National renewal fund, redux

The Centre’s labour reforms push is laudable, but seems to have overlooked an important issue: the need to create a better safety net while removing fetters on the movement of labour and capital. Employees put out of work for no fault of theirs deserve better. The reasons for job losses are varied: a spike in taxes or input costs, an exchange rate or interest rate shock, political turbulence, mismanagement at the top, and a technology shift leading to a sudden disruption in demand patterns. The last is captured in the growth of e-retail, which has resulted in jobs being lost in brick and mortar establishments. The challenge in this and every other case is to improve the skills of workers by retraining them. This is a worthy investment in a skills-starved economy. It is unfortunate that the Centre’s skill development and apprenticeship scheme, which expands the capacity of training centres, falls severely short on this score.

The focus is largely on training new entrants into the workforce, with little concern for the aptitudes of those already in the labour market. For instance, the Twelfth Plan document points out that five million jobs were lost in manufacturing between 2004-05 and 2009-10, the high growth years. But it does not explore whether the skill sets of employees in one sector can be put to use in another. ‘Redeployment and training’ is not a new idea; in 1992, as part of its reforms push, the PV Narasimha Rao government created the National Renewal Fund (NRF) not just to rightsize the public sector, but also to redeploy those cast aside. The NRF ended up being no more than a golden handshake scheme for the 75,000 or so ‘surplus’ employees and was wound up a decade later.

It is time to refashion the NRF as a redeployment initiative. It should be conceived as a public-private partnership in financial terms but implemented in a tripartite spirit. Industry should be incentivised to undertake such activity, perhaps as part of its CSR initiative. One of the pre-requisites for moving ahead on this score is to have usable data. Market surveys tend to be more optimistic than reliable, which leads to misallocation of both capital and labour. The National Sample Survey Organisation’s (NSSO) surveys on ‘employment and unemployment’ are conducted every five years. This is not enough. The Labour Ministry should get back to doing, or coordinating, quarterly (or at least half-yearly) job surveys, a practice it began after the 2008 financial meltdown but discontinued after five quarters. The scope of such surveys should be expanded with the support of the NSSO and industry bodies. Shock-prone industries can then be identified and the right steps taken. The new skills scheme can step in here.

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