L&T is facing a shortage of 25K labourers and 20K techies!

As conveyed by SN Subrahmanyam, Vice-Chairman of L&T, the reasons behind such a crisis have three matters:

1). Adverse weather conditions

2). Disruptions by-elections

3). Skilled labourers moving abroad for higher earnings.

Additionally, L&T also has an attrition rate of 10–12%.?

Let's look into all the reasons that are standing as an obstacle in L&T's labour shortage:

Adverse weather conditions are a problem because they can cause a high amount of absenteeism in labourers, posing a significant delay in the work. Not just L&T; every construction company will face the same. This would not just decrease the number of employees on a particular project but also increase the working hours of the existing employees. Both of these things, i.e., absenteeism and increased working hours, can cause shortages and attrition.

L&T’s construction projects don’t face the “no-work” problem in heatwaves in Gulf countries, as in India, the directive for “no work” in heatwaves was given by the government. There too, Indian skilled workers are used for the projects, which gives an idea of how cross-country policies are putting obstacles in their work.

Disruptions due to elections happen when labourers and migrant workers shift to their villages to find work around elections. An election activity includes a lot of things, and these labourers are able to find so many things around the same time in their own villages.

Let's separate the skilled labourers and techies to discuss their issues:

Skilled Labour: An article in "The Economic Times" said from the survey of 300 manufacturers that 76% of them reported a shortage of skilled labour.

The NDA-led government addressed skill shortages through three iterations of the Pradhan Mantri Kaushal Vikas Yojana. But the results showed that out of 14.3 million people enrolled in the programme, only 1/5th of them got placed. In short-term training, out of the 5.6 million certified candidates, only 43% were placed. The challenge with an average Indian worker is that he has less than 8 years of education, much less than the 14 years of a typical worker in China. Only 5% of India’s workforce has received formal skill training, compared to 80% and 96% in countries like Japan and South Korea.

Now the problems behind such a shortage of skilled labourers is familiar to all of us. Today, every blue-collar worker that we will come across will primarily don't want their next generation to pursue blue-collar fields, which is automatically bringing a gap in the skilled labour force. There is no external encouragement that will lead to an increase in such things. But there is a demand that needs to be fulfilled in order to secure our future needs. There is a need to change mindsets towards blue-collar work. Educated people spend long periods in unemployment looking for suitable openings in government, often settling for lowly openings like peons despite their higher educational qualifications.?

Another reason skilled labour shortages happen is because of their shift towards abroad for high earnings. In many countries, the income of skilled labourers is decided on an hourly basis, which is not a prominent pay model in India, making them settle abroad.?

Techies: An article from Livemint conveyed that the average salary growth rate in the IT industry in 2024 stood at 8.4–9%, which shows that to double a salary at such rates, it will take almost 8–9 years. If the IT companies earn Rs. 3 lakh, then they will pay Rs. 35,000 to the techies. If a person takes on the responsibility of completing the project on his/her own, then he will earn more than what he earns in the company as a salary. Now this can be the reason that companies are finding it difficult to find techies. But this shortfall in the IT industry might be shifting somewhere else, and the answer to that can be the rise of the "gig economy" in India.?

The gig economy seems to have 2.35 crores of freelancers in India in 2030 as compared to 77 lakhs reported in 2021, and currently 30% of the same is composed of IT industry professionals. The charge levied on the service inquirer by a freelancer is less than that of the IT companies for a service, which leads to many small and new companies using the services of freelancers. So the IT industry is facing a shortage of techies due to two factors, i.e., low pay growth and better earning potential in freelancing.

In the last year, not just LTI Mindtree but the whole IT industry has been facing a slowdown with an average year-on-year revenue increment in single digits due to many geopolitical factors like the Russia-Ukraine war in 2022 and the Israel war in 2023.?

After the record hiring done by IT companies in India in the pandemic, because they don’t have bigger projects to manage, they are also laying off many employees. And this is happening not just in smaller IT companies but also with the leaders.?

All these things might be affecting the L&T employee shortage in a very rudimentary way. But is there any way companies can revive themselves from such a crisis? In the case of skilled labour, it can only be possible if people change their mindsets towards blue-collar jobs, as demand is not the case; it's there, but fulfillers aren't.

But in the case of Techies, they are available but are not satisfied because of the pay gap, which is making them wonder if they should choose to remain with the company despite the opportunities out there to earn as a freelancer. It's not just a problem for techies; companies will increase the salaries of their employees when their own revenue from operations increases.

Maybe this year will prove to be a performing year for the same.

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Written by : Archit Kabra