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Symposium 2010

Proposal - Training and skill development

The Challenge

Informality of employment is a way of life throughout the developing world. In poor Sub-Saharan African countries, the informal sector employs the vast majority of the nonagricultural labour force ...

Informality of employment is a way of life throughout the developing world. In poor Sub-Saharan African countries, the informal sector employs the vast majority of the nonagricultural labour force. Informal jobs continue to account for a high share of employment in the middle-income Latin American countries, The global economic crisis is likely to cause a further surge of informal employment because of job losses in the formal sector.

Despite unprecedented growth in the last decade, India has a very low low per capita income. The Indian workforce is around 460 million strong. More than 90 per cent of the workforce is in the unorganised sector and the unemployment rate is around 9 per cent.

Employment surveys report low unemployment rates; the reality is that many Indians work on more than one job and continue to search for other opportunities even when they are already employed in some activity. Low productivity is a major cause for both of these. This disguised unemployed when added to the unemployed results in very high unemployment. To freeze unemployment, India needs 8 million new jobs. Given India’s employment elasticity (0.15) and ICOR (3.75), this will require an annual GDP growth rate of 12 per cent and investments of 200 billion dollars.

Even among those employed, 140 million or 30 per cent of the people work with no regular jobs, Not only do they earn irregular incomes, the wage rates in these activities are very, very low. Over 70 per cent of the total labour force (organized and unorganized) is illiterate or educated below the primary level.

The supply of unskilled labour is very high, and hence, the wage they can command is very low. On the other hand, the demand for specific skills is very high, and often, unmet. The solution therefore is to ensure that the unorganized labour is skilled. This requires trainers and training infrastructure. Then that the skill is recognized and accepted by the potential employers. This requires credible certification of the skills acquired by labour. An added advantage of certification is that labour markets become integrated.

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