A large part of training costs are for infrastructure costs
The next wave of impact and innovation in creating skills does not lie in delivery but in financing
Anybody in public policy or corporate India who has not heard about India’s demographic dividend and skill crisis has obviously been living in a cave. Although the volume of ink and conference time devoted to this subject have been useful in creating awareness around delivery issues, the question that still remains unanswered is, “Who Pays?” High attrition makes employers unwilling to pay for training for candidates; they are willing to pay for trained candidates though. Candidates, on the other hand, are unwilling to pay for training but ready to pay for a job. Third party financiers like micro-finance or banks are unwilling to lend for vocational training unless a job is guaranteed. The government wants to pay for outcomes and has not figured out how to do that effectively, efficiently or honestly. And training companies are unable to fill up classrooms because the many students who need skills or “repair” can’t afford their courses.
So, while there is much innovation pending or being tried in delivery – satellite, e-learning, para-skilling trainers and much else – the next wave of impact in skills lies in figuring out models that will enable the creation of a market in collateral-free student loans or third-party financing at the entry gate of training, which can be repaid out of the salary from the job the student gets at the exit gate of training. Employment at exit gate is key to creating a viable, scalable and sustainable model. This is why the innovation – and solution – lie at the intersection of employment and employability. While it is clear that any viable model will involve some form of public private partnerships (PPPs), this will be challenging because the government has developed experience in hard infrastructure like roads, power plants, et al, that are hard to build but easy to operate. But PPPs in education and skills – soft infrastructure – mirror hard infrastructure because they are easy to build and hard to operate. So PPPs in soft infrastructure have not taken off because they require high level of contracting skills, investments and trust that are currently in short supply on all sides of the table. But let’s look at a few possible models involving employers and the government that can help solve the skill crisis prevalent in India.
State Asset Banks: A large part of training costs are for infrastructure costs. State and Central governments control large chunks of buildings and land that could be put into a common asset bank, which could then be made available for training by the private sector on long leases at less the market rate rents. Obviously, all these leases must be structured as conditional on training outcomes.
State Skill Vouchers: Making government money available for private delivery is difficult to manage honestly but is the only way to create competition and gather information about outcomes. We need to shift state money from ‘financing institutions’ to ‘financing students’. Giving skill vouchers to children who can’t afford to pay for their training but can redeem these vouchers at authorized skill centers would expand capacity and biodiversity.
State Financed Private Apprenticeships: Make work programs like NREGA are neither creating assets nor creating skills. Reimbursing private sector employers for stipends would create the sustainable and self-healing vehicle of ’learning while earning‘ and ’learning by doing‘. Expanding non-farm job creation in rural areas is a key public policy priority that could be accelerated by modifying NREGA to include 60- / 90- / 100-day apprenticeships with private employers.
Employer Reimbursements: Private sector companies may not be able to pay for training upfront but many are willing to create reimbursement programs for students who pay for training themselves. For instance, companies may choose to reimburse 50% of the cost after six months and the entire cost in eighteen months.
Employer Financed Apprenticeships: The Apprenticeship Act of 1961 ensures that India has only 250,000 private apprenticeships even though smaller countries Iike Japan and Germany have programs five times bigger. Legislative changes shifting our apprenticeship regime from push to pull would create an elegant solution at the intersection of financing and delivery.
It is clear that the next wave of impact on India’s skill crisis does not lie in poetry but in plumbing. Today’s traffic jam lies at many intersections – state vs. centre, 19 ministries vs. two human capital ministries, delivery vs. financing and training vs. certification. These intersections will be resolved by innovation that balances on both sides. But innovation, like science, needs hypothesis testing because you can’t prove anything right but can only prove things wrong. In other words, we have to kiss many frogs to find our prince – the model that works. This needs the ecosystem – candidates, governments, employers and trainers – to work together in finding new models at the intersection of employment and employability. We have nothing to lose but our demographic dividend.
Manish Sabharwal is Chairman of TeamLease Services Pvt. Ltd.