Who Will Pay the Skills Premium?

An inherent gap between industry and academia, and how awful it is that their graduates are not employable. India is not alone in this regard

Meeta Sengupta
Updated: Mar 13, 2014 04:01:08 PM UTC

Meeta Sengupta works at the cusp of policy and practice across the education and skills spectrum and enjoys sharing her gleanings via her writing for a wider audience. She has been an investment banker, a researcher, an editor, a teacher and school leader across continents. A keen observer of how economics, foreign policy and investments affect the policy and thence practice of education, she works with leaders to design interventions that improve the quality and process of education. Designing education processes to realise the potential of individual students is at the centre of her education philosophy. Meeta has worked both as a policy observer, and at the coalface of education across the board and across countries. She has served as a governor of an aided school, part of the management committee of a residential school, managed an academic centre in an elite post graduate management school and led a business school supported by a community college. She has worked with children, teenagers, business school and PhD candidates and has also worked with those seeking to rebuild their lives via education. Meeta W Sengupta is a Fellow of the Salzburg Global Seminar, among others and can be contacted via her personal blog at meetawsengupta.wordpress.com/about

The market doesn’t want your skills training. That, Sir, is the first and only problem we need to face. The market doesn’t want to pay for the training and does not want to pay a premium for your trained folk.

Does this say something about the product or about the market?

The 'Skills Gap' has been discussed for over a decade in various countries across the world. Almost all have come up with some sort of white paper that declares how bad the skill levels are, why these are going to lead to economic decline, why they represent an inherent gap between industry and academia, and how awful it is that their graduates are not employable. India is not alone in this regard.

Nor is India alone in acknowledging the fact that there will not be enough jobs for the sheer volumes that will continue to flood the job market. India used to call this surge the demographic dividend. It is now teetering on demographic disaster. A truth that few wanted to acknowledge publicly was that India would almost inevitably have to export its unemployment problem. There will never be enough jobs per square inch of land in India to feed its teeming millions. (Till the population surge dies down as it is expected to in three decades). Not only does India have to fill a skills gap to meet the expectations of national employers, but those of global employers too. In an economy, that is not quite booming.

This is both a troublesome and a blessing. The best skilled people will be weaned away to better jobs globally leading to a “skills drain” as was seen with the brain drain phenomenon of the sixties. At the same time we can hope that the larger cohort will be trained to global standards, leapfrogging a generation of incremental quality discussions in the production of goods and services. But this is precisely where India is stuck at this point in time: the leapfrogging does not have a defined value. And therefore many are unwilling to pay for it.

Very simply: Why would an individual pay for a certified training programme if they are not convinced that it will significantly improve wages? Why would an employer pay a premium for a certified worker if they are not convinced that they will improve productivity?

(An aside: Who should answer these questions with proof?)

Maybe it is just a question of riding out the storm as we wait for the structures that bring order to be built. Sector Skills Councils (SSCs) are in place and growing. The National Skills Development Agency and National Skills Development Corporation are doing their bit. As we speak, the national skills qualifications frameworks have been drafted and a five-year plan for alignment created.

Without this foundation it is almost impossible to create a clear understanding of value. How can there be one till there is clarity on what the certificate really means? The meaning and value of the certificate can only be proven in the market when the pioneers and the crusaders work together. This must be given time to run its course and the market must be allowed to arrive at a true and fair price. Any prescription at this stage will merely be setting it up for failure. If a level 4 plumber must be paid so much by diktat and a level 5 plumber is paid an additional (fixed) sum, the entire system collapses — it cannot perform two basic functions of price. To give feedback to the supply system (trainers, curriculum developers and creators of operating standards) and to be responsive to demand (employers).

The challenge in the skills arena is the tightrope between standards (not standardisation) and speed. It is a about designing a scaled up system designed to be nimble. About creating a network of moving parts that do not clash with each other. Yes, it is complicated and the hard slog remains. As every start-up knows, the idea and the organisation is much easier than proof of the product in the market. This is where skills certification stands now. It needs to prove its value to customers and investors. It is a start-up that cannot be allowed to fail. The price of failure is the dignified livelihoods of at least one generation.

The question in skills used to be: Who will pay to fill the skills gap? As this has been resolved, the question that now needs to be answered is: Who will pay the skills premium? I am looking at you, employers.

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