Startups Spot Opportunity in Training India’s Informal Workforce

Ramashish Ahirwal, 35, works 12 hours a day. He gets paid US$100 at the end of each month, a sum contributed by 20-odd households of a typical middle-class residential locality in Delhi. He is designated a security guard but most of his time is spent helping residents find a parking space in the chaotic lanes of the colony or in running small errands.

Ahirwal is a typical worker in India’s informal sector. A school dropout, he doesn’t have any vocational training either. His income is not fixed; it depends on the number of households in the pool and the tips he sometimes gets. When asked about Social Security benefits, he laughs and says, “What’s that”.

Ahirwal is part of what the National Statistical Commission, a federal agency, defines as the unorganized or the informal sector in India. This group constitutes more than 90% of the country’s workforce and generates about 50% of its national product. The government is attempting to bring more of these workers into the formal labor force through initiatives like the National Skill Development Corporation (NSDC), a public-private partnership set up in 2009 with the target to “skill and up-skill” 150 million people by 2022. But the government’s own estimates put the number of workers who will need such training at 500 million.

But entrepreneurs have also started to launch ventures intended to address the issue. Social enterprises including Gram Tarang, Get Domestic Help and Babajob are not only imparting requisite skills to people, but also helping them find suitable employment opportunities.

Social Innovation

Get Domestic Help (GDH), which describes itself as “a 360-degree domestic help solutions provider,” serves as an example of the potential of the Indian household support services market. India has 70 million urban and 150 million rural households. Based on its market research, GDH estimates that the number of households seeking domestic help in Tier I cities is 2.5 million, growing at 12% annually. Another metric of demand: There are 10 million searches annually on Google for maids in India. On the supply side, there are 10 million people in cities and villages willing to work as domestics.

The scenario is very different in the West, where domestic workers are in extreme short supply. Having returned to India after eight years in the U.S., GDH founder Rahul Chowdhury saw an opportunity to tap the potential of the market. “In India, people are surprised if you are able to run your house efficiently. It is not the norm. When my friends came home, they remarked on the efficiency of my domestic help. That made me curious.”

He discovered that domestic workers typically receive limited training. In April 2011, Chowdhury launched GetDomesticHelp.com, a portal for households, corporates and expatriates to “find good, reliable, verified and trained domestic help.” Part of the motivation also came from his desire to become a social entrepreneur. (Chowdhury previously founded Dallas-headquartered DenuoSource, an analytics and consulting firm, and currently serves as its co-CEO.)

GDH was started with Rs. 3 million (US$50,000) from Chowdhury’s nest egg and contributions from friends. Last year, the company received US$340,000 from Srini Raju, co-founder and managing director of seed capital firm Peepul Capital. (Raju invested in GDH in his personal capacity.) The site’s model is simple — to source candidates from the bottom of the pyramid, screen and train them and, once they are selected, conduct background and health checks.

The company currently receives about 250 serious inquiries each day. It has completed over 800 full-time placements since inception, with revenues of around US$170,000. GDH’s Delhi operations are already profitable and the firm is poised to break even soon in Hyderabad. Apart from search-and-hire, GDH also offers verification services and training solutions. Chowdhury hopes to reach US$1.75 million in revenues in 2014 and US$8.6 million the following year. This year, he plans to expand operations to India’s top 10 cities and create a national brand.

Targeting Industry

The focus of Gram Tarang Employment & Training Services, the social entrepreneurship arm of the Centurion University of Technology and Management in Odisha, a state in Eastern India, is training and job placement for people living in the Naxalite-infested regions in Odisha and Andhra Pradesh. Since the organization’s inception in September 2009, it has trained over 23,000 youth and placed 83% of them. Gram Tarang is also implementing a special project under the federal ministry of rural development’s Swarnjayanti Gram Swarozgar Yojana to train 10,000 youth from below-poverty-line families.

“The absence of empathy and sensitivity toward bottom-of-the-pyramid human resources is quite pervasive. We [at Gram Tarang] have succeeded in inking long-term partnerships with various industries to ensure fair and acceptable compensation, and other benefits and career progression plans,” says Mukti Mishra, chairman of Gram Tarang.

Toward this end, Gram Tarang has instituted a system of regular visits to its employment hubs. Mentors accompany trainees initially to ensure a soft landing for them. A 24-hour toll-free number is also available to address the grievances of the trainees. Sample surveys about their welfare are also conducted.

Gram Tarang was launched with an investment of US$3.4 million, half from the NSDC and the rest from funds raised by Mishra and other promoters. Though it has not been able to break even yet, Mishra hopes that by March 2014, Gram Tarang will be able to register a “decent surplus, and by April 2016 reach a turnover of US$10.3 million.” The organization’s future plans include venturing into several other states.

Catalysts for Change

Entrepreneurship efforts such as GDH and Gram Tarang are seen as catalysts for change. A report — “Adapting to Change: How Private Employment Services Facilitate Adaptation to Change, Better Labor Markets and Decent Work” — by the Boston Consulting Group and the International Confederation of Private Employment Agencies notes that by creating new, formal job opportunities each year, the private employment services industry plays a key role at the institutional level in reducing both unemployment and undeclared work. These services deliver the specialist knowledge needed to navigate the complex regulatory framework for organized labor, including different labor compliance requirements across the country’s 28 states and seven union territories. (Labor is on the concurrent list, which means that both the federal government and the states can enact laws.)

Rituparna Chakraborty, vice president of the Indian Staffing Federation (ISF), says that labor market transitions in the Indian context — farm to non-farm, unorganized to organized, rural to urban, subsistence employment to wage employment — are particularly dysfunctional. “Every year, 1.2 million youth are getting added to the workforce, a million of them to the unorganized sector,” she notes. ISF, a consortium of staffing companies or private employment agencies, is trying to facilitate the transition from the unorganized to the organized sector. It represents companies with over 350,000 temporary staff on its rolls and ensures that each employee is covered under minimum wage laws. The organization also tries to ensure that workers get all the statutory benefits.

According to “Turning Available Work into Jobs,” a report compiled by ISF in October 2012, there are more than 360 million people in the unorganized sector in India. “Our demography is getting younger and requires multipronged initiatives to facilitate the transition from the unorganized to the organized. We urgently need a platform that brings employers and prospective candidates closer and faster. We need to revamp our practically defunct and ineffective employment exchanges,” adds Chakraborty.

The NSDC also acknowledges the role that these entrepreneurs are playing. According to managing director and CEO Dilip Chenoy, “Many areas with skill shortages are in sectors that do not even have avenues of formal employment. Skilling a person and giving him or her a fungible asset like a training certificate, creating job opportunities, and bridging the gap between demand and supply are all crucial steps by organizations such as Gram Tarang, Centum Learning, Access Livelihood and Mpower. It completely changes the way a person enters the workforce. They ensure that there is a contract…. They organize the unorganized in a local setting.”

Centum Learning, for instance, set up Centum WorkSkills in late 2010, with US$3 million in funding from NSDC. It is working toward training 12 million workers by 2022 in areas such as retail, telecom and health care. “At Centum Learning we are focusing on the unorganized space with the mandate of improving the capability of the workforce,” notes Sanjeev Duggal, the company’s CEO and director. Last year, the organization trained 140,000 people and had a turnover of US$30 million. “We should be able to reach US$40 million this year,” Duggal says. “The modern service industry tends to commoditize people and that’s where we try and intervene.”

A Win-Win Situation

Debapratim Purkayastha, an assistant professor at ICFAI Business School (IBS) Hyderabad, explains that building sustainable livelihoods is a win-win for both employers and employees. The former get well-trained workers and the latter get fair pay and the dignity of labor. Moreover, being part of a formalized employment structure increases workers’ bargaining power and awareness of their rights.

“Imparting skills goes a long way in formalizing the labor economy. It leads to a change in the workers’ demographic profile and helps them settle into a long-term occupation, thus reducing frictional unemployment,” says Purkayastha. “Constant upgrading of skills helps workers stay abreast of changing technologies, thus reducing structural unemployment. They also get better equipped to withstand seasonal fluctuations and sector shifts.”

It is not just training and recruitment that has caught the interest of entrepreneurs. For example, Babajob.com is a village version of LinkedIn, listing jobs for drivers, cashiers, cooks, tailors and nannies. Founded in 2007, the company has raised US$1.2 million in Series A funding. Currently the site has approximately 1.7 million jobs posted; on a monthly basis, it helps more than 150,000 job seekers and employers connect with each other. The revenues are derived from prospective employers paying the portal to get leads to candidates.

“Having multiple interfaces helped,” says Vir Kashyap, COO of Babajob.com. “The mobile phone revolution in India allowed us to connect with many bottom-of-the-pyramid jobseekers…. Digital tools such as Babajob will help make the labor market more efficient and reduce the demand-supply imbalances in future.” The enterprise is yet to break even, but a preliminary survey found that on average, candidates who got placements through the portal were able to raise their salary by 20% and reduce their commute times by approximately 14 minutes a day.

Bangalore-based Canvera has occupied a different segment of unorganized space, though perhaps not as underprivileged. The company caters to professional photographers. Dhiraj Kacker and Peeyush Rai, both Indian Institute of Technology Mumbai alumni, set up the online photography company in 2007. Canvera is currently servicing close to 14,000 photographers spread across 400 cities in India. That figure is just a fraction of the 250,000 professional photographers in the country. Since inception, Canvera has raised US$12 million from Info Edge, Footprint Ventures and DFJ. The enterprise is yet to break even; Kacker hopes it will do so in 2014. It closed the last fiscal year with revenues of US$5 million.

The Challenges

Despite the enthusiasm being pointed toward the sector by social entrepreneurs, “it is tough to get this industry its due respect, to ensure that the domestic help gets paid as [outlined in] the Minimum Wages Act,” says Chowdhury of GDH. “It is a challenging task to explain to domestic help the concept of training and how it can change their careers in the long term. It is equally challenging to work with the government on recognizing this labor force as a formal work stream and create social security for them.”

Mishra of Gram Tarang notes that the type of training offered by his and similar organizations needs to gain greater recognition. “The market has not embraced competency and skill-based certification yet,” he says. “Rather, it thrives on exam-based certification.”

There are concerns at the policy level, too. “The lack of comprehensive legislation to provide for minimum conditions is a severe lacuna,” Purkayastha of IBS notes. “In emerging markets such as India, legislation is not always properly or consistently enforced. Thus, legislation alone may not be enough. The problem calls for public-private partnerships involving the government, NGOs and private agencies.”

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