Many state governments who are giving up on employment exchanges should read last year’s Nobel prize citation in economics that went to Peter Diamond for his work on why employment exchanges are important and necessary labour market institution. Of the three problems in India’s labour market, in the pipeline (preparing supply for demand), mismatch (repairing supply for demand) and matching (connecting demand to supply); matching is at the bottom. The matching problem is obvious. How will a kid in Hisar find a job in Delhi? Or, an employer in Thane find a potential employee from Nasik? This matching problem is amplified in India because of the skewed geography of work, since we have 35 cities with more than a million people, besides 6 lakh villages. In the short run, India cannot take jobs to people but must take people to jobs.
This needs employment exchanges. Currently, we have 1200 employment exchanges that generated 3 lakh jobs for 40 million registered people last year. Every year, about 40 lakh new job seekers register themselves with employment exchanges across the country, but most of them do not get shortlisted for interviews. The poor performance of employment exchanges lies in their faulty structure. Governments are not recruiting, as supreme court judgement has killed their monopoly. Unemployability is a bigger problem than unemployment and private sector participation requires a client or service mindset rather than the current regulatory framework. India’s skill crisis – more than 58 per cent of our youth deal with some degree of unemployability – is emerging as a constraint for India’s growth. This is a large challenge because apart from the labour supply flow – 10 lakh youth will join the labour force every month for the next 20 years – we have to worry about stock – 200 million people who are already in the labour force, battling the problems of low skill and productivity.
Public Private Partnerships (PPP) for employment exchanges were put on the agenda in a budget announcement more than three years back. But, like most government transformations, this project is also suffering from official lacunae at the intersection of central and state governments. The central government has set out to modernise employment exchanges with better use of technology. However, many state governments identify the issue as that of governance and performance management. They want these employment exchanges to be disbanded.
The central government may have wrongly diagnosed the problem because fixing employment exchanges requires a lot more than technology. It needs a service mentality, performance management, strong employer linkages and a deep understanding of vocational training. The state governments are wrong because job seekers need a physically accessible lighthouse for career services, information and delivery.
The traditional notion of employment exchanges has a binary outcome – you either get a job or not is redundant in the current context. They do nothing but register job seekers, do not have easily accessible and well organised database and are not proactive. However, most of the exchanges are situated in easily accessible locations, have decent infrastructure (though not properly maintained) and awareness of the exchanges among candidates is high. Policy makers can use existing infrastructures, so neither the government nor the private party makes higher investments on infrastructure and other capital intensive requirements, but find it convenient to divert the resources to people, processes, technology and output.
Employment exchanges need transformation at two levels: governance and services. There is a need to reform their governance through PPPs and rebadge them as career centres which would offer five services: counselling, assessments, training, apprenticeships and jobs. Assessments are important to judge the opening balance of job seekers, their strengths, weaknesses, aptitudes and also help the counsellors match the existing skills to the aspirations of job seeker.
Providing skill development programmes at the career centres will boost the skills of job seekers and increase their productivity at work. Apprenticeship are important because learning by doing and learning while earning are wonderful vehicles for skill development, but India only has three lakh apprentices (Germany and Japan have 6 and 10 million respectively). Finally, employment exchanges need to become credible clearing houses for labour markets, job seekers and employers. The PPP contracts should not only incentivise them on their performance but also rank and rate them in terms of performance; to help industry players, parents and students in making informed decisions.
Some states have started moving forward with the transformation. Karnataka has taken the lead by converting 9 of their 29 exchanges into institutions with the help of private partners that offer assessments, counselling, training and jobs. Many of these exchanges have thrown up good results over a short period of time.
They provide training to candidates (currently includes english, soft skills, finance, IT, hardware, and sales) that have been chosen based on local demand from employers. Most importantly, they convert the process of finding job from the episodic job meals to a dial tone that is always available.
While reform of the universities and schools is complex and will take a long time; the reform of our skill system and employment exchanges is something that is doable, urgent and in the hands of our state government. The big question is, are there any takers?
