Self-employment is the biggest source of employment in the Indian economy. According to the 2020-21 Periodic Labour Force Survey (PLFS) 55.6% of India’s workers were self-employed. However, most self-employed workers earn very little in India and their average earnings were just Rs10,643 per month in the 2020-21 PLFS, which is 60.4% of the average income of a salaried worker in the same period.
What can be done to give a boost to the incomes of the self-employed in India? An
Self-employment is the biggest source of employment in the Indian economy. According to the 2020-21 Periodic Labour Force Survey (PLFS) 55.6% of India’s workers were self-employed. However, most self-employed workers earn very little in India and their average earnings were just Rs10,643 per month in the 2020-21 PLFS, which is 60.4% of the average income of a salaried worker in the same period.
What can be done to give a boost to the incomes of the self-employed in India? An Economic and Political Weekly (EPW) paper by Indrajit Bairagya, assistant professor at the Institute for Social and Economic Change, Bengaluru, published in June this year shows that skill enhancement programmes such as the government’s Skill India Mission can play a major role. The only challenge seems to be that workers are either not aware of or not convinced about the benefits of such programmes.
Skilled workers faced a smaller decrease in income during lockdown
The EPW paper is based on a survey non-farm rural self-employed workers in Karnataka and is part of a larger study funded by the Indian Council of Social Science Research (ICSSR) and Ministry of Human Resource Development (MHRD) to examine the importance of vocational training (such as under the Skill India Programme). The survey was conducted between September to November 2020. The Indian economy suffered a contraction of 23.8% and 6.6% in the quarters ending June and September 2020 and grew at just 0.7% in the quarter ending December 2020. A total of 880 non-farm self-employed workers were surveyed in 16 villages. Around 40% (355) of them had undergone formal vocational training under the Skill India programme and the rest had not undergone any formal training. The findings show that income loss for non-skilled workers was significantly greater than that of skilled workers.
What helped skilled workers survive the lockdown better?
What explains the ability of skilled workers to protect their incomes in the post-lockdown period? The paper finds that there was a marked difference in the response of skilled and non-skilled workers for expanding business. While the dominant response for both cohorts was to expand production (of either goods or services), the skilled workers chose to diversify their business or focus or doing business with a larger consumer.
This might have been a direct benefit of the skilling programme
The ability of skilled workers to diversify or market themselves better, compared to the non-skilled workers could be a direct result of the training they received. “This could be because of better access to ideas received through vocational training and skill development programmes that helped them diversify their production,” the paper says. Skilled workers also had more access to technology (such mobile banking, online transactions, and e-billing facility). “This is important as the relationship between technology and businesses can be considered as a proxy for the level of capital investment made in one’s business. It plays an essential role in continuing with businesses when physical movement is restricted at the time of the pandemic,” the paper adds.
What is preventing non-skilled workers from gaining these skills?
The paper shows that a large number of workers might not be aware of the benefits which skill enhancement programmes can bring. More than a third of the unskilled workers in the survey reported that they were simply not aware of formal vocational programmes, and 18% were not aware of its usefulness. Another 28% believed that they already had the skills needed to take what it succeeds. The paper, therefore, rightly suggests that the awareness building efforts of such skilling programmes need to be reassessed, as the advertisements released did not appear to have reached to a large share of workers. Another third of respondents were inclined towards informal learning. This could be due to lack of qualifications or time needed for enrolling in training programmes, the paper says.
To be sure, the size of the market still matters
While the paper makes all the right arguments about the importance of vocational training programmes, it will be naive to assume that these programmes are the silver bullet to India’s quest for generating well-paying jobs on a mass scale. Firstly, the paper itself points out that the biggest source of headwinds (almost 60%) to income in the post-pandemic phase came from a decline in sales. This makes it clear, that both skilled and non-skilled workers were competing for a market which had suffered a squeeze and even if everyone had a vocational training, the aggregate demand and income would not have been very different. This is why skilling needs to be seen as a complementary policy objective which can only succeed when there is adequate demand for employing such workers. This kind of demand will only come when other focused interventions such as a cluster based industrial policy or pragmatic government support generate the demand for this kind of labour.
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