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Putting India’s demographic dividend to work: Skill development for a digital economy

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Jyoti Chaudhary has a diploma in information technology from the Government Girls Polytechnic institute in Varanasi, Uttar Pradesh. When she sought employment, Jyoti quickly realized her three-year technical education was inadequate in the job market. Her teacher advised her to pursue another three-year degree to become an engineer, after which the likelihood of securing a job was better—at least on paper.

Jyoti’s story is similar to millions of other young people in India. Faced with low prospects of a job or none at all, youth who can afford to continue their studies choose to get another degree or certification, which delays their entry into the workforce. The time and money spent to acquire additional degrees without a corresponding increase in job prospects prove costly. Indeed, as the BBC notes, “the more educated the person is, the more likely it is they will remain jobless and unwilling to take up low-paying and precarious informal jobs.”

This blog discusses the changing nature of employment and provides recommendations to improve current skilling programs.

The demand side: The informal economy continues to dominate the employment market

While India has succeeded in moving the bulk of the labor force away from the unproductive agriculture sector, most jobs remain limited to the economy’s informal sector. The National Sample Survey Organization (NSSO) and data from the Periodic Labor Force Survey (PLFS) indicate that between 1999 and 2019, most of the labor force that moved out of agriculture (16%) was absorbed in the construction sector (11%). PLFS 2019-20 notes that informal enterprises employed 69.5% of the labor force. Informal enterprises include self-employment and micro, small, and medium enterprises (MSMEs).

Entrepreneurship as self-employment

Except for a few years, India’s economy grew at more than 7% annually between 2003 and 2018. This growth earned it the tag of the fastest-growing major economy globally. Even as the country clocked impressive growth numbers, economists were worried about one anomaly—jobless growth.

In 2019-20, the share of salaried employment in the country fell from 21.9% to 21.3% in the previous year. The Centre for Monitoring the Indian Economy (CMIE) explained that the stagnation in salaried jobs and the sharp rise in entrepreneurship indicated that self-employed people drive much of India’s entrepreneurial growth. It further notes, “Entrepreneurship is often a desperate escape from unemployment rather than an initiative to create jobs. An increase in entrepreneurship of the kind India has been witnessing since 2016-17 is evidently not the kind that creates salaried jobs.”

Therefore, the most likely scenario is not jobs created in large companies that employ hundreds of people. Instead, we will see economic activity generated by exchanging products and services between entrepreneurs (and MSMEs) and freelancers. For example, a weaver manufacturing artisanal sarees will enlist the help of a freelance photographer to create a portfolio of her products and a web designer to create an e-commerce site.

The role of digital India and the COVID-19 pandemic

Between 2010 and 2020, India saw a remarkable rise in the adoption of digital technologies aided by the availability of cheap data, low-cost mobile phones, and the digital transformation of public services, technology infrastructure, and citizen empowerment architecture under the Digital India program.

In 2017, freelance workers from India had a 24% share of the online global gig economy. These numbers grew further due to the drop in full-time jobs and the rise of remote work during the pandemic. Both factors helped create a favorable perception of freelance work.

This trend is validated among the alumni of the grassroots organization, Medha. For over a decade, Medha has helped prepare youth for life after school. In a recent study, 70% of Medha’s alumni indicated they were eager to work as freelancers. However, they felt they needed more information about opportunities and skills to thrive as freelancers and handholding support to access the market.

To summarize, on the demand side, economic opportunities will continue to emerge in the informal sector, the MSME sector, and among individuals who offer services as freelancers in the gig economy.

The supply side: Skilling infrastructure in India

Skilling in India is a massive challenge because of the wide rift between the traditional primary and secondary education systems. Over the past decade, however, the country has made much progress in improving its vocational and technical education infrastructure. Technical institutions now cover polytechnics and engineering colleges (for undergraduate and graduate courses).

Another focus has been the government-led skilling program (short-term courses of 2-6 months each) to certify participants, mostly school dropouts, in one skill or award a skill certification for prior knowledge. This is an attempt to create a cadre of skilled workers and reduce the challenges of information asymmetry by assuring employers of the skill levels of potential employees. However, these efforts have led to limited results in a scenario where formal jobs in the economy are rare.

Building skills for the digital economy

We recommend the government expand the current skilling architecture in the country to address the fact that most jobs in the short to medium term will come from the MSMEs in the form of self-employment, as discussed above. The nature of most jobs would also change to task-based and micro-work that focuses on a single step of much longer value chains with multiple players.

The survey of youth aspirations by ORF mentions information asymmetry, lack of guidance, and work experience as factors that impede young people’s ability to access jobs and economic opportunities. Our proposed approach builds on students’ core technical skills to help them thrive in the digital economy.

It seeks to reduce information asymmetry—by developing processes and capabilities that improve the discovery of employment opportunities and reduce information gaps between employers and potential employees. The proposed approach will guide young people on their path to upward economic mobility.

The proposed approach is divided into three parts:

1. Integration of 21st-century skills into the skilling systems: Skill development programs must prepare students to navigate the digital economy. The components of such a curriculum are as follows:

  • The 4Cs: critical thinking, creative pitching, collaboration, and communication—provide students with the skills needed to survive and thrive in the modern work environment.
  • Modern-day literacy with the “become an entrepreneur” approach: includes modules on accessing information over the web, basic financial literacy, understanding markets, using social media and digital platforms. Students can then manage finances, identify potential marketplaces, and market their work.
  • Essential life skills: flexibility, self-awareness, leadership, and people skills prepare students for life after school. These skills put participants on the track for lifelong learning and development.

2. Provision for on-demand guidance and mentorship models for individuals: MSC’s research on entrepreneurship and MSME development points to the outsized impact of access to mentorship on an entrepreneur’s performance. Medha’s Swarambh program—to skill freelancers—connects mentors with aspiring students. Customized and on-demand guidance helps create a supportive ecosystem, enabling entrepreneurs to navigate their work.

The current vocational and technical training infrastructure might serve as support centers providing ongoing advice to entrepreneurs regarding access to technology, business opportunities, financial management, and compliance, among other areas. The recent announcement of the Digital Ecosystem for Skilling and Livelihoods in the Finance Bill (Union Budget) for 2022–23 can potentially act as a technical backbone to scale this idea.

3. Address the digital divide to enable youth to access opportunities in the digital economy

While the COVID-19 pandemic has highlighted opportunities for students in the digital economy, it also exacerbated the digital divide in India. Any program to enable skilling for a digital economy should account for the wide disparity in the ownership of mobile phones and computers among the low- and middle-income groups. Skilling programs should avoid a one-size-fits-all approach. Instead, these should subsidize the cost of digital assets and data plans for students, wherever applicable, to enable them to access digital programs. Similar efforts are needed to overcome the gendered access to education, skills, and digital assets.

Skilling the 13 million youngsters that join the workforce in India every year is an uphill task, especially given the shortcomings of its education system. While fixing them remains the top priority of the country, they are beyond the scope of this blog. In the short term, we need to deploy large-scale efforts to equip the skilling programs with modules on 21st-century skills and fortify the necessary infrastructure for mentoring the youth. If done correctly and jointly, it can help India realize the potential of its demographic dividend.

A fine-tuned approach to digital platform design and development in Africa—Part II

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Many thanks to Chris Maclay, Director of Youth Employment at MercyCorps for his time and viewpoints regarding the Jobtech ecosystem in Africa.

An old African proverb proclaims, “It is the young trees that make up the forest.” Africa’s youth will determine its future. The next several years will be decisive in determining how successful we are in caring for the younger trees to help ensure they grow into a vibrant forest. In the previous blog, we outlined some systemic constraints hindering the sustainability and scalability of job matching platforms in Africa. With 70% of the youth population in Africa under 30, stakeholders must seize the opportunity to onboard youth to digital platforms transparently, provide them with consistent and reliable work, and ultimately allow platforms to serve as a roadmap to formalization. Below we have provided recommendations as to how this can be accomplished.

Recommendations

Build the ecosystem from scratch: The digital platform ecosystem in Africa seems to be modelled on digital platforms in developed countries despite the significant differences in the economic models. The “winner takes all” approach, in the absence of adequate labor protections, can actively harm the workers it seeks to benefit, as many platforms aim to run down their prices which negatively impacts workers’ wages, and their trust in the platforms. There is, therefore, a need to develop an ecosystem that can identify and respond to the unique challenges of the African continent regarding youth employment. The Jobtech Alliance, hosted by MercyCorps serves as a place for startup platforms and development practitioners to share best practices and disseminate knowledge in the space. The sharing of information within and among the members will enable stakeholders to address the systemic constraints and facilitate a double bottom line impact – both in terms of running profitable, scalable businesses and providing economic livelihoods to its workers.

Don’t put the cart before the horse: There is little doubt that digital job matching platforms have the potential to positively impact [youth] employment in Africa. However, before such platforms can catalyze this long-anticipated employment boost, they must understand the markets in which they operate. There has been much talk in the development world about the unfair conditions to which platform workers are subject – lack of employment contracts, social protection benefits, labor regulations, etc. In fact, foundations, such as Fairwork, have established fair work principles for gig workers (which include social security benefits, gratuity, minimum wage protection, and working hours), in hopes of raising their working standards globally through transparent evaluation of platforms. There is no doubt that such initiatives are necessary to raise awareness, however, it is important to maintain a balance between the platform’s viability (through the provision of economic opportunities to workers) and its responsibility to ensure fair working conditions. Benefits remain a costly proposition for platforms. Given the negative effects that youth employment has on the African economy, as a whole, and the historical challenges of worker protection, governments should  be involved in sharing the costs of worker protections with the platforms.

Gig workers have expressed more interest in consistent work and the value they ascribe the flexibility, than social protection benefits and workers’ rights. The flexibility and access that platforms provide to low- and middle-income populations initially outweighs the need for such protections, which most certainly are not available in non-platform mediated informal markets.

Build Worker Centric Platforms: A digital job matching platform is only as successful as its workers. Therefore, despite the drive to maximize profit and reduce costs, platforms should be built putting their workers at the forefront – in the long-run this will create brand-value, and thus loyalty of both gig workers and those that hire them. Platforms that offer low-skilled, standardized work, which are the choice of many informal workers in Africa, run the highest risk of designing platforms that give little bargaining power to workers, simply due to the commoditized nature of the work itself. The importance of worker centricity in platform design and execution has been highlighted by organizations like the ILO. The ILO examines how the architecture or business model design of labor platforms directly impacts worker well-being in terms of increasing worker agency on the platform, particularly through greater data transparency that can improve worker bargaining. The role of imbalanced supply and demand incentives or rewards, information asymmetry, inability of workers to coalesce and certain labor management mechanisms put workers at an inherent disadvantage and often results in high attrition rates. Other resources on this topic include a report by the Institute For The Future on Positive Platforms which outline positive design principle that platform designers should consider when designing and operating platforms.

Caribou Digital, as part of its work with the Partnership for Finance in Digital Africa, has done work in this area in regards to advocating for platform payment systems that reduce friction around worker payouts, revisiting withdrawal fees, looking at the timing of payouts and the implications of pay-to-promote policies. Platforms should also consider the role that financial services could play in the lives of its workers and use the platform to facilitate financial inclusion. Several platforms have begun offering financial services to their workers including insurance and credit for the benefit of both their workers (retention, ability to grow quickly etc.) and their core business (diversifying revenue streams). In fact in 2019, MSC, using human centric design principles, collaborated with Britam to design a pay-as-you-go personal accident coverage for Lynk’s workers.

Invest in platform-led upskilling: Platform creators must realize the importance and value of imparting skills and training to small scale vendors and/or individuals who have joined the platform. As the skills gap in Africa is large,  the training that platforms provide, including soft skills, online training and financial literacy, has the potential to result in a stronger and more capable workforce with portable skills. Although it requires an investment, and weighs heavily on the platform itself, governments and donors alike should step in to subsidize or fund such programs. For example, Lynk has experimented with different training mediums to see which resonate most with their workers. Lynk’s application “Lynk Lounge,” contains videos and text training modules on various topics, such as how to create an appealing profile or provide good customer service, as well as vertical-specific tips. MAX, an on-demand motorcycle-hailing and delivery platform in Nigeria, sends in-app messages to drivers to reiterate and reinforce lessons taught during face-to-face onboarding training sessions. A platform’s investment in its workforce is not a sunk cost as it will contribute to higher retention rates and a better market reputation, which is paramount at this time when environmental, social and governance (ESG) companies are increasingly valued and valuable.

Conclusion

With the advent of technology and the ubiquitous use of cell phones and the Internet in Africa, digital job matching platforms are here to stay. We can look at them as a necessary evil in 21st century life, or rather ensure they are filling the role for which they are optimally designed: that is, in many cases, providing job discovery and work opportunities to informal workers while ideally serving as an “onramp to formalization.” There is no one business model fits all approach to platform design and execution. Therefore, by taking market nuances into account, and putting the interests of its workers at the center, platforms in African markets will not only survive, but thrive.

A fine-tuned approach to digital platform design and development in Africa—Part I

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MSC thanks Chris Maclay, Director of Youth Employment at Mercy Corps, for his time and viewpoints regarding the Jobtech ecosystem in Africa.

Most young people in Africa currently face an uncertain future. The African Development Bank reports that each year, while 10 million–12 million youth enter the workforce, only 3 million formal jobs are created. As a result, many young Africans seek work in the informal sector without legal and social protections.

The informal sector in urban Africa accounts for 85.8% of jobs. Moreover, it is the primary source of employment and the backbone of economic activity. Although we look forward to a day when formal work opportunities in Africa will be abundant, informal work is not going away any time soon. Accordingly, the emergence of digital job-matching platforms has given development practitioners and economists a reason to be optimistic. Many see these platforms as an essential source of job discovery for African youth and a progressive onramp to formalization.

The ubiquitous use of digital platforms to connect consumers with contractors that provide short-term services is nothing new, particularly in developed countries with a burgeoning middle class. Such services include transportation (Uber or Lyft), home services (TaskRabbit), grocery (Instacart), and food delivery (Postmates and DoorDash). These digital platforms remain viable and scalable in developed markets based on their “winner takes all” business model. It involves thin margins, deep-pocket investors, and enormous user bases monetized at later stages by adding ancillary services. A single company receives most of the available profits, a few others receive a modest share, and the remainder fight over what is left and do not survive long.

However, digital platforms have not performed in African markets despite dramatic growth and monetization in developed economies like the United States. Aside from some digital platforms, notably ride-hailing apps and delivery services, many have failed to scale across the continent or outside of specific African markets. Moreover, when digital platforms scale, they often do so at the expense of the quality of workers’ lives. Unlike more developed markets, Africa is characterized vastly by different educational, economic, and regulatory ecosystems, which influence the digital platforms’ viability, sustainability, scalability, and success.

This blog is the first of a two-blog series examining the Jobtech market in Africa. Here, we explore some of the systemic constraints that hinder the sustainability and scalability of job-matching platforms in Africa.

Oversupply of labor: Africa’s informal sector saw significant growth over the past decades. This growth was driven by technological and macro-economic trends, including the closure of many state-run industries, a shortage of employment and labor law regulations, increasing skill mismatch, and the difficulty of starting and running a business in Africa. These trends resulted in an oversupply of low-skilled workers who recently gained access to mobile phones and the Internet. Many of these low-skilled workers have flooded the job-matching platforms in search of informal work. As a result, supply has surpassed demand for services, resulting in downward pressure on pay and infrequent or inconsistent opportunities, or both, for work.

According to the ILO, most workers on online web-based platforms (86%) and delivery platforms (69%) expressed the desire to do more work. Yet, they cannot obtain extra gigs because of excess labor supply and scarcity of tasks. The platforms cannot provide consistent, predictable, and reliable work, which leads to distrust. As a result, these platforms grapple with demonstrating tangible value to workers. People join these platforms primarily because they need more work quickly. If the platforms cannot deliver on this, workers struggle to buy into the business model, making non-platform mediated work preferable.

Lack of demand: Household economics often hampers the demand for services provided by the digital job-matching platforms in Africa. For instance, local platforms, such as Lynk and Fundis, have shared that their business models were initially targeting countries with a perceived growing middle-class population. The more developed markets in the U.S. and Europe have a sizeable middle class with discretionary income to use such services, which is partly why these platforms have taken off. However, a study conducted by Mercy Corps revealed that countries like Kenya had limited demand from this population group—they lacked the disposable income to purchase the services of gig workers. This situation poses a significant challenge, and the lack of sufficient demand prevents these digital platforms from scaling.

Unit costs: Most successful startups in African markets thrive by drastically reducing costs. Since the startups are compelled to remain competitive and drop prices, many digital platforms in Africa cut the main cost of labor, which impacts the workers. In informal markets like Africa with lax enforcement of minimum wage, platforms that seek to be transparent risk their reputations by paying rock-bottom wages. As a result, digital platforms struggle to sustain demand for their services when consumers realize they can buy the same service for much less on the “informal market”—outside a job-matching platform. The higher unit costs make profitability less attainable. In contrast, most of the labor force in the U.S. and Europe is regulated by labor laws due to the large formal sector. Accordingly, wage arbitrage is not a challenge, and platforms in these developed countries do not face much pressure to run down labor costs.

Further, operational costs drive up unit costs for the platforms. Platforms in Africa, such as Lynk, must incur additional costs to deliver a consistent experience to consumers. Such costs are associated with vetting workers and standardizing work procedures, among other factors. Although these investments facilitate a reliable experience for the customer, they increase costs for the platform, thereby limiting scalability.

All the factors discussed in this blog emphasize the need for business models that are inherently profitable on an individual transaction basis or have built-in monetization measures, or both, early in a company’s lifecycle. In the next part of this blog series, we will suggest ways to design platforms optimally while accounting for the dynamics of African markets.

What will it take for eSanjeevaniOPD to help tackle the third COVID-19 wave and future pandemics?

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India is witnessing another spike in COVID-19 infections, driven mainly by the Omicron variant. The nature of this wave has changed—most symptoms appear less severe than previous waves. The change in symptoms implies the burden of care will likely shift from intensive care units (ICUs) at hospitals to outpatient departments (OPDs). In the previous wave of COVID-19, teleconsultation played a critical role in helping meet India’s growing demand for outpatient and home-based care—and will continue to do so.

This briefing note shares insights and recommendations from our pilot to strengthen the eSanjeevaniOPD—the Government of India’s teleconsultation platform and similar private platforms. We expect these insights will help these institutions withstand the current pandemic and future health concerns.

“Train me like this”: Lessons from a pilot with CDOT and JRGB on CICO agent training

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The inability of BC agents to clear the IIBF BC/BF examination has ramifications both for the individual BC agents and the BCNMs. On the one hand, agents may lose their authority to continue BC operations. On the other hand, BCNM risks losing active agents and spending resources recruiting and training new agents. MSC tested a pilot with CDOT and helped increase the pass percentage of agents, a total of 175 agents appeared for the exam, and 86% of them managed to pass it. Please refer to the deck to learn about our pilot intervention design.

The Ujjwala scheme needs a budget push

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The flagship Pradhan Mantri Ujjwala Yojana (PMUY) might be a big milestone when it comes to women’s empowerment but it urgently needs a budget push to reach every rural household. PMUY was conceptualised and reached scale under the stewardship of the then Minister of Petroleum and Natural Gas, Shri Dharmendra Pradhan” The scheme, launched in 2016 to reduce the dependency of rural households on polluting and low-cost fuel sources, not only changed the indoor air pollution landscape in rural India but also catalysed a larger social movement towards women’s empowerment.

The scheme reached 80 million households in 2019, but five years after its launch, it seems to be flailing. An estimated 20% of the 80 million households no longer use cooking gas despite having a gas stove and canister. Sixteen million households still use a mix of coal, wood, crop waste or cow dung cakes, and are prone to heavy indoor pollution, between two and five times the ambient pollution levels. As a result, in the poverty bowls of Uttar Pradesh and Bihar, many women are estimated to become fully or partially blind by the time they turn 60.

The scheme expanded access to clean cooking gas to rural households by providing subsidised Liquefied Petroleum Gas (LPG) connections for low-income households. It was a runaway success. Adoption in rural areas was fast and good targeting by the government and oil marketing companies ensured that the poor were first in the queue to get the benefits. As against an LPG coverage of 62% in India as on May 1, 2016, Ujjwala enabled a near-universal outreach of 99.8% by April 1, 2021.

However, policymakers need to address three key challenges – cost, convenience and culture – if India wants to keep its Ujjwala promise. In these targeted households, where the average monthly income is around Rs 4,000-5,000, women are unable to muster the Rs 900 ($12) needed for the refill of a gas canister. The annual refills under Ujjwala are hovering around three canisters as against the national average of six canisters. Coupled with financial woes, access issues pose a major barrier for women. Typically, in villages, Ujjwala gas dealers are located at a distance and women are unable to make the journey on their own. Further, fighting cultural barriers is difficult when the family thinks food cooked on traditional chulhas is more nutritious and tastier, though the government has begun to address these attitudes through behaviour change communication campaigns.

A crucial challenge is to ensure access to a lump sum of funds that enable access to canister refills. Ideally, the product should allow smaller ‘byte-sized’ payments over a period of time. Traditional cooking methods allow for byte-sized payments, just enough for a day or two of cooking. On the other hand, a canister is a one-time payment for fuel that will be used over a month or more. Beneficiaries in the most vulnerable income sections find it difficult to accumulate the entire amount of cash. The government, however, tried to reduce the upfront cash outgo by allowing beneficiaries to choose a five kg double bottle connection (DBC) instead of the 14.2 kg canister.

A joint pilot by oil marketing companies (OMCs), State Rural Livelihood Mission (SRLM) and MicroSave Consulting has shown great success, with the key catalyst being local self-help groups (SHGs).

The programme, launched in Madhya Pradesh’s tribal-dominated district of Jhabua had a little over 100,000 customers who had taken either zero or one refill in the previous six months. With the support of the SHG network in these blocks, LPG distributors reached out to these dormant customers between July and November 2021 to provide a three-month-long loan to finance their refill. From a mere 1,200 women beneficiaries, the campaign eventually saw a total of 36,800 women refill their cylinders under this initiative.

While access-related issues were more inhibiting as compared to availability of cash, loans of Rs 900 enabled poorer households to get clean fuel. Policymakers will do well to consider similar solutions. The SHG model to extend credit can be scaled across India. The government can also provide slightly higher subsidies to Ujjwala customers to increase LPG usage.

 

This article first appeared in the print version of the Hindustan Times dated 1st February, 2022.