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Talk on Skills Gaps and Manufacturing Employment in the Global and Indian Contexts
Date: September 2, 2014 [Download Presentation]

About the presenter: Dr. Aashish Mehta is a development economist, and an Associate Professor of Global Studies at the University of California-Santa Barabara.

Summary of the talk: Dr Mehta at the outset defined skill as an ability to execute a task efficiently. He emphasized that foundational skills delivered through high quality basic education are essential for a person’s success in life and the labor market, and are also a pre-requisite for training workers in high productivity skills.  These foundational skills, including reading, writing, arithmetic and the ability to think analytically and critically are learned at an early age. He emphasized the importance of job creation in manufacturing though he stressed that it is becoming much harder globallyto sustain manufacturing employment in recent years.

From India’s perspective, more than skill gaps, it is the poor quality of public education that leaves a trainability gap which in turn hinders employability. For instance, a report by ASER, brings out the lack of basic reading and arithmetic skills among rural school children in India. According to Dr Mehta’s calculations based on NSS 2009-10 data, 25 per cent of economically active persons having vocational training are not able to find jobs. It is observed that manufacturing firms face other problems besides skills, which need to be addressed as well.

Dr Mehta categorized the skills gap into two types. One being the economic skills gap (Type I) and other the commercial skills gap (Type II). Type I is whenthe benefits to society as a whole of increasing the supply of skills exceeds the costs of doing so, while type II relates to employers’ inability to find skilled workers at the wages they can afford to pay.  He argued that while the discussion of skills gaps in India today revolves around evidence of Type II skills gaps, policy must be based primarily on type I skills gaps.  This will ensure that workers will actually benefit from skill acquisition, that firms’ most serious problems will be addressed first, and that limited public resources will be spent to fill the country’s most pressing educationaland skills needs.

Dr Mehta concluded by suggesting a few policy responses. He urged to fix the trainability gap first, by improving the quality of basic education. As basic education, acts as the main source of skills gap and also is a biggest source of socio-economic stratification. Secondly, he suggested prioritizing type I skill gaps and providinglabour intensive industries the support they need most, which may or may not be skills, depending on the industry. Lastly, for India to assess upward mobility implications, it needs longitudinal surveys of workers that capture the education system in detail.