Revisiting the link between labour market, skill development and gig economy

According to the Global Wage Report 2019 by International Labour Organization (ILO), India stands at the third position from below in the Gross Monthly Minimum Wages in the Asia-Pacific region. “In India, though the labor productivity is growing at a faster rate, the minimum wage is not growing in consonance with productivity”, mentions Dr. Anoop Satpathy pointing at the statistics in the report.

Dr. Anoop Satpathy is a Fellow (Faculty) at V. V. Giri National Labour Institute (VVGNLI). He has also been associated as a Member of National Level Commissions/Technical Committees such as Planning Commission Sub-Group on Creating Employment Opportunities during the 12th Five-year Plan (2012-2017), Steering Committee on Training of Trainers of the Director-General Employment and Training (DGET), Ministry of Labour and Employment (MoLE) among others.

Team NSN had the privilege of conversing with Dr. Satpathy to understand the link between the labor market, skill development, and the gig economy and how skill development can be an integral part of the strategy. Read on to know more and you can also watch the complete video interview on our YouTube channel for which the link is given below.

Q: How do you think we can re-establish the connection between skill development and the labor market?

A: As we all know, in the post-COVID situation, the labor market is under pressure. Even though it is slowly picking up but we are yet to reach the pre-COVID scenario. Our labor market is largely informal and therefore, the productivity of the worker is low. This is compared to those in the organized sector and compared to people in other countries who are doing similar types of jobs.

If you ask me the solution for this, skill acquisition is the strategy one can adopt. This is more relevant to India because India has a large youth workforce, compared to East Asian countries, BRICS countries, and other similarly placed countries.

Skill acquisition is one of the fundamental strategies to take the labor market out of this underemployment situation. But that should not be the only intervention to bring up the situation of the labor market to decent employment. Skill development can be part of an integrated strategy. One of the strategies is to formalize the informal economy both in terms of workers and enterprises. When we talk about skill acquisition, we should also talk about enterprise development. Most of the enterprises we have in India are small and medium, and a significant number of them are having only five workers.

To formalize the informal and to get due recognition in policymaking, we have to focus on growth and quality of employment. Employment created from growth should be given fundamental emphasis. When it comes to skill development we should focus on the extension of social security and extension of labor rights to all the workers.

For the enterprises to grow, we should provide them credit facilities, market facilities, and business development facilities. So, along with skill development, there are many other aspects that need to be considered to address the labor market issues.

Q: With demand-driven skill development and grassroots level interventions taking place, how do you think we can make skilling aspirational?

A: To make skills aspirational, we have to provide an adequate wage premium for a higher level of skills in the market. Today when we compare the wages of skilled, semi-skilled, and unskilled people, there is no much difference. Skill acquisition is not rewarded in the labor market in terms of higher wages and skills are not getting due recognition. According to the Global Wage Report 2019 by International Labour Organization (ILO), India stands at the third position from below in the Gross monthly Minimum Wages in the Asia-Pacific region. In India, though the labor productivity is growing at a faster rate, the minimum wage is not growing in consonance with productivity.

There is a need to set the minimum wages, to make minimum wages rewarding for higher skill level people. This issue has been addressed in the wage code. The wage rule talks about constituting a technical committee, which will have experts from the Ministry of Skill Development and Entrepreneurship (MSDE), Industry, Trade Union, etc. This is suggested to link minimum wages with NSQF levels. This is to determine minimum wages objectively rather than subjectively. We hope this provision helps in making skills rewarding.

Q: How is the issue of social security addressed in Gig economy in reference to the Social Security Code 2020? How are labor laws going to help the workers in the gig economy?  

A: In the Social Security Code 2020, for the first-time gig economy and platform workers are recognized in the labor law. They may be independent or contractual and therefore not classified as workers per se because our labor legislation is not considering the new form of employment regulation to classify them as workers. It might take some time for the gig workers to get recognition. Therefore, the minimum wage is not applicable for these workers.

(The interview was taken before the announcement of Union Budget 2021. According to which, “For the first time globally, social security benefits will extend to gig and platform workers. Minimum wages will apply to all categories of workers, and they will all be covered by the Employees State Insurance Corporation,” announced Finance Minister Nirmala Sitharaman.)

Read more on highlights from the Union Budget 2021 –https://nationalskillsnetwork.in/union-budget-2021-22-skill-development-education-entrepreneurship-gig-economy/

Even if they are independent or contractual workers, they are still working under someone and not completely independent. None the less, for the first time they have been defined in the social security code, thereby extending them the social security. There will not be a problem of funding, because the cess will be imposed on the platform economy enterprises through which a fund will be created for the extension of social security.

Funding might not be a problem but the implementation would be an issue. The funds may not be utilized efficiently. Therefore, the challenge lies in how fast we can register these workers, how fast we can design benefits for these workers, and how fast we can link the workers to the benefits. These are some of the challenges to extend social security to gig and platform workers.

For skilling to become aspirational, we need to emphasize on legal rights of the workers, until then implementation is a problem in India. We must focus on awareness creation, online grievance redressal mechanism, and probably have a toll-free number where workers can call and put out their issue. We must use technology in a bigger way. And this will ensure the last mile connectivity.