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How skills vouchers can help emerging markets
By: Sourajit Aiyer
A common thread binds all developing and developed nations today – the issue of skill-creation. Dynamics of
commerce are shifting, and in these changing times, our skill capabilities can help keep our countries competitive and
relevant. Efforts have been made in many countries, including India. Innovations have been implemented to make
those efforts more impactful. One of this is the use of “skills vouchers”.
Skills vouchers have been up and running in countries like Australia, Austria, Kenya, Paraguay and El Salvador. In
India, they were implemented in 2013. While the actual format might differ a bit between countries depending on their
specific needs, skills vouchers essentially form a system of reimbursement that the government gives to the institutes
that provide training to the candidates, instead of actually running the institutes itself. The system has shifted the
government’s role from a training provider to a financier/facilitator. Resultantly, its role is more relevant now towards
the objective of skill creation – the government was never good at running institutes itself. Instead, the training is done
by specialist institutes, who are better suited for that job.
While skills vouchers had their positives, there are still some challenges observed in the system’s implementation in
countries like India:
 raising the training quality so that companies do not need to retrain the candidates
 skills vouchers in their current format have not entirely succeeded in creating awareness of the skills available
and enabling candidates to take best decisions
 ensuring candidates who utilize the skills vouchers enter the job market instead of the training being simply
wasted
 inability to ensure the skills vouchers maximise the training’s reach into the economically-backward households
 creating incentives for the candidate to choose the training that is best suited for him/her, for the institute to
provide the best training, and for the company to invest into training.
This situation suggests a redesign/restructure of skills vouchers is needed, in order to minimize the probability of these
shortcomings.

2. Realistically speaking, the implementation of such complex initiatives in developing countries like India is never going
to be 100% perfect. But one can think how the probability of these shortcomings can be, at least, minimised by
focusing on ownership based on who is ultimately impacted, giving precedence to merit, creating incentives to perform,
putting responsibility of ensuring quality standards, and genuineness of participants.
There are three categories of skill shortages confronting most nations, in varying proportions.
 The first is vocational/job-specific training which includes production roles, as well as self-employment and small-
scale artisan opportunities.
 The second is professional/educational training, which is slightly higher on the education-grade than the
vocational training category.
 The third category is the need for non-cognitive, soft-skills category that can enable candidates to move up the
professional ladder based on their seniority/experience.
PROFESSIONAL SKILLS VOUCHERS
Starting with the professional/educational training category, these include skills related to computers, book-keeping,
process-oriented roles, etc. It can significantly use talent that is currently languishing in unorganized sector jobs by
giving them the wings to fly.
In this category, the responsibility/onus of quality delivery might be with the institutes. These skills are too varied and
generic for the companies to involve themselves directly in, and may not be worth their time and effort.
To avoid cases of non-serious candidates enrolling for trainings on a whim without the intention to move into jobs and
sorting out those candidates who are really genuine in utilizing the training, the skill skills vouchers can be restructured
as subsidised loans.
This means the candidates have “skin in the game”, and would enrol only if they are serious and put more thought in
their decisions. Failure to get jobs means paying the interest-bearing loans, or losing the collateral. The loan might be
paid off by the voucher in periodic instalments, rather than in one go, to ensure the candidate sticks to the job.
The idea behind this suggestion is to award merit and reduce non-serious players. If the candidate’s performance in
the aptitude test, actual training and finally on the job are really good, then he gets the voucher’s benefit purely on
merit. Focus on merit would help build efficient and productive teams.
The risk is that the candidate would be liable to repay the loan even if he is unable to get a job. This is where the
quality of the institutes and curriculum of trainings available would come into focus. Institutes would need to ensure
quality of training that would make the candidate job-ready, since the inability of the candidates to get job placements
despite showing merit would determine the institute’s future enrolments.
The area of training/skill itself would not see any demand if there are no jobs in that area, hence the institute has to
build its curriculum of available trainings more carefully to keep it relevant, rather than just offer a whole lot of courses
just to maximise intakes.
Aptitude tests done initially might help the candidates take the best decisions related to skills that would be relevant for
them. It is pointless going for a course just for the fascination of it, if the candidate does not have the inherent
competencies. Making and delivering these aptitude tests might require co-ordination between the institutes,

3. companies and career agencies. The job of advising the candidates in their decision-making might be outsourced to
career agencies.
They get paid as a percent of the voucher amount, part of which is paid when the candidates enrol for their training and
part is paid when they enter the job market. This creates an incentive for the agencies to give the best and relevant
advice.
The government’s role might focus on creating awareness of the skill courses through SMS/email alerts to registered
candidates, and through advertisement/pamphlets in local newspapers. In short, the objective here is to focus on merit
– merit in terms of performing candidates, performing career agencies and performing institutes.
CRUCIAL SOFT SKILLS
Moving to the non-cognitive/soft-skill category, it is ironical that the countries that need these skills the most to climb
the “ladder of economic relevance”, are those who give it the least importance. Non-cognitive/soft skills here include
analytical capabilities, inter-personal communication, emotional intelligence and psychological understanding, out-of-
box thinking etc.
These qualities help build the quality and effectiveness of leadership teams. Having such leadership teams would help
more companies from developing countries grow their scale of business across geographies, which would help them
break into the league of top global companies that enjoy the maximum market share of production and supply in most
product categories.
In this category, the ultimate responsibility has to be with the companies, as they benefit by building relevant senior
teams for their own expansion ambitions. Such ambitious companies themselves have to lead this initiative.
Companies can accredit institutes based on the training quality and infrastructure. The government in its role as a
facilitator can register those companies who are keen to participate in this skill-building category along with the laundry-
list of skill components and quality levels that it would include.
Institutes filling these criteria can be examined initially by those companies, to arrive at a list of accredited institutes.
This list might need to be periodically renewed, as it will create the incentive for institutes to build the best-
quality/delivery, innovate and ensure requisite skill levels are reached, as the quality of its previously trained
candidates would be tested on-ground by the companies already.
While the companies might use employment-bonds to retain the trained candidates and avoid fast attrition, it might also
create an incentive for the companies to provide good working conditions and opportunities, so that the candidates
themselves do not feel the need to switch jobs continuously.
Indian companies like Larsen & Toubro and TATA Group are examples who have invested into staff training
programmes across levels, in the process building quality and relevant leadership talent with extremely low-levels of
attrition.

4. Companies might need to co-ordinate with the institutes to build practical test modules, which create an incentive for
the candidates to put efforts into learning, as their ability of rise in the companies post-training would depend on their
testing scores.
While it involves a larger role from the companies in terms of ownership, the soft-skilled senior category (employees
who stay for the long-term) are critical for the companies’ own growth objectives. Hence, companies themselves need
play a role in this category.
JOB-SPECIFIC SKILLS
Coming to the vocational/job-specific category, it reminds one of the old adage – “a country needs only that many
engineers, and it will amount to nought if it does not have enough electricians”. In this category, the ownership might lie
with multiple stakeholders, given its sheer mass.
Institutes, government and companies might draw a priority-list of skills as per National Manufacturing Policy and give
precedence to industrial production skills that are urgently required. Aptitude tests on motor-skills and hand precision
might need to be done by the industrial training institutes.
Another priority list is that of those skills that create self-employment jobs in this mass category. In many developing
countries, youngsters learn their trade by working with experienced tradesmen hailing from their families/hometown.
While this means a low-cost resource for that tradesman, it may not always be relevant in terms of the youngster’s
aptitudes, impacting their performance and job stickiness. Apprenticeship post-training might be relevant, but this
would require a psychological shift in tradesmen to let go of low-cost resources.
The government/institute’s role is to focus on the youngsters, by creating awareness of skill options and institutes, and
the better/relevant job opportunities they can get post-training.
A significant challenge here is the network of accredited institutes, as most candidates in this category might not be
able to bear travelling costs if institutes are located far from their towns. This means prioritizing the network based on
economies of scale where institutes get access to a large pool of candidates, like Tier 1/2/3 urban towns, or including
the travel expense within the voucher’s amount.
The quality of the institutes would be under the spotlight, as the inability to make the candidates job-ready for factories,
workshops or self-employment can create negative publicity through word-of-mouth in the area’s captive candidate
pool.
Companies might need to get involved for those skills that they require on regular basis and in large quantities, for their
own assured supply of trained labour. This also creates an incentive for candidates to enrol for training.
An issue that the above-mentioned suggestions might fail to address is on delivery of this subsidy to economically-
backward families by identifying deserving candidates from that pool.
While ideas like restructuring skills vouchers in the form of subsidised interest loans might be relevant to weed out non-
serious candidates, they cannot bring in economically-backward candidates as they have no collateral.

5. Reserving a percent of skills vouchers per year to economically-backward candidates is useless, since it is possible to
misuse it by showing wrong documents related to family income/assets.
A possible solution might be physical checks to the candidate’s dwellings to estimate the family’s economic position.
While this also does not mean accuracy and can be prone to wrong estimates, it might weed out some inappropriate
candidates at least. The investment in physical checks is substantial, and the institutes/government might outsource
this activity to microfinance field-officers covering that area for a commission.
The above-mentioned suggestions for the three categories of skill shortages focus on the twin pillars of giving
precedence to merit and performance, and on creating an ownership/responsibility for achieving the required standards
in skills and training, from the perspective of all the stakeholders – candidates, institutes, companies, career agencies
and the government.
In the process of weeding out non-serious players, there might be fewer institutes, fewer agencies and fewer
candidates participating down the road, but at least they will comprise the genuine, serious and quality lot. No
suggestion is 100% perfect, and there might still be scope for slippages.
The broader purpose here is to enlarge the talent pool of skilled people who can perform as per requisite levels, and
help keep their countries relevant in these rapidly changing economic times. As the skilling cycle sees success, more
and more serious players would be incentivized to enter, thus enlarging the pool of candidates and institutes over a
period of time.
- The author is a finance professional based in India. Views expressed are entirely personal.
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This entry was posted in In Depth, Views and tagged careers, developed countries, emerging markets, employment,
jobs, professional development, recovery, skills vouchers, training, unemployment on July 8, 2014 by Antonia Oprita.