Indian firms are facing a skill shortage and have a problem of finding talented and qualified employees, the report finds.
India witnessed major technological advancements, increased globalization, labor market developments and demographic migration in the recent years. All these are some of the key factors that are leading to skill shortage and skill mismatch in the country. Skill mismatch describes the situation in which worker’s skills exceeds or fall short of those required for the job while skill shortage is the situation in which an industry is not able to avail the required number of skilled professionals.
According to the OECD latest report, 64% companies with 10 or more employees in India are facing a skill shortage as their managers find it difficult to fill the specific job. The biggest shortages are found in the engineering, technicians and skilled trades such as welders, electricians, machinists.
Image Credit: Forbes
The report identified the following key things as reasons that are creating the problem of skill shortage in India:
- Changes in the way firms are organized
- Technological innovation
- Demographic changes
- Changes in the jobs that make up the economy
- Increased dependence on domestic jobs on the economic globalization
- Changes in labor market developments
For example, technology such as a computer can replace the human in many skilled activities that lead to a change in the skill requirement to carry out a particular job.
Skill mismatch and skill shortage, both, negatively impacts individuals, businesses, and economy to a great extent. They increase labor hiring cost, slower adoption of new technologies, lesser business productivity, and impacts how well workers are assigned to a particular job.
Reasons for skill shortage and mismatch vary across countries, which implies they can be addressed through better policies and plans. In reality, it’s essential to assess the factors of existing skill shortage and create policies and plans to fill the gap.