I have been meaning to write about one of the major tragedies of India today: a massive, young population but a population with very poor skills. I've made some time to jot down a few preliminary thoughts in a hurry.
The issue: HOPELESS WORKMANSHIP
Except for mega-projects managed by foreigners (such as Malaysians who have built our new roads), 90 per cent of the work undertaken in India is of the SHODDIEST quality. Literally everything made by Indians is third rate: taps, locks, toilets – all the way to roads and bridges.
We allegedly have highly skilled scientific and technical manpower. But why such poor quality of workmanship?
The opportunity: INDUSTRIALISATION
It should be self-evident to the meanest policy maker that one of the reasons India has missed the bus on manufacturing, unlike China, has been the shoddy quality of its work skills. This is still a huge opportunity if we apply our mind carefully to the task.
This is what the World Bank wrote about vocational education in India, in 2006:
Since the early 1980s, the relative wages of workers with secondary education have been growing even as these workers have become relatively more abundant. However, the relative supply of workers with technical/vocational skills has declined throughout this period while their relative wages have also come down since the early 1990s. This may be due more to the fact that workers with technical/vocational qualifications do not have skills that meet the labor market (often because of the poor quality of training provided) than that there is little demand for skilled [Source]
My brother, who manufactures motorcycle parts for the German market, told me about the great difficulty he has in finding skilled technical workers. There is a huge wage gap between what a skilled aluminium welder, for instance, receives, and an ordinary welder. But there is no system in India to train ordinary welders in the advanced skill of aluminium welding – even though there is a significant demand.
What happens therefore is that my brother directly trains people in this task in his factory, but after four months of effort, that person often gets a job with a bigger manufacturer who pays him double the salary. This means my brother has to start all over again, hoping to somehow retain the skilled person. Given his business model, he is unable to compete on wages with wages paid by the big manufacturers. That also means he can't pick such skills from the open market. Anyway, that's my broad understanding of the situation.
Whatever the detailed position, the simple fact is that there is a huge shortage of skilled workers. This shortage is adversely affecting small manufacturers across India.
The modern world needs HIGHLY SKILLED workers. Ordinary household plumbers and electricians that we find in India won't meet the requirements of the modern age. Indeed, skilled plumbers in Australia are often as highly paid (or better) than full professors of universities.
Obstacles to the industrialisation of India
Centralised control and management of the sector by the government
The basic problem is bad public policy. There is too much centralisation and control by the government. This constrains the sector in many ways. Fewer resources are allocated to it than would be the case if the private market was allowed to directly interact with the training sector. Also, the skills imparted are not matched to industry demand.
This sector should be totally privatised (with regulatory control), and students enabled to take cheap loans for their education. That is the model being developed in Australia after excessive centralisation was found to distort incentives and reduce the responsiveness of the sector.
Privatisation will also help create close linkages between training institutions and in-house training programs:
"On-the-job training is far more important; overseas studies show foreign companies can train up unskilled labour to world-class standards, making a mockery of the relentless drive for university degrees." [http://www.theaustralian.com.au/business/economics/entrepreneurs-key-to-productivity-boost/story-e6frg926-1226297567984]
With total privatisation, factories would be incentivised to establish training programs, to upskill their workers to suit the factory's specific needs.
India's labour laws are particularly pernicious, and oppose growth of the manufacturing sector.
Second, youth from villages (particularly upper caste youth) are unwilling to work in the trades even though there are significant job opportunities emerging in this area. (I believe, however, that the sheer number of existing half-skilled tradesmen in India is so large these people can first be upgraded to the next level without requiring new entrants. Once salaries exceed those of the college educated "bhadralok", expect even the Brahmins to take up plumbing.
A key barrier is the poor language skills of such people. The PRIVATE technical training institutions for this purpose will therefore need to undertake three things:
a) upgrade their language skills
b) help them unlearn existing poor skills and bad habits
c) train them in higher level skills.
This is expensive, but doable. The result will be a dramatic improvement in the availability of skilled people to feed into a rapidly growing manufacturing/export sector.
Effects of NREGA etc
There also seems to be an adverse effect of NREGA and such schemes on incentives of youth to train and get jobs in the manufacturing sector. Elimination of such schemes will create the right work incentives for India's youth.
India, be prepared to be replaced by robots
Given the endless frustrations experienced in this area, my brother is thinking of purchasing a welding robot that does specific high-end welding tasks. That is a very expensive option, but it will become more economical as technology improves.
There is now a narrow window of opportunity for trainers who can upskill existing technicians in India.
It is in this context that Australia (and other Western nations) can quickly step in to create infrastructure for improved training in this area in India. I don't see the possibility of such students moving physically to the West to receive training. Instead, I see Western experts moving to India to set up training institutions and receive royalties.
NOTE: These are very hastily jotted down thoughts. More later. I welcome your thoughts.
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