. The states are major stakeholders in terms provision as well as financing. At the same time, it is important that skilled manpower is available within the state for development. Therefore issue of skilled manpower is critical to large number of stakeholders. Despite its importance, efforts towards skills development lack focus, coordination and suffer from many implementation bottlenecks. Often public investment in schemes for skills development is either not monitored or is monitored only in terms of expenditure or disbursement with little focus on its end use and outcomes.
Summary and conclusion
Growth of higher education and developments in labour market for the qualified people in India has been tracked in this paper. It calls for the intervention by the state to make the connection between higher education and the jobs more efficient as a means for reducing unemployment and underemployment of graduates on one hand and addressing the problem of skill shortages on the other. Employment structure in Indian economy has been impervious to economic growth and changing structure of Indian economy. Despite sharp decline of agriculture in terms of its share in GDP, the share of agriculture in employment dropped only marginally. Agriculture had continued to employ over sixty percent of the workforce for many decades. The organized sector with the dominating presence of the government and the public sector has a limited potential to provide employment. With the opening of the Indian economy fueled by entrepreneurial spirit, there are large and varied private initiatives across different sectors in
economy. Beginning with late 1990s, the employment pattern has however begun to change. Many non-agricultural sectors have grown rapidly. Apart from IT / ITES services, there is growth in trade and transport services, financial services, construction and health and education services. In recent years, there has been a feeling that the country’s growth may come to a grinding halt unless it handles the problem of skill shortages. Evidence of large and growing overall unemployment and underemployment and particularly amongst the youth and the educated people seem to suggest that such perceptions could be wrong and unnecessary alarmist. However a detailed examination of the skill shortages based on the existing education and skill profile of the workforce taking into consideration the actual growth sector-by-sector and projecting the growth until 2010 shows that the skill shortages is real. While, there may not an acute problem of graduates in terms of absolute numbers, yet because of uneven quality of a large majority of graduates, as the industry goes on to recruit a larger proportion of graduates, there is a sharp fall in quality. By the year 2010, 77 percent of the people with graduate and above qualifications will have to be in the workforce against 62 percent in the year 2001. The skill shortages are also to be viewed in terms of the increased appetite of the industry. Higher education system that produces a much larger number of graduates than before cannot be blamed for it. It needs to be realized that education systems have momentum of their own. A very quick response is not easy to achieve particularly in a system with large public sector having permanent employment. Analysis of growth pattern shows that from the 1980s higher education and training sector in India saw a surge in private provision. Private providers are now dominant providers for programs with occupational focus. Overall the country now has a good mix of public and private, formal and non-formal system of higher education and training. There is a need to further increase higher education capacity through diversified expansion. However issue of enrolment expansion should be seen from point of view of the occupational structure of the Indian economy. More than enrolment expansion, the issue of skill shortages in India is an issue of quality and mismatch. Since the enrolment growth over the last two decades has been primarily in institutions set up through private initiatives. The growth has been slow but it was able to meet actual unmet demand. In all, there is a need to enlarge the adaptive capacity of the higher education system so that it is more responsive to the changing world of work and meets the diversified needs of economy –
both domestic and global. For that purpose diversification of the Indian higher education and training system has to be pursued as a goal. This can be achieved by having a proper mix of public and private, formal and non-formal institutions. Special initiatives are required to enhance employability. Curriculum and content has to be continually renewed through Teaching and Learning Support Networks and specific skill development network may be set up. Collection of data on job market trends, its analysis and dissemination is important. More than setting up a few institutions that may produce a few hundred at best few thousand quality graduates at huge costs, interventions are required at the systemic level to alter the nature and quality of regulation for the private institutions and more investment in public institutions with an increased accountability mechanism. There is a case for increasing public funding for higher education. However considering the limitations in this regard, it is important that public funds are strategically deployed to address equity issues and leverage change in public funded institutions. Country’s recent success in the global knowledge economy has been object of envy of not only the developing countries but even advanced countries. A fair amount of credit for this and rightly so is being given to the country’s large pool of qualified manpower and as a corollary to its higher education system. The country’s higher education system suffers from several problems that need to be addressed. Though efforts should be made to fix these problems, but focus has to be on not doing anything wrong that may compromise country’s competitiveness in this sector.
doc_860245835.pdf
This is a HRM research project on Labour Market in India and Higher Education.
HRM Research Paper on “Labour Market in India and
Higher Education”
Introduction
As the knowledge has become a key factor in economic development, there is a change in the nature of work, shifting away from occupations rooted in industrial production to occupations associated with knowledge and information. This transformation has both increased and updated the skills required in economy. It is now increasingly felt that the jobs of the future would necessarily require some kind of higher education qualifications. Growing enrolments in higher education and rising rates of return on it in not only advanced countries but also many developing countries tend to make a case for expanding higher education to reach larger number of people across the world. A consensus is now emerging that though primary and secondary education is important, it is the quality and size of the higher education that will differentiate a dynamic economy from a marginalized one. Source of competitiveness in the new knowledge economy being talent, it is felt that the countries that are able to nurture talent by pursuing progressive policies in higher education would be the winners. These and many more such arguments have brought focus on higher education in the developed and the developing countries alike. More and better higher education has become like ‘gospel’ – an article of faith for most countries. At the same time there is evidence of growing unemployment and underemployment of graduates across a wide range of countries. There are concerns that the higher education is not equipping students with skills and competences required in the global knowledge economy. As a result many countries face a paradox of mounting skill shortages co-existing with rising graduate unemployment and underemployment. This makes it necessary to understand the dynamics of the linkages between higher education and labour market seen in the context of globalization. Globalization is integrating the labour market for the skilled people. There is a rising wave of internationalization of higher education marked by increased flow students, programs and providers across national boundaries. In the above context, there have many interesting developments in India since early 1980s. These have impacted the dynamics of linkages between the higher education sector and the labour market for qualified people. With a large system of higher education, a vast pool of qualified manpower and an employment structure with small organized sector India’s experience in this regard would provide valuable insights for developing as well as developed countries. This paper
analyses the linkages between higher education and labour markets in India in the context of recent developments. Various sections in this paper have been organized as follows – an overview of recent developments; review of the higher education and training sector in India bringing out its salient characteristics; labour market, its structure and trends particularly as they relate to qualified people; new employment opportunities and perceived skill shortages; and finally evolving an action plan for better alignment of growth in higher education with changing labour market conditions in the country.
Recent Developments
To set the context, this paper outlines recent developments to improve understanding of the linkages of higher education / training with the labour markets. These developments relate to the changing occupational structure in the knowledge economy; different ways in which higher education relates to work at the individual level; clearing of demand and supply in higher education and labour markets. Experiences of the a few countries / regions and their concerns relating to higher education and labour market have been stated to set the overall context bringing out similarities and the differences amongst them. Changing occupational structure: Accompanied with growth and development, there has been a change in occupational structure resulting in better division of labour and shifting from manual at times hazardous occupations to intellectual work. This transformation is the outcome of changing nature of work impacted by computerization. The end result is the emergence of a global occupational structure with an increasingly integrated labour market. Change in nature of work: While much of the technical change during the early nineteenth century has been skill-replacing, the twentieth century is marked by skill-biased technical change. Rapid increase in the supply of skilled workers has induced the development of skill complementary technologies. The skill-biased technical change has altered work-environment. It has transformed the nature of work and its content. The changes are at individual as well as organizational level and this impacts employment structures and labour markets. At the individual level, there are two undeniable trends: the decrease of workers in industrial and manual jobs and a rise in tertiary employment. Tertiary employment requires large number of people who do intellectual work. Work content of jobs has changed leading to new demands in
terms of knowledge, skills and behavior. There is a demand for more abstract form of thought. It gives priority to analytical and problem solving ability, adaptability and capacity for innovation and written expression. In view of rapid technical changes, in many cases focus is now on attitudes and behavior of people rather than their technical capacities – that need to be renewed continually. At the organizational level influenced by new technologies, distributed work has become the dominant form of work organization. It overcomes the challenges of working across organizational boundaries in different time zones or flexi-time at different physical locations and often transcends national boundaries. Integration of job markets: Routine cognitive tasks, mostly services, were formerly almost nontraded across borders. These services required real-time communications and coordination and massive information flows. Revolutionary advances in telecommunications have lowered the costs of sending vast amounts of information rapidly and have improved coordination in realtime basis across continents. As a result of these changes, there has been an emergence of offshoring industries in a big way in the last few years. It is now clear that the dominant growing segment of the workforce will be the knowledge technologist in computers, manufacturing, and education.
Higher Education and Economic Growth Over the past few decades many theories have been propounded to explain economic growth of nations. Some of them distinguish between the growth due to inputs (more labour and capital) and growth by use of inputs in a “better” or more productive way. The later measure is commonly referred to as “Total Factor Productivity” or TFP, and is generally considered to be very closely linked to the way in which knowledge issued in production. Higher education has been seen principally as a form of investment that develops human capital (Schultz 1972) for many years, with new understanding of the decisive role of TFP strongly influenced by higher education has brought higher education to the centre stage in economic growth of nations.
Higher Education and Employment Developments over the past several decades – first marked by a wave of industrialization in one country after another and then with the emergence of knowledge economy endowed education explicitly with an economic value by forging both direct and indirect backward and forward links between education and economy. The evolution of economic purposes of education is seen as the single most important educational development of the twentieth century. With this, learning to do has become a vital function of education, particularly higher education that usually connects formal education to the world of work. There is a general belief that investment in education and training by people enhances their skills and capacities, an increase in their skills increases their productivity and the employers award such people with higher earnings. People therefore invest in education and training by making rationale estimates of returns of education. Education acts as a signaling device in the job market. Employers do not have much information about the potential employee’s quality; they use markets to judge quality: a higher education qualification is treated as an indicator of ability. The link between formal education and work is usually established through what is termed as qualification. This qualification could mean the skills required to do a job, the skills that a worker possesses (linked mainly to his or her education) and/ or the skills that are recognized in the labour market. The qualification could merely provide a signal in the job market. These concepts, not being identical, fail to establish any hard and fast correlation between education and employment. This makes it difficult to define the objective standards of qualification. As a result, it is not always possible to create a total fit between the supply of graduates from the higher education system and demand for graduates from the job markets.
Labour Markets and Higher Education Demand for higher education could either the private demand from students and parents or demand from the labour markets for particular kind skills and competencies or even social demand of need for educated people in society. There is often a dichotomy between various types of demand. Responding to the private demand and taking the plea of social demand, there
is often a bias towards expansion of higher education, despite poor labour market conditions for the educated people. This results in a situation where people with high qualifications are ready to accept inferior jobs which do not require those qualifications on the ground that some job is better than none. Public policy is concerned with creating a fit between supply of skills and competencies by the education system and the demand for skilled manpower from the Labour market and also with ensuring provision of adequate number of places in the higher education system to meet the aggregate of students demand for such places. The above requires coordination at two levels – between the demand for qualified manpower and places in higher education system on one hand and places in higher education and students demand on the other. Since, the link between in fields of study and occupational areas are relatively loose in most countries and the process of transition from higher education to employment has become more complex and protracted, it has its own dynamics of rising and dashing hopes (Gibbons 1998). The fact that the formal higher education does not necessarily equip students with skills required in the job markets creates a problem of unemployment on one hand and skill shortages on the other.
Higher Education and Training Sector There were 560 million literates in India in 2001 as compared to 359 million literates (excluding J&K) in 1991. As per 2001 Census literacy rate among the population of 7 years and above at the national level was 64.8 percent. Amongst the literates, 6.7 percent were graduates and above and only about 0.7 percent have technical diploma or certificate. Decadal trend in Figure 1 below for the period 1991-2001 show increase in population at all education levels in absolute terms. In percentage terms it is mainly at the higher levels because a large number of people with primary education go on for secondary education and those with secondary education go on for higher secondary education and so on. The figure shows stocks rather than enrolment levels that may be important to assess growth pattern in terms of education facilities. Number of people who were graduates and above in 2001 was 37.67 million that is around 6.7 percent of the literate population against 5.7 percent of literate population being graduate and above in 1991. The stock of graduates and above has increased both in absolute as well as percentage terms; although this increase is rather slow. Higher education and training sector in India comprises of large
university sector and a big and complex non-university sector. It involves both public and private institutions and formal and non-formal activities. In the Indian context the distinction between education and training is often blurred. It is therefore necessary to look at the higher education and training sector together to understand as to how this relates to labour market in India. Below we track the growth of higher education and training sector in the country to bring out its salient characteristics particularly those that relate to the emerging labour market for the qualified people in the country. Stock, Enrolment and Outturn: University sector in India has an enrolment of 10.4 million students with an outturn of 2.65 million each year as noted in Table 1 below. Nearly one third of the undergraduates go on for postgraduate programs or for second degree programs. Total stock of graduates in India is around 51.14 million. The university system comprised of 348 universities and 17,625 affiliated colleges4 in 2005. With eighty seven percent of enrolment in affiliated colleges, affiliating system defines the main academic arrangement in the higher education system in the country.
Growth Pattern: The foundation of modern higher education in India was laid by the British colonial regime prior to independence in the mid-19th century. While universities were examining bodies, teaching and learning took place in colleges. With a view to consolidate and maintain their dominance in the country, the British needed clerical staff that was well-versed in English. Therefore English was not only taught as a language but was also the medium of instruction in higher education. The curriculum and contents were biased in favor of languages and the humanities, and against science and technology. Post- independence, political freedom and rise in democracy resulted in a galloping demand for higher education. Until independence, higher education was the preserve of the elite class. Over the last fifty-five years since 1950, while the country’s population increased threefold, higher education enrolment rose 105 times. Possession of some kind higher education has become passport to a decent job. Now higher education has become a norm for the middle class. For those who want to stand out of the crowd, must ensure that their degree is awarded by prestigious university or college. Since there are not many of such institutions, the middle class insecurity has resulted in intense competition for limited seats.
Post-independence and till about 1980, expansion of higher education was with few exceptions was driven by the colonial mentality. Acquiring a degree – or several – became an end in itself. Higher education was neither job-oriented nor research oriented. It was confined to undergraduate programs in arts, science and commerce in the prevailing tradition of liberal education with little connection to the economic and social requirements of society. The notable exceptions were setting up of the Indian Institutes of Technology (IITs) and Regional Engineering Colleges (later renamed as National Institutes of Technology) for engineering education and the Indian Institutes of Management for management education. IITs and IIMs were set up with the help of foreign guest faculty from advanced countries. These institutions introduced a whole new academic culture. Unfortunately that culture remained confined to them and the academic standards have continued to deteriorate in the rest of the system. Though the number of these elite institutions and the enrolment in them has increased over time, they enroll only a tiny fraction of students. Occupying the top slot in the hierarchy of higher education institutions in the country, they are extremely selective in admissions. Several hundred thousand students do intense preparations to get through the high stake tests for admission into them. While this may have resulted in sudden spurt of coaching classes, but it spurred competition and self-directed learning and improved the knowledge base for a large pool of students. With economic growth there was a demand for higher education relevant to the needs of business and industry in the 1980s. It became evident that there was a huge capacity gap in the provision for professional higher education. Growing middle-class that could afford higher fees made the non-subsidized higher education a viable enterprise. Financial constraints had put a brake on the expansion of the government funded universities and colleges, even the existing ones faced financial difficulties. Under these circumstances private entrepreneurs saw an opportunity in the huge and growing unmet demand for professional education. Large number of private unaided institutions emerged initially in the southern and western part of the country and then all over the country. The state reluctantly allowed their entry. A large number of professional institutions – engineering, medicine, management, teacher education have come up in the private sector over the past two decades. The National Policy on Education (NPE), 1986 advocated a systematic and a well-planned program of vocational education. This was intended to be a distinct stream intended to prepare
students for identified occupations. In pursuance to this, a scheme for vocationalization of education at the university / college level was started in the year 1994-95 by the UGC. This was redesigned in the year 2003-04 to bring in greater flexibility. This now allows students to pursue both their regular programs and utility oriented certificate / diploma courses together. Since inception, 2769 colleges and 39 universities have been provided assistance amounting to Rs.2.44 billion. For want of any systematic study, the effectiveness of this initiative is not known. At the same time, its coverage is small. Overall the impact of this scheme has not been significant.
Labour Market: Structure and Trends
Status and dynamics of the labour market for the educated people in India has to be viewed within the context of the overall employment pattern and labour market trends in the country. Employment pattern has to be viewed in terms of the shift taking place between the economic sectors and formal and non-formal sector of economy. The education and skill profile of the workforce and labour market trends have to be analyzed. Employment Pattern: A vast majority of workforce is engaged in agriculture and allied activities marked with low productivity levels. Law levels of productivity and low wages dominate even in the non-agricultural activities. Nearly ninety percent of the workforce is in the informal sector most of them in poor working environment. Despite changes in economic structure over the years, the employment pattern has been resistant to change. Employment Pattern by Economic Sectors: As per Census 2001, 61.6 percent of all workers were engaged in agriculture, 17.2 percent in industry and 21.12 percent in services sectors. Data on workers as per industrial category as per 1991 and 2001 Census is given in Table 2 below. Census 2001 had recorded 402 million workers. This comprised of 313 million main workers and 89 million marginal workers and 626 million non-workers. The workers included 127 million cultivators and 106 million agricultural labourers. Decade 1991-2001 saw a decrease in the number of main workers in agriculture with a significant increase in the number of marginal workers. Agriculture sector that did not grow at the same pace as growth resulted in division of the available job opportunities causing marginalization of workforce in agriculture. The nonagricultural sectors (except mining and quarrying) saw growth in absolute as well as percentage terms and in both the main and marginal workers as seen in Figure 3 below. This suggests a shift in occupational pattern from agriculture to other sectors in the country, but the shift has not been
significant. India has followed a non-traditional pattern of development. This is evident from two facts. One - in recent years, growth in services has preceded growth in manufacturing and there is growth in skill intensive rather than labour-intensive manufacturing within manufacturing sector. Two - share of services in employment has grown much slower than its share in GDP. Services that account for over 57 percent of GDP now, contribute only about 28 percent of the employment. Many people have raised doubts about sustainability of this growth pattern. Services sector with its backward and forward linkages would induce growth in manufacturing and improve its productivity. It awes also pointed out that within the services, fast growth is confined to communication and business services sectors that absorb less labour compared to labour intensive construction and transport sectors resulted in relatively jobless growth. Education and Skill Profile of Workforce The educational and skill profile of existing workforce in India is very poor and primarily responsible for its low productivity. Though enrolments in academic institutions are significant, more than 90 percent in primary classes, around 60 percent in middle classes, more than 30 percent in higher secondary and above 10 percent in higher education, yet percentage of people having marketable skills is woefully low. As per National Sample Survey on employment and unemployment (1993-94), only 10.1 percent of male workers and 6.3 percent of female workers possessed specific marketable skills. The percentages were marginally higher in urban areas. The levels of vocational skills of labour force in India compare poorly with other countries. Only 5 percent of the Indian labour force in the age group 20-24 had vocational training compared to 96 percent in Korea and varying between 60-80 percent in industrial countries. This points out to the fact that education system in India is excessively oriented towards general academic education with little or no vocational orientation. Work participation rates by levels of education in Figure 4 shows that participation rate increases with the level of education. At the same time non-workers seeking work or available for work also increases by level of education. More graduates and people with technical diploma or certificates are seeking or available for work than those with below metric qualifications.
Labour Market Trends About 75 percent of the labour force is located in the rural areas with a vast majority of the same engaged in the low productivity agriculture sector. Many other jobs also have low productivity levels and low pay; 102 million (25 percent of the total) are low earning jobs. Ninety percent of the prime aged workers were in the informal sector jobs in 2004. Female labour force accounted for 114.2 million. In India, women are usually responsible for household activities (not classified as economic activities) and men work outside. Between 1993/94 to 1999/2000, rate of employment growth has slowed down from 2.1 percent to 1.6 percent per annum and is below the growth of labour supply which is around 2 percent per annum. During the 1990s, there has been a shift from low productivity sectors earlier to middle productivity sectors such as financial and business services category. After 2000, there appears to have been a surge in employment in IT and IT enabled services sector. It is seen that overall share of manufacturing in employment has not changed over the past two decades. Generous depreciation rate of 25 percent for investment in machinery and equipment for tax purposes and rigid labour laws encourages firms to be capita intensive. Employment within manufacturing and services sector show signs of dualism, with most jobs clustered at low productivity end and some growth taking place at high productivity ends. Indian manufacturing is marked by the concentration in very large scale and very small scale firms, leading to the problem of missing middle. International experience shows that this missing middle is the most dynamic in employment generation and entrepreneurship generation. As per NSSO 56th round and the Annual Survey of Industries, while in the year 2000-01 the gross value added by the organized sector is 75.24 percent, it employed only 13.85 percent of the workforce. Within the services sector growth has been in financial and business services sector (primarily in the IT and IT enabled services) creating high skilled jobs with high productivity level. Jobs have also been created in trade and transport and hotels and restaurants sectors marked with low productivity levels. The Directorate General of Employment and Training (DGET) collects data on employment in the public sector or in nonagricultural establishments employing more than 10 workers as organized sector employment. According to these estimates formal sector constitutes merely 7 percent of the total workforce. Other estimates put the figure somewhere between 11 and 14 percent. DGET data in Table 4 below shows that employment in organized sector has
remained stagnant since 1990. There has in fact been a fall in public sector employment since 2000, while employment in the organized private sector has marginally increased recent year.
New Employment Opportunities
Over the past few years, India has seen a healthy economic growth. India is emerging as the fourth largest market in the world with its GDP measured on the scale of purchasing point parity. Often referred to as “sleeping giant”, development in India has been its move from a “working power” based on supply of low-cost labour to a brain power comprising of skilled and educated workforce. The country has strong macro-economic fundamentals. The economists are now trying to find out the microeconomic phenomenon that is driving this change. With growing middle class with increasing aspirations, large consumption due to easy access to finance, powerful media and strong judiciary, somewhat muddled up democracy, Indian society is witnessing small order behavioral changes. These changes aggregated and over a period of time results in big and fundamental change. India is currently witnessing a virtuous cycle of growth. In the virtuous cycle of growth as Freidman (2005 p378) points out as the countries “begin to produce enough food for people to leave the land, the excess labour gets trained and educated, it begins working in services and industry; they leads to innovation and better education and universities, freer
market, economic growth and development, better infrastructure, fewer diseases, and slower population growth. It is that dynamic that is going on in parts of urban India, enabling people to compete on a level playing field and attracting large investments”. This has dramatically changed the face of employment opportunities in India. Till about mid1980s, it was employers’ market. There was little job-hopping; engineers, doctors and civil services were most coveted. After that, till about 1995, job opportunities expanded as multinational corporations came in; MBA became a middle-class dream degree. Between 1995 and 2000, there was a boom in the services sector; manufacturing shed jobs and the multinational corporations continued to be big hirers. After 2000, manufacturing has rebounded; exports are doing well and the services sector is continuing to boom. There is now a scramble for qualified people. A leading news weekly-India Today- in its cover story on March 7, 2005 identified ‘Top 10’ emerging job opportunities in India. These were - hospitality, biotech, education and training, animation, aviation, event management, research and development, fitness consultancy, fashion designing and the NGO sector. A recent CII Employment Potential Study for 36 sectors that an additional 2.5 million jobs would be created the automotive sector, while the financial sector could employ another 1.1 million people. The construction industry could employ 9.9 million more people, whereas the defense equipment sector sees the possibility of generating only 160,000 jobs. Employment potential in banking & financial services sector is 1.1 million jobs. Other important sectors where high employment is possible are oil & gas (2.3 million), gems & jewellery (3.16 million), healthcare (6.1 million), horticulture (2.6 million), khadi (1.9 million), media & entertainment (1.0 million), retail (9 million), tobacco & tobacco products (6.4 million), tourism (19.6 million), railways (1.9 million), state transport undertakings (2.3 million), and food (2.1 million). The Study makes a case for major initiatives to provide skilled manpower in these sectors failing which future growth may not be constrained. Integration of labour markets globally accompanied with technological changes offer an opportunity to India. The demographic differentials provide a distinct advantage to India due to the young profile of its workforce. Report of a High Level Strategic Group in 2003 that by 2020 India could possibly generate (direct or indirect) job opportunities for 10-24 million people by providing an increasing array of services to advanced countries that currently face skill shortages. An additional 10-48 million jobs could be created by servicing overseas consumers of services such as medical, tourism and education (AIMA 2003). The emerging global
occupational structure offers an opportunity for India to provide workforce for the knowledge economy beyond the national borders. Further, India also has opportunity by sending its people for work abroad. For a country like India with large population and huge capacity to generate skilled professionals at home and by education abroad, out-migration of professionals is now seen as an opportunity and not a threat. It is seen that advanced countries have a big appetite for skilled professionals. In a globalized economy countries compete for markets by creating and attracting technically skilled talent. A large part of such flow is through education abroad. In all, outlook for job opportunities for Indians looks good. India can become a magnet economy attracting high skilled and high waged investment capital from the MNCs, and offer high value added services to the rest of the world. This would require India to adopt an outward looking approach to reach out to the global markets and focus on sectors where it has resource advantage. This transformation is also reflects the emerging global occupational structure on the basis of a more efficient division of labour across nations. Technological changes, particularly rapid growth of new information and communication technologies is responsible for this. Two specific sectors, namely - IT/ITES sector, the manufacturing sector and the personal and community services sector are examined below further. IT / ITES sector: The services sector in India has been growing rapidly over the last few years. Within the services sector, other business services (which include IT/ITES) have seen phenomenal growth in recent years with a significant proportion of the same coming from exports. According to the World Bank (2004), India exhibits a strong revealed comparative advantage (RCA) in services, particularly software services as compared to goods. The country has leveraged its rich pool of human capital with quality educational institutions and large English speaking population. India is globally positioned in IT-ITES sector with a cumulative average growth rate (CAGR) of 35.3 per cent over the financial year FY-2000/05 amounting to US$ 17.9 billion in FY2004-05. India is now an international services hub. It commenced with IT-enabled services, both voice and data, and expanded to all knowledge sectors, such as pharmaceuticals, biotechnology, and engineering design. This sector directly employs 0.85 million people. Seventy two percent of them are engineers and other graduates. This number is likely to go up to 1.5 million in the next four years. Though the growth of IT / ITES sector would have a limited impact of the overall employment scenario in India, but its share in graduate
employment is significant. In addition, it has many multiplier effects on the Indian economy. It has created indirect employment opportunities for 1.15 million people in transport, catering, construction, security and housekeeping services. Large disposable income of a relatively young section of society has fueled consumer demand. There has been a surge in demand for cars, twowheelers, real estate, hotel and airline travel. Adding more than Rs.10 billion in direct tax revenue, the sector is contributing to rapid growth in consumer demand, hotel accommodation and air-traffic demand, and the demand for real estate both for offices and housing (NASSCOM 2005). Manufacturing sector: With increasing international competition, mass-production demanding a work-force with a low level of skills tends to gravitate towards low-wage countries. Also, automation would affect the most simple and most repetitive jobs. In the more complex manufacturing sector, greater modularity and disintegration in product design and related manufacture is expected. With increasing use of ICT in design and logistics, the services component of manufacturing activities is bound to increase and can be delivered from remote location. Skill-intensive products would require highly qualified and trained manpower. India is already on the way to become an important destination for off shoring engineering services. Further, whereas, manufacturing will continue to exploit economies of physical scale, speed and scope, with greater modularity, a lot of components can now be produced by a large number of small manufacturing units in the unorganized sector. Thus, through entrepreneurship and skill up-gradation, the Indian manufacturing sector can become competitive in specific areas. Such signs in some sectors such as automotive sector are already visible. In all, there are huge and diverse job opportunities available in India. According to CISCO Chairman, John Chambers, “the jobs are going to go where the best educated workforce is with the most competitive infrastructure and environment for creativity and supportive government. It is inevitable. And by definition those people will have the best standard of living. This may or may not be the countries who led the industrial revolution”. Education Economist of Stanford University argues that globalization “increases the pay-off to high level skills relative to low level skills….because interdependence between globalization and education presupposes competitiveness and efficiency which is achieved upon the latest technology or knowledge accessibility of the system”. Therefore, now the country has the opportunities, but to seize them requires an overhaul of the education and training system.
Towards an Action Plan
Though some unemployment and underemployment of graduates may be due to imperfections in labour market but high levels of the same coexisting with shortage of skills suggests problems with higher education and training system. Though quality and to some extent numbers may be an issue, but major problem concerning poor labour outcomes of graduates relate to relevance. Mismatch is the primary concern. To address this concern, there has to be focus on enhancing employability and aligning higher education with labour markets. New institutional arrangements may be required to enlarge the pipeline of quality graduates in the country. Aligning higher education and labour market In a changing economic environment with a dynamic labour market, it is necessary to enlarge adaptive capacity and flexibility of higher education system so that higher education continues to be aligned to the labour market. This is not only desirable to ensure that higher education institutions continue to be relevant, but essential step so that they continue enjoy greater autonomy within a framework of greater self-responsibility. Adaptability in higher education has to be nurtured both at the systemic level and the institutional level. While at the systemic level, policies for structural adaptation have to be pursued; at the institutional level it involves creating conditions so that curriculum and content are continuously updated as per changing needs. Promoting Entrepreneurship Education With limitation of the organized sector providing employment in large numbers, hope for creating jobs for a country like India lie in promotion of small firms and in self-employment. In this context, education system is not only faced with the problem of disseminating knowledge and technical skills, but even more with the problem of developing attitudes and patterns of behavior, particularly those that encourage self-confidence and spirit of initiative and help people to work independently. A special focus on promotion of entrepreneurship in mainstream education is, therefore, necessary. Promoting Life Skills Surveys of skills required in workforce across nations consistently show that the core characteristics employers are looking for, and not finding, include motivation and flexibility,
willingness to work and learn, confidence, appearance and good manners. In contrast, written communication, literacy skills and using numbers, although important, come much lower in priority. Education system is overly concerned with structures, with insufficient attention given to extra-curricular activities, sports and project work – the activities that help to develop interpersonal skills and emotional intelligence. Aligning curricula to take care of these needs is, therefore, necessary. National Mission for Skills Development The issue of skills development cuts across allocation of work of many line ministries at the centre. While some ministries are responsible for education and training, for others need adequate numbers of skilled people for growth. The states are major stakeholders in terms provision as well as financing. At the same time, it is important that skilled manpower is available within the state for development. Therefore issue of skilled manpower is critical to large number of stakeholders. Despite its importance, efforts towards skills development lack focus, coordination and suffer from many implementation bottlenecks. Often public investment in schemes for skills development is either not monitored or is monitored only in terms of expenditure or disbursement with little focus on its end use and outcomes.
Summary and conclusion
Growth of higher education and developments in labour market for the qualified people in India has been tracked in this paper. It calls for the intervention by the state to make the connection between higher education and the jobs more efficient as a means for reducing unemployment and underemployment of graduates on one hand and addressing the problem of skill shortages on the other. Employment structure in Indian economy has been impervious to economic growth and changing structure of Indian economy. Despite sharp decline of agriculture in terms of its share in GDP, the share of agriculture in employment dropped only marginally. Agriculture had continued to employ over sixty percent of the workforce for many decades. The organized sector with the dominating presence of the government and the public sector has a limited potential to provide employment. With the opening of the Indian economy fueled by entrepreneurial spirit, there are large and varied private initiatives across different sectors in
economy. Beginning with late 1990s, the employment pattern has however begun to change. Many non-agricultural sectors have grown rapidly. Apart from IT / ITES services, there is growth in trade and transport services, financial services, construction and health and education services. In recent years, there has been a feeling that the country’s growth may come to a grinding halt unless it handles the problem of skill shortages. Evidence of large and growing overall unemployment and underemployment and particularly amongst the youth and the educated people seem to suggest that such perceptions could be wrong and unnecessary alarmist. However a detailed examination of the skill shortages based on the existing education and skill profile of the workforce taking into consideration the actual growth sector-by-sector and projecting the growth until 2010 shows that the skill shortages is real. While, there may not an acute problem of graduates in terms of absolute numbers, yet because of uneven quality of a large majority of graduates, as the industry goes on to recruit a larger proportion of graduates, there is a sharp fall in quality. By the year 2010, 77 percent of the people with graduate and above qualifications will have to be in the workforce against 62 percent in the year 2001. The skill shortages are also to be viewed in terms of the increased appetite of the industry. Higher education system that produces a much larger number of graduates than before cannot be blamed for it. It needs to be realized that education systems have momentum of their own. A very quick response is not easy to achieve particularly in a system with large public sector having permanent employment. Analysis of growth pattern shows that from the 1980s higher education and training sector in India saw a surge in private provision. Private providers are now dominant providers for programs with occupational focus. Overall the country now has a good mix of public and private, formal and non-formal system of higher education and training. There is a need to further increase higher education capacity through diversified expansion. However issue of enrolment expansion should be seen from point of view of the occupational structure of the Indian economy. More than enrolment expansion, the issue of skill shortages in India is an issue of quality and mismatch. Since the enrolment growth over the last two decades has been primarily in institutions set up through private initiatives. The growth has been slow but it was able to meet actual unmet demand. In all, there is a need to enlarge the adaptive capacity of the higher education system so that it is more responsive to the changing world of work and meets the diversified needs of economy –
both domestic and global. For that purpose diversification of the Indian higher education and training system has to be pursued as a goal. This can be achieved by having a proper mix of public and private, formal and non-formal institutions. Special initiatives are required to enhance employability. Curriculum and content has to be continually renewed through Teaching and Learning Support Networks and specific skill development network may be set up. Collection of data on job market trends, its analysis and dissemination is important. More than setting up a few institutions that may produce a few hundred at best few thousand quality graduates at huge costs, interventions are required at the systemic level to alter the nature and quality of regulation for the private institutions and more investment in public institutions with an increased accountability mechanism. There is a case for increasing public funding for higher education. However considering the limitations in this regard, it is important that public funds are strategically deployed to address equity issues and leverage change in public funded institutions. Country’s recent success in the global knowledge economy has been object of envy of not only the developing countries but even advanced countries. A fair amount of credit for this and rightly so is being given to the country’s large pool of qualified manpower and as a corollary to its higher education system. The country’s higher education system suffers from several problems that need to be addressed. Though efforts should be made to fix these problems, but focus has to be on not doing anything wrong that may compromise country’s competitiveness in this sector.
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