Column: Dont give up on employment exchanges

Written by Manish Sabharwal | Updated: Oct 29 2012, 08:34am hrs
The proposed changes to employment exchange laws are an embarrassing declaration of surrender

The 1971 surrender by General AA Niazi of Bangladesh with 93,000 soldiers to Lt Gen Jagjit Singh Aurora has been a perennial source of national shame in Pakistan. But the merciless gaze of history has been kinder to General Niazis legacy; he was cut off from his army, his army was poorly rationed, he faced a hostile local population, and he presided over East Pakistan for only two days. In other words, he faced an impossible situation. But history will not be kind to the authors of the draft of the Employment Exchanges (Compulsory Notification of Vacancies) Amendment Bill, 2012, that is being introduced in Parliament. This current draft amendment should be withdrawn because fixing employment exchanges is neither impossible nor unaffordable. But the proposed amendment is an embarrassing declaration of surrender because it not only lacks ambition and imagination but it diagnoses the wrong problem and prescribes the wrong medicine.

The Press note after the Cabinet decision to approve the amendment says: The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 was enacted in the year 1959 and with the passage of time some of its provisions have become obsolete and require modifications. With this in mind, the Act is being amended. Employment Exchanges will be renames as Employment Guidance and Promotion Centres as the focus is now on vocational guidance and career counseling besides registration, submission and placement, etc. Establishments in the private sector employing between 10-24 persons are being brought under the purview of the Act for the purpose of submission of returns. This is likely to result in a more realistic estimate of employment in the organised sector. The employer is being mandated to furnish information related to the result of the selection against the vacancies notified within 30 dates from the date of selection, to make the registration data more rational. The definition of employee and employer are being broad-based to include contract labour that has worked for more than 240 days in a year.

The proposed amendments focus on compulsory notification, redefining employers and submission of returns. These are all useful. But more than inefficient, employment exchanges are ineffective. Some amendments may be superfluous; Section 2 (e) of the Act may already include the private and public sector. The decision to expand to smaller employers is welcome but smaller employers are more difficult to service for their hiring needs than larger employers. And if employment exchanges have largely failed for larger employerslast year, to the 4 crore people registered, they gave 4 lakh jobshow will their services be attractive to smaller employers The Act previously did not cover employees with a tenure less than 90 days and the decision to expand this to 240 days is a welcome recognition of the increased role of fixed-term employment. But the amendments are incomplete and will consequently be impotent.

The Nobel Prize in Economics for 2012 went to Lloyd Shapley and Alvin Roth for their work on matchmaking. In 2010, the same prize went to Peter Diamond for his work on search costs in labour markets. These prizes represent an important recognition of the upsides of reducing labour market inefficiencies by improving the matching between employers and job seekers. How does a candidate in Manesar find a job in Delhi How does an employer in Kanpur find a candidate from Etawah How does somebody from Gulbarga find a job in Bangalore This matching problem is particularly painful in India because of our poor geography of work (we have 6 lakh villages but 2 lakh of them only have 200 people), our high rural agricultural employment (that has low signalling value of skills), high subsistence self-employment (the poor cannot be unemployed so they are self-employed), our low manufacturing employment (the ideal mezzanine layer for the farm to non-farm transition), and a poor apprenticeship regime (only 0.0007% of the labour force versus 3.7% in Germany and Australia).

The poor performance of employment exchanges lies in their thought world, a regulatory mindset rather than a client or service mindset. Public-private partnerships for employment exchanges, like most government transformations, are stuck in a traffic jam at the intersection of the central and state governments. The central government has defined modernising employment exchanges as technology induction. State governments have concluded that they cant run the exchanges so they are better off shutting them down. Both are right and wrong. Employment exchanges need technology but also performance managementa fear of falling and hope of risingthat is very hard to create in government-owned and run institutions. They need to move beyond matching to providing training. Innovating successfully at the intersection of jobs and skills needs a shared framework with employerswhat kind of jobs and skills they needthat is self-healing and keeps updating itself in real time. The amendment has proposed to rename employment exchanges but does not create the plumbing that will enable all constituents (candidates, employers, and trainers) to work together.

Employment exchanges need to morph into career centres that offer five things: counselling, assessments, training, apprenticeships and jobs. While job matching on the Internet and SMS is interesting, it is ineffective at the bottom of the pyramid where 90% of our labour force works. The proposed amendment to the employment exchange legislation is useful but the bill should be sent back by Parliament with the message that fixing Indias labour market inefficiencies needs ambition, innovation and courage. Employment Exchanges are not useless, they can be fixed, and they must become the first port of call for employers looking for employees.

The authors are with Teamlease Services