EDUCATION SPECIAL...Gearing Up for Global Skills

Gearing Up for Global Skills

India must change the game in education altogether, to let India’s young bridge the world’s skill deficit

    India is often described as a land of contrasts. Nowhere is this more apparent than in its labour force — one of the world’s largest, youngest and fastest-growing. Thanks to a well-developed higher-education system, India has captured a large share of outsourced services work from the global economy. Yet, 70% of Indians lack education beyond primary school, and 100 million fewer working-age people participate in the economy than they should. Jobs for low- and middleskill workers are limited: a third, who entered the labour force with high-school education in the past decade, could only find employment in the agricultural sector. Labour force participation is dropping — partly because women are dropping out. The result: India’s economically-active population is 25% lower than it could be, income inequality has increased, and millions lack the skills and opportunities to break out of low-income trap. However, if India addresses these issues, it could capitalise on unprecedented opportunities in forces shaping labour markets globally. A new report by the McKinsey Global Institute (MGI) shows that advanced economies’ labour forces are shrinking, or growing very slowly, raising a need for higher productivity and high-skill labour. In many countries, rising technology use and a higher productivity imperative to compensate for ageing will drive skills demand beyond projected supply. There will be too few high-skill workers and a surplus of lower-skill workers; MGI estimates that advanced economies could be short of 16-18 million college-educated workers by 2020. Among the emerging economic giants, China will add only about 13% of the world’s labour force growth to 2030, compared to nearly 20% from 1980 to 2010. Like advanced economies, it will need to compensate for its ageing working population with more high-skill workers. Despite a decade of raising tertiary attainment rates — positioning China as the largest supplier of college-educated workers in the next two decades — it will still face a shortage of 23 million high-skill workers in 2020.
In contrast, India’s labour supply will reach 630 million by 2030 from about 470 million today, making it the singlelargest source of incremental labour supply in the world. India’s strength will be its capacity to add more collegeeducated workers to the market, second only to China in net additions of this category. With a higher share of science and engineering graduates than nations like the US, India could capture a greater global opportunity in technology and other knowledge-intensive fields. However, numbers alone will not guarantee India’s advantage; for example, there are still concerns about how well India teaches creativity and higher-order problem-solving skills to its engineering graduates.
Despite high-skill labour growth, India must urgently commit to upgrading its expanding labour force as the economy faces a future shortage of medium-skill workers. Already, wages for vocationallytrained workers have risen faster in some moderately skill-intensive sectors, such as construction, than for workers without training. Increasing use of capital — through automation and IT — and shifts in employment towards knowledge-intensive jobs will drive higher skill demand than India is equipped to supply. The country’s secondary education system is not on track to deliver the numbers as school retention rates remain low, although primary school enrolment is nearly universal. So, in 2020, India’s educational system will have produced about 13 million too few high school-educated workers, or about 10% of the demand for such workers, based on current trends.
    To eliminate the gap in secondary and vocational education, India would need to achieve universal secondary schooling by 2020. This means doubling current school construction rates, doubling teacher-hiring rates to add 1.5 million teachers by 2020 and substantially improving quality. A large proportion of these secondary school-goers would need to learn vocational skills, perhaps through an optional track in their curriculum. While recent initiatives in vocational training target young people with some secondary or post-secondary education, India already has 285 million adult workers who have no secondary education, and 150 million of these have not even completed primary school. Providing vocational skills to these workers is a unique challenge; apart from technical skills, employers say this should entail even basic training: punctuality, communication, teamwork and time management. The global labour market’s dynamics will not only create opportunities for India but also for other young emerging economies. As China moves into less labour-intensive, more knowledge-intensive areas, younger economies such as Vietnam, Indonesia, Bangladesh and Cambodia have the opportunity to capture a greater share of the world’s labour-intensive manufacturing jobs. India’s growing workforce can take advantage of this shift to raise living standards for lowerskilled workers by reforming its education sector and lowering barriers to job growth.
(A Madgavkar leads India teams, and R Dobbs is a director, at the McKinsey Global Institute, and R Mohan is a former deputy governor of the Reserve Bank of India. The full MGI report is available on the firm’s website)

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