Job Creation: What does it take to make it happen? Part 2 of 3

First part here. Second part below. Third part on its way.

In my last post, I spoke of the four interlocking systems: Technology, Policy, Market and Talent, that fundamentally influence Job creation. I argued that, Technology unlocks opportunity; Policy enables value creation and distribution; Talent readiness is critical for value creation and adoption; And Market is the cauldron that translates opportunity to value. In this post I want to speak about what are some of the short-term drivers to enable Job creation (and equally importantly, what are not). The short answer really is, there is not much we can do to create more jobs in the short-term. What we can focus is really more equitable distribution and increasing income premium. At the bottom of this article, I highlight 10 areas which Philanthropic capital should focus on.

Given the short-term focus, we will not be discussing the role of the education system, policy unlocking global markets or technology breakthroughs - Topics that we will cover in the third part of the series. In the short-term, there are only four potential levers to address the issue of Job creation: (A) Increasing the Ability and Agency of the job seeker (B) Reducing Market frictions in connecting seekers and markets (C) Increasing the number of Job creators and (D) Ensuring equitable distribution & social protection.

There is limited evidence of social sector improving ability for the organised sector: Despite all the investment by the government and philanthropists, every Market opportunity that created jobs for many within the organised sector in the last two decades - Be it Software engineers, aviation staff, Cab drivers, Delivery boys, Home-care staff, Retail workers - did not rely on the impact ecosystem in addressing the talent needs of the industry. At the same time, private players like NIIT, Aptech, Frankfinn Institute thrived when the opportunities increased. Even today, while non-profits struggle with mobilisation (and blame the government's free programs), private training providers are running sustainable businesses without even committing to placements. The simple truth is that these companies have thrived not because of industry's willingness to pay for talent but because of the job seeker's willingness to spend to improve his/her employability. And among those looking to invest precious time and capital to be more employable, social sector does not have enough brand credibility for job seekers to invest time and money.

We have created a ineffective system by targeting the wrong outcomes: Here's the challenge: Since every funder is measuring success of such programs by placements, the entire skilling ecosystem is focused on people who are in the narrow sliver of 'those who are economically disadvantaged but not so disadvantaged that they would take up any job'. They often have poor academic record but are good enough to be placed in a job after 45 days. On the market side, the skilling agencies find companies and sectors that are leaking buckets and are looking to fill their ongoing attrition of staff with new talent. We then put the seekers through a short-term program and celebrate success once they find a job. What in effect is happening is (A) We are subsidising the staffing costs of large companies who should ideally be paying for it (B) We are not digging deep enough to improve the agency of those that need it badly. We even went as far as subsidising training costs of large companies in construction and retail using government investment, because we want to be "demand led".

There are companies solving market friction problems, but they don't need philanthropic capital: There is a definite need for staffing companies that are operating at scale because companies are looking to hire and people are looking to be hired. Given that the future of work is going to be short-term by design, there will be growing interest in finding talent for short-term gigs, contract staff and seasonal talent. Work itself will be redesigned to become micro-gigs executed by a distributed workforce. Similarly, companies are keen to invest in specific skills that have direct top line or bottom line impact. They are looking for scalable, low cost solutions. Hence, on-the-job, tech-based, modular learning that is low-touch, low cost and large scale is already a reality today. All of these are problems that market is keen to solve and hence should be willing to pay for. There is really no need for Philanthropic capital to subsidise these problems for companies. While it is interesting to see initiatives such as the Job tech 2.0 competition to encourage new market models for addressing the jobs and livelihood opportunities, Impact capital should be used only a catalyst here to attract mainstream capital.

Agency building is still not market driven investment: We need agency building for those that need the most – People with disability, rural women, craftsmen and artisans, women reintegrating to the workplace, youth in rehabilitation, the very poor – all those who today cannot go by themselves to a staffing company and get themselves a job. We need organisations that can work with these people and build them in them intent, awareness and motivation. These are not only training programs but also access to services, networks and lifelong support systems that enable them to succeed. Once done, these people should be connected to staffing agencies and market access platforms that can provide them access to livelihood opportunities. There is of course the question on outcomes – It is about time that we build outcome metrics around improving agency that all of us can trust. Given all the work that is happening on 21st century skills and Social and Emotional learning, the timing cannot be better. But let's move away from measuring effectiveness through placements.

Entrepreneurs are rarely poor, and need risk capital & market access: Entrepreneurship is all the craze these days and the impact sector is keen to make every student an entrepreneur. While it is definitely a critical lever for job creation, research has shown that most successful entrepreneurs are older and experienced in the markets they engage in. Also, Entrepreneurs are those with high agency – As Sattva's own experiences with entrepreneurs have shown, they often have capital to invest, access to networks and a higher social support system. We should hence be cautious to position entrepreneurship as a poverty alleviation mechanism. What we should focus on is to see what we can do to enable Small and Growing businesses better. And this is especially critical to do in Middle India. So, our entrepreneurs don't need to be selected purely based on the poverty lens. We need to support those that can truly building inclusive workforces and unlock markets, even if they are not poor themselves. And where Philanthropy has to play a role is in providing risk capital and enabling market access (and not on training and entrepreneurship development programs).

Collective entrepreneurship models in rural areas have to succeed: Entrepreneurship, as a function of the individual, is always going to be in short-supply. Hence, we definitely need to pioneer models where collective entrepreneurship models among farmers, artisans and SHG groups have to succeed. NGOs should strongly focus on collectivisation and building institutional rigour, which market will never be willing to pay for. NBFCs and market players that have business models hinged on their success should be supported with access to risk capital. Just as with organised sector, market-based solutions that can serve as B2B and B2C platforms should be built through mainstream capital.

Policies can help create pockets of jobs and create income premium for the current workforce: Policies can be judiciously used as levers to push Industry to invest in skilling where it is absolutely required. A pilot who flies us from Mumbai to Delhi needs to clock hours of training and flying. But those drawing blood off our hands in hospitals often have no formal training today. Rigorous definition and implementation of policies to enforce a skilled workforce on critical jobs (E.g. Healthcare, Public infrastructure) can help create a market for for profit companies that offer on-the-job training and assessments while unlocking income premium for the current workers. It is highly unlikely however to create many new jobs. Another area where stronger policy enforcement can help is Apprenticeship because there is limited uptake from the Industry to invest in building a skilled work pool.

Policies around social protection are critical to put in place: We should be cognisant that those employed in some of the largest sectors today – such as Construction, Manufacturing – do not have access to essential social protection services putting these families under grievous risks. Government needs to ensure a social security net that covers these so that their poverty does not impact the next generation. There is a need for stringent laws and equally rigorous implementation of fair labour practices and social protection schemes to ensure that no worker’s life and future is at risk.

We need to rethink the relevance of Vocational Education: There is a lot of discussion on reimagining vocational education and increasing the pride of vocational education. The larger question, however, is of relevance. Vocational education, as a construct, was created when industrial machinery was deployed at scale and were assumed to stay forever. Hence a stream of education that would prepare people to use those machines made sense. While it took 158 years for the spindle to reach 50 million users, Reliance Jio took 53 days. And that is the world that we live in. Today, even if we know the sectors of enduring value, there is no certainty on the actual tools and machinery that will be in use. So, it is critical to ask ourselves whether vocational education is relevant in the current context at all. Industry has no willingness to create a pool of talent for them to choose from. Which brings us to ...

"Keeping young people engaged" programs have their place and need limited investment: There are BA/B.Sc colleges, a share of engineering colleges, vocational training institutes and also some of the skilling initiatives run by NGOs which today purely play the role of "keeping young people engaged". These programs keep them in class, help build social relationships, have some impact on their skills and behaviours but do not necessarily making them job ready or productive. It is a known reality to the students, staff and the market (but unfortunately not always to the parents). There are limited incentives to invest in these institutions to improve them but the impact of shutting them down can mean more young people on the streets. Government and philanthropy should have realistic expectations from such investments and keep them running without rueing about why the employability quotient is low among the students of these programs.

So in summary, here are my suggestions for the short-term. In the short-term Technology has a limited role to play in creating new jobs. From a Talent perspective, building agency is much better investment than building Ability. Policy can help ensure an effective social protection net and improve premium by enforcing a mandatory skilled workforce. Defining Market as the large organised sector is of limited value. Promoting entrepreneurship both as individual and collective models, especially in Middle India, has much higher value. Existing skilling investments made by the government and the Philanthropic ecosystem should be redistributed to these 10 specific focus areas.

1. Be catalytic capital to attract market investment to companies solving market friction problems for the organised sector / gig economy. In an increasingly short-term job environment, they can help unlock income to a wide range of people.
2. Not be used to fix the staffing costs of leaking bucket industries and companies.
3. Double down on agency building to ensure that we bring the women, people with disability, those at risk and in rehabilitation to the workforce. This has been the enduring strength of the social sector, does not have any market returns, and can shift the needle on the supply side.
4. Invest in building new metrics for measuring increase in agency. To measure programs through placements provides false incentives and encourages organisations building agency to become staffing companies.
5. Entrepreneurship is definitely a lever for job creation. But entrepreneurship is not a poverty alleviation program since entrepreneurs are inherently high agency. Philanthropy should provide risk capital and enable market access to existing entrepreneurs, especially in Middle India, to scale their businesses and build an equitable workforce.
6. Encourage collective entrepreneurship by investing in institution building through NGOs and providing risk capital to NBFCs. Market access solutions should be driven by mainstream investments.
7. Advocate for strengthening policies and implementation around social protection because it is not enough if someone is employed when the person and the family is at constant risk.
8. Push for policies that ensure that Industry invests in Skilling, where they don't have market incentives to do so but carry significant risk for the society when they don't.
9. Reconsider investment in vocational education given its limited relevance in the VUCA Markets that we are heading to.
10. Allocate limited capital to keep students in classrooms but critical to have realistic expectations on what those programs can deliver.