 "Productivity is about the 3Es: education, employment and employability: Manish Sabharwal")
Earlier this week, the World Economic Forum released the human capital index where India was ranked at a lowly 105. The index measures countries' ability to nurture, develop and deploy talent for economic growth. Despite the much-improved quality of education, this index was critical of India utilising only 57 per cent of its human capital. Manish Sabharwal, chairman and co-founder, Teamlease Services, spoke to Shakya Mitra about the deeper malaise that India's low ranking could be pointing towards, and what could be done to make things better. Edited excerpts:
Is this abysmally low ranking a wake-up call for India to better utilise its workforce?
With the caveat that large countries will always be disadvantaged in all such rankings, it is clear that India has long had a big unfinished agenda around human capital. But for me this report was useful in highlighting that labour surplus and young countries like India have very different human capital issues than rich countries which are rapidly ageing (the sale of adult diapers recently crossed baby diapers in Japan). Poverty is about productivity; within a month of landing in the US for my MBA, I was asking myself that these Americans are not smarter than us, why are they richer than us? And productivity is about the 3Es of education, employment and employability. The government is organized vertically but this report reminds us that this problem is horizontal.
Does India have sufficient outlets that will be able to better implement our improved education quality?
I think we have done a commendable job in improving the quantity of education - school enrolment ratios in many states are 110 per cent and 30 per cent of engineering and MBA seats in the country are empty - and we have started work on improving the quality of education. If you are asking whether the constraint has shifted from demand to supply it is hard to answer the question of who comes first; skilled employees or productive employers? Let's just say the only way to solve a chicken and egg problem is to become vegetarian i.e. do something completely different. So policy has to think about urbanisation, formalisation and industrialisation as human capital issues.
India does well when it comes to finding skilled employees. So isn't this report showing the country in poor light?
India doesn't have an employment problem; we have wage problem. Our official unemployment rate of 4.2 per cent is not a fudge and almost anybody who wants to find a job can find a job - just not at the wages they need or want. These are two different problems because the wage premium is a reflection of total factor productivity not just individual productivity and skills. We made a mistake in 1991 by not reforming factor markets like land and labour and consequently we have too many enterprises that are not productive and therefore don't pay the skill wage premium (if you rank manufacturing companies by size there is a 22-time differential in productivity between companies at the 90th and 10th percentile). That said, India has begun the journey of improving factor markets, transforming enterprises and decentralising power to states; most kids who have the right skills in the next decade will not have a problem in finding jobs.
Is our education system robust enough to help youngsters find jobs?
The world of work has changed; employment has shifted from being a lifetime contract to a taxicab relationship and it is impossible to predict where jobs will be in the future (research suggests that 50 per cent of the jobs created in the US in every decade since the 1960s did not exist in the decade before). This has huge implications for education because a rapidly changing world means strong foundations may be more important than specific skills. We are already noticing that Class 10 has become the new Class 8; we think that soon Class 12 will be the new Class 10. In the new world of work the most important vocational skills are reading, writing, English and arithmetic; instead of vocationalising schools we should fix them. The Right to Education Act needs to become the Right to Learning Act. And we need to create flexibility in regulatory structures for modularisation, apprenticeships, and multi-modal delivery to facilitate lifelong learning. WB Yeats applies even more in the modern economy; education is not the filling of a bucket but the lighting of a fire.
How would one address the issue of high gender gap in employment?
India women labour force participation at 23 per cent is just above Saudi Arabia and down 40 per cent in the the last twenty years. My guess is that it came down because many more of them are in education and many of them were tired of wage self-exploitation in farm jobs. My worry is that it has not gone up because of the lack of robust rural non-farm formal job creation.. There is no difference between the reform agenda for a Ministry of Women's Employment or a Ministry of Employment; urbanisation (we only have 50 cities with more than a million people vs China's 385), formalisation (our 6.3 crore enterprises only translate to 17,500 companies with a paid up capital of Rs 10 crore), industrialisation (only 11 per cent of India works in manufacturing and 50 per cent works on farms). Improving this needs reducing regulatory cholesterol in compliance, tax system, labour laws, credit markets, and much else.
