Oct 22, 2017

Formalise the informal jobs

When Prime Minister Narendra Modi’s Economic Advisory Council met for the first time recently, the focus areas it identified can be summed up in on word: Jobs.
The Council chose 10 themes for creating actionable suggestions. These were economic growth; employment and job creation; informal sector and integration; fiscal framework; monetary policy; public expenditure; institutions of economic governance; agriculture and animal husbandry; patterns of consumption; and production and social sector.

All of them point in one direction. The realisation that employment from formal sector will not rise to keep pace with the 12 million job seekers that enter the market every year. This is over and above the millions who are either under-employed or in the informal sector.
Here two efforts are required. First is to focus on the individuals who can be job creators. “All significant inventions and innovations in history were done by individuals, not corporations,” said Dr Bibek Debroy, Chairman of the Economic Advisory Council to the Prime Minister at the recent National IoT Summit by Confederation of Indian Industry. All efforts, therefore, must be to empower the individual to not only realise the innovation but also commercialise it. So far, the focus of the supportive ecosystem for start-ups has been on a corporate entity.
Government organisations are bound by strict procurement rules that make it difficult for them to do business with start-ups. They recognise corporations with track records and high earning. But they don’t award business to smart ideas by smart people.
A new framework and approach is needed here. Not just in government but also with large corporations that have a supplier ecosystem. Large companies have begun to support small innovators but much more is needed.
The most important effort is for start-ups to support each other. In the EU zone, the most aggressive start-up community is the Estonia Mafia (#estoniamafia). This is a loosely organised but tight-knit group of start-ups that work together to constantly support each other. Estonia has been the birthplace of Skype, Transferwise and Taxify. The country has more than 1,000 start-ups which work in an extremely collaborative fashion. Each start-up is ready to support and mentor even younger ones. They hold regular hackathons, have a global mindset and work closely with the government. A similar attitude will help startups in India become an important voice that policymakers will pay heed too.
The second important effort for the government is to formalise the informal sector that offers work to many millions. Even today in India, more than 90 per cent of the workforce is employed in the informal sector. So far this meant people working in farms, construction labour and even the self-employed micro and small businesses.
Policymakers have been focusing on increasing jobs in the formal sector where companies employ white and blue collar professionals. This effort has helped but may not be relevant in the future.
The last few years have seen rise of technologies that allow people to work without seeking a job. The sharing economy is allowing millions to earn a livelihood without working as an employee. From ride-sharing, to logistics, to even the app-based start-ups. In the eyes of policymakers, anyone without a job but with an income is considered to be in the informal sector. There is not much to distinguish a farm worker from an app developer. Both work with specific objectives and are paid by the service receiver.
It’s time for the government to review its approach and remove the distinction between formal and informal. The informal sector is the new formal sector. I have argued that industry must become more flexible in its approach.
Especially in manufacturing, the lines between blue and white collar workers are blurring. With Internet of things (IoT) and 3D printing based models influencing the shopfloor, a manufacturing unit may have more computer science graduates in the factory than welders.
Even the millions that work in the farm sector can be redeployed in related services. Those with natural knowledge of farm products can find work in the farm to fork value chains. As mechanisation increases in the farm, labour can be utilised in logistic and procurement services.
Industry leaders would do well to embrace such workers who may be skilled but without formal degrees and certificates. Here the concept of recognition of prior learning (RPL) comes into the picture. RPL formalises and accepts talents of people who did not earn those skills in an academic atmosphere. RPL is now a crucial pillar of the Prime Minister’s Kaushal Vikas Yojana that hopes to impart additional training to 10 million professionals from 2016 to 2020. Of these about 40 per cent will be with prior skills who will be assessed and certified.
With such certificates, they can hope to get work and even credit from formal institutions. Formalising the informal sector will allow governments, large firms and start-ups to ensure sustainable work. This could also make a deep impact on the political and social demand for reservations for government jobs.
The writer is an economic analyst and author of Kranti Nation: India and The Fourth Industrial Revolution.