Keya Madhvani and Raphaela Sapire

Why India’s Economic Growth Depends on Vocational Training: LabourNet links skills to jobs

India has an enormous population of young people – over half of the 1.2 billion people are younger than 25 years old. Yet, only 2 percent of its 500 million person workforce has any skills or training. The majority (90 percent) work in the informal sector, where there are few opportunities for education other than what workers “pick up” on the job. This reality limits overall productivity, as well as upward mobility.

With over 12 million young people joining the workforce each year, India has made vocational training a top priority; in 2012, the Indian government set a target to train 500 million people by 2022.

At Acumen, we believe that on-the-job training offers the potential to create opportunity among the informal workforce. In 2013, we invested in LabourNet, a company focused on improving livelihoods through work-integrated job training for informal sector workers in trades such as construction, manufacturing, leather and beauty. The company creates a measureable increase in the wages that people earn through their skills-building training.

Gayathri Vasudevan, LabourNet’s CEO, emphasizes the importance of skills-building not only as a form of training, but as a continuing learning process.

“Workers enter the workforce with a particular skill, and leave the workforce with the exact same skill. This lack of an improved skillset implies no wage increase, and instead whatever wage rate increase individuals may experience is due to inflation, which is prevalent in the developing world,” Vasudevan explained.

Since 2006, LabourNet has trained over 100,000 students across 25 Indian states. It currently operates 74 livelihood centers and 41 corporate training sites. There are dozens of vocational skills training companies in India, but the quality of training and resulting employment opportunities vary. LabourNet is unique in that they introduce skills training early on with a focus on quality content, increased productivity and employment opportunities in a scalable manner.

Early skills training and translating it to employment

LabourNet believes that skills-based training should be introduced in high school and then continue through to graduation – the barrier differentiating between the “work spaces” and “learning spaces” needs to be broken. LabourNet assesses the level of skill individuals have before and after their training to assess how it has impacted their productivity. For example, the company measures how many buttons an employee can stitch onto a garment before training, compared with his or her output after training.

LabourNet also links certified students with potential employers through a resource center that provides various services ranging from financial inclusion to protecting the rights of informal workers. For students who took courses that offer placement services, the placement rate in 2012-13 was 71 percent.

In its 12th five-year plan, India prioritized faster, more inclusive economic growth and identified manufacturing, retail, tourism and construction as key sectors in achieving these goals. Training the millions of the largely unskilled workforce to participate productively in the economy is essential in driving India’s future growth. Highly scalable companies like LabourNet that focus on increased productivity and employment opportunities at scale are critical in achieving India’s national growth story.

LabourNet Feature 2

This article originally appeared on the Acumen blog and has been reposted with permission.

Keya Madhvani is an Innovation Associate at Acumen.

Raphaela Sapire is a Business Development Analyst at Acumen.

impact investing, skill development