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Business News/ Politics / Policy/  The curious story of India’s employment exchanges

The curious story of India’s employment exchanges

Exchange numbers show that they are doing a stellar job but the expert consensus is that their numbers are inaccurate

A file photo of Thane empoloyment exchange, Mumbai. Photo: Mint Premium
A file photo of Thane empoloyment exchange, Mumbai. Photo: Mint

One of Narendra Modi’s key election planks on which he won a historic mandate this year was job-creation. Towards that end, the government has begun the long-pending task of modernising the country’s employment exchanges, to transform them into vibrant centres of job creation. While the general impression about employment exchanges in the country is that they have gradually become redundant in the modern Indian economy, the statistics on employment exchanges (which are reported by respective state governments) show a starkly different picture.

If those numbers are to be taken at face value, the efficacy of employment exchanges has increased dramatically over the past decade. Data provided by the exchanges show that the number of people registered with the exchanges has increased over time, and that the exchanges are becoming more effective at placing them, as the first chart shows.

Most experts, within and outside the labour ministry, consider these numbers to be misleading for two reasons. First, the data is furnished by state governments, which may be overstating numbers. Secondly, the aggregate numbers mask huge regional disparities within states when it comes to placing job-seekers.

According to Alok Kumar, the director-general of employment and training at the labour ministry, employment exchanges have actually declined in importance over the past decade. “People no longer prefer to go to exchanges because the functioning is very archaic," said Kumar. “It takes months for the paperwork to get cleared and even longer for them (job-seekers) to actually get placed."

Kumar declined to comment on the reasons behind the over-stated placement numbers.

Even outside the ministry, labour experts all agree that the exchanges are declining in importance. “Employment exchanges have failed to reinvent themselves and fulfil the aspirations of job-seekers in present day India. They lack the efficiency to match jobs to job-seekers," said Rituparna Chakraborty, senior vice president, TeamLease Services Pvt Ltd, a staffing and training company.

Confirming this, KR Shyam Sundar, professor of industrial relations at the Ranchi-based Xavier School of Management, said, “If the numbers are showing that more people are getting registered with employment exchanges and an increasing proportion are being placed, then I feel the numbers are suspect. In reality, fewer people are opting to go to employment exchanges."

The rise of job websites has also contributed to the decline of physical employment exchanges, he said.

Another labour economist, Alakh Sharma, director and professor at the Delhi-based Institute for Human Development, also lent his support to the view that the employment exchange numbers cannot be taken at face value. “The exchanges have become useless. If their statistics are showing that they are getting more registrations and doing more placements, then the numbers themselves are wrong," he said.

While the overall numbers are suspect, there seems to be consensus that most of the good work has been happening in only a few states, with the rest of the employment exchanges barely accounting for any placements.

Gujarat and Maharashtra combined accounted for 9.2% of the employment exchanges in the country but provided 82% of the exchange-facilitated placements in the country in 2012. In other words, 91% of the country’s employment exchanges accounted for only 18% of the job placements. While there could be a reporting bias even in these states, most experts contend that employment exchanges in these states are indeed more effective than in other states.

“Gujarat and Maharashtra have adopted more modern techniques such as outreach programmes and job fairs," said a senior labour ministry official, who declined to be identified. “The other states are not so proactive, still relying on traditional methods. Another key factor why these states are doing better is because they are placing people in the private sector, while the others cater only to the government and public sector."

Maharashtra’s success is partly owing to the fact that the exchanges have effectively served the need of migrants to the state, according to Shyam Sundar. Mumbai has the highest number of job seekers, he said, and the bulk of them still rely on employment exchanges rather than online portals.

According to the labour ministry official cited above, employment exchanges can become more effective if they follow the example of those in Gujarat and Maharashtra. It is the overall ineffectiveness of exchanges coupled with the regional imbalance in their performances that has prompted the latest exchange modernisation drive. The labour ministry is looking to bring all the processes—registration, counselling, assessment and job matching—under a single centre, turning them into one-stop job shops.

But before the modernisation drive begins, the labour ministry must focus on getting correct data on effectiveness of exchanges across the country. If state governments continue to mis-report data, we will have no way of measuring the true impact of the latest exchange reforms.

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Published: 24 Dec 2014, 12:54 PM IST
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