Private Sector and Skills (Country Case Study)October 28, 2015

(C) Wadhwani Foundation 2014

About Wadhwani Foundation

• Nominated by President Obama to become Trustee of Kennedy Center

• Forbes 400 richest American

• Member of the Gates Buffet Giving Pledge; Committed to donating 80% of his wealth through philanthropy

• Chairman, Wadhwani Foundation which he started in 2000

• CEO Symphony Technology Group which he built from startup to $3 billion in less than 10 years

Enable large scale job creation through entrepreneurship

Accelerate employability through skill development

Empower the educated disabled

Impact policies to accelerate economic activity

Promote world class research and innovation

Accelerating economic development in emerging economies - creating and fulfilling millions of jobs

India’s Demographic DividendChange in working age population (2025 less 2015)

• India will account for 20% world’s working age population• Only 7% of India’s population has vocational education.

Source: Global Demographics, Macquarie, September 2015

Status of Skill Development in India

Education, Quality and not the Quantity that matters

• %age of secondary completed population: 40% (vs 23% in 2005)• 7% vocationally trained, but only 3% underwent formal training.• Right to Education Introduced in 2009.• Learning Outcomes remains low

Productivity - lot of scope for improvement

Employment: Female participation rate key to drive productivity and growth• Employment propensity for females is 28% (vs. 82% for males)• Attributed to cultural attitudes and social norms about women in workplace.

Weaknesses in existing Vocational Education System

Mismatch between demand and supply

Weak Industry and Job Linkages

Out-dated courses and inadequate curriculum

Lack of practical orientation and apprenticeship

Stigma/ Lack of Motivation

Financial constraints

Dead End – Certificates and DiplomasAspirational links to Higher Education and better jobs unfulfilled

Education Profile of India’s Population (15+ age group)

Source: Global Demographics, Macquarie, September 2015

• India’s workforce is much less educated than its peers.• Impacts productivity and propensity to be employed.

College and High School Graduates Ill-Equipped for Industry

Skilling needs to align with the Economic Growth

• Most of vocational education focused on Manufacturing industry• 58% of India’s GDP now comes from Services Sector Distribution of Work Force

Initial Inroads by Private Sector in Skilling: Case Study - NIIT

• Started in 1982 – Bringing People and Computers together…Successfully

• Model: Industry driven, placement led, student paid, for-profit, high quality, aspirational

• Objective: Help nascent IT industry grow

• Introduced franchising in training• Many more for-profit IT training

organizations started• Became engine for provide trained

people to India’s IT industry• Got listed in the stock exchange in

1994• Has impacted 35 Million learners

across 40 countries

Lesson: Make Training Aspirational, Industry Led

Initial Inroads by Private Sector in Skilling: Case Study

Skill Training expanded in areas like• Air Hostess Training Schools• Sales Training Schools• Fashion Designing• Pilot training

But did not expand to Blue collar jobs!• Informal training continued to dominate• Guru….Chela

In-house training by companies• IT industry took the lead• Hospitality, Large Auto manufacturer’s ….

Government / PSU jobs remained aspirational• Coaching for recruitment exams continued to expand

2007-2012 Journey – National Skills Mission 2009

National Skill Development Corporation (NSDC) set up in 2010.• 51% private sector and 49% public

National Skill Development Fund (NSDF)• Primarily funded from General Tax Revenues

Target to skill 500 Mn during 2010-2022

Main growth in Skilling Capacity• Increasing private sector ITIs.• ~250 Private VTPs – Financed by NSDC• Skilled about 3.3 Mn people till Mar’15

Release of National Skills Qualifications Framework (NSQF) in 2012

• National Occupational Standards released for ~1300 Job Roles• Skill Training being aligned to NSQF – Work in Progress

37 Sector Skill Councils set up (Industry bodies, NSDC facilitated)

• Create National Occupational Standards• Set up Assessment and Certification ecosystem

Mainstreaming skills for Employment

ITI Program

Year1

NSQF Diploma

Class12Pass

Year2

NSQFAdv. Dip.

Year3

High SchoolIX | X | XI | XII

IndustryEmployment

NSQF L2 L3 L4

School Program Community College Program

L1NSQF B.Voc.

National

Skills

Qualifications

Framework

National Policy for Skill Development and Entrepreneurship - 2015

110 Mn additional skilled manpower required across 24 key sectors by 2022

25% high schools to integrate skilling with formal education over next 5 years.

3-tier structure for Skill Development Mission

Key Paradigms• Aspiration & advocacy, Capacity, Quality, Synergy,

Mobilization & Engagement, Promotion of skilling among women, Global Partnerships, Outreach, ICT enablement, Trainers & Assessors, Inclusivity

Financing Mechanisms to scale Skill DevelopmentSupply Demand Issues

Supply Side• Moral Hazard• Skilled people as "Public Goods"

Demand Side: Effective demand needed from Youth• Information Asymmetry• Ability to pay

• Final cost of training• Opportunity cost of not being in job

Financing Mechanisms to scale Skill DevelopmentWho Should Pay

Costs Benefits

Individual • Financial cost of training• Opportunity cost (may earn

more being an unskilled labour)

• Flexibility and mobility to move vertically and horizontally across jobs

• Higher Salary

Employer • Mistakes by inexperienced trainees

• Learning curve Lower productivity

• Training Materials etc.

• Higher efficiency – Larger profits• Solving supply side shortage of

skilled workers

Government • Subsidies to training firms• Vouchers, loans• Financial concession to

employers

• Lower cost of supporting people as higher wages would mean higher standard of living

• Inclusive growth• Increase in income tax from higher

earnings

Source: Realising the Demographic Dividend – Santosh Mehrotra

Financing Mechanisms to scale Skill DevelopmentSolution

Supply Side• Moral Hazard• Skilled people as "Public Goods"

Demand Side: Effective demand needed from Youth• information Asymmetry• Ability to pay

• Final cost of training• Opportunity cost of not being in job

Solution• Financing through a dedicated training Fund• Labour Management Information System

National Policy for Skill Development and EntrepreneurshipFinancing

National Skill Development Fund (NSDF)• Receptacle for all contributions from Government, Private sector and individuals

CSR• Companies encouraged to spend 25% of CSR money for skilling

Govt. schemes • Encouraged to spend 10% of scheme budgets for skilling

End User Funding• Basic fee paying model by trainees• Grant of Scholarships, rewards and Skill Vouchers by Government

National Credit Guarantee Fund• Provide loans for skilling

Questions ?

Thank You