As informal enterprises are facing unique impediments in availing themselves of formal skilling, interventions are needed to boost their economic productivity in long term. Elaborate (200 Words)
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Enrich the answer from other sources, if the question demands.
IAS Parliament 5 years
KEY POINTS
Unique Impediments
Limited awareness
· Small and informal business owners often see limited benefit of formally skilled workers due to a lack of awareness of the productivity and income gains that can accrue because of skilling.
· This problem also extends to parts of the formal sector, which is experiencing increased ‘contractualisation of labour’.
· These formal employers might not see any incentive to invest in training, given the temporal nature of the occupation and high attrition rate for the ‘contract employees’.
Cost and time of training
· Around half of the workers employed in the non-agriculture sector work in enterprises that employ less than two people on an average.
· This low number increases the opportunity cost of training per worker and discourages small and informal enterprise owners from investing in training.
· Entrepreneurs also find it difficult to upskill themselves as they already face time and financial constraints in their business.
· Finally, potential workers who do get formally skilled, demand a wage premium that small enterprises are unable to afford.
· Lack of alignment between current formal programmes and the skilling needs of small and informal enterprises.
· Small enterprises often depend on workers who perform multiple tasks and thus need their employees to be trained in multiple skills.
· The current formal skilling programmes are often not designed for this and tend to be specific to a job role.
· The current programmes also provide full-time and non-local solutions while firms need flexible, hyper-local models. This combination limits the effectiveness of the initiatives.
Interventions that can help catalyse demand for formal skills
· Provide incentives and increase awareness to drive demand for formal skills training.
· Giving financial and non-financial incentives to enterprises in the informal sector has the potential to mitigate the cost and time pressures of engaging workers in formal training and increasing uptake of skilling programmes.
· Further, as small firms experience the productivity gains from investments in skill building, the demand for skilling of their workforce will increase.
· For example, Kenya launched the Jua Kali Skill Voucher Program to catalyse adoption of skill training programmes among micro and small enterprises (MSEs) through demonstration effect.
· After experiencing more than double the average sales, the MSEs increased their permanent training resources and staff.
Any incentives, therefore, must be designed with the goal of sustainability, with firms eventually transitioning to skilling their workforce without needing external support.
· Foster tailored models of skill provision, there is a significant need to create an enabling environment and dedicate resources to support testing of new models across the sector.
· The ‘micro-training’ provider model in Rwanda is a case in point. It is a hyper-local and flexible training model operated by small enterprises that engage in production and sale of goods and services and provide training as a parallel service.
Recognise skills required through traditional apprenticeships or other non-formal channels.
SARI 5 years
Please Review..........
IAS Parliament 5 years
Kindly provide better quality picture. Try to include some examples, Government schemes if possible. Keep Writing.
N.k 5 years
Review
Thanks
IAS Parliament 5 years
Good answer. Keep Writing.
