To work in a post-Covid world is what psychologist Robin Hogarth called a wicked learning environment, one where the rules keep changing, players keep changing, patterns and relationships keep changing, goals keep changing and feedback is often inaccurate or delayed.
Hogarth contrasted this with a kind learning environment where the rules are fixed, players are known, goals are predetermined, patterns and relationships are predictable and feedback is often timely and accurate. I make the case that the Covid-19 pandemic is a tragedy but is also setting off a super-cycle of a radical rise in the productivity of Indian cities and firms as well as their people.
The pandemic has accelerated many opportunities for India — geopolitical, structural, global and regulatory. Our geopolitical opportunity arises from the simultaneous shift of global economic gravity to Asia and the “China fatigue” forcing the reconfiguration of supply chains from just-in-time to just-in-case.
The structural opportunity has three components, starting with the ‘World of Work.’ Over the last 50 years, the life expectancy of a Fortune 500 company has shrunk from 64 years to 14, employment has shifted from a lifetime contract to a taxicab relationship, and there is capitalism without capital, where intangible assets matter more than physical assets. The second component is the ‘World of Organisations,’ where employers staff themselves in concentric circles, with organisation structures — that became cylinders instead of pyramids — now becoming Eiffel towers; where there is more workforce diversity and more variabilisation of fixed costs. The last component is the ‘World of Education.’ Knowing is useless in a world where Google knows everything. Employed students in higher education will soon cross full-time students, our children will have 55-year-long careers relative to our parents’ 35 years, and soft skills will matter more than hard skills.
The global window has multiple components. Capital markets — a global capital glut that has made fixed income no income (25 per cent of the world’s bonds trading at zero or negative interest rates) means investors will overvalue growth; US policymakers’ short-termism — the Federal Reserve’s balance sheet is exploding and it is shifting the goalpost on monetary policy as it manages a $3 trillion fiscal deficit. China — its credit to GDP is an unsustainable 300 per cent, many of its big companies are animals bred in captivity that will not survive in the jungle, and its domestic consumption is insufficient to act as a substitute for global trade. Digitisation supercycle — the Covid-mandated global digital literacy programme has led to the demand for software exploding and is expected to drive IT employment from 4 million to 10 million.
But the most important window is our policy window, especially since the Covid-19 crisis has weakened resistance to long-overdue reforms.
This has interesting implications for work. Vertical organisations need to flatten so that information and insights travel faster and without distortion. Fixed costs need variabilisation because business outcomes are no longer guaranteed, forecasting has become difficult, and resilience matters as much as performance. Organisational structures must reflect goals and strategy rather than drawing circles around employees. Middle management pruning must be designed to convert a pyramid into an Eiffel tower. The increasing effectiveness of online learning means that the biggest costs for corporate learning, travel and stay, are no longer excuses for the lack of a vibrant learning ecosystem. Performance management systems need higher frequency and more differentiated outcomes. Expect higher flexibility in working from home, some blunting of business travel, a spike in women’s participation in the labour force as well as a higher acceptance of online meetings and paperless workflows. But the notion that offices are dead may be premature. About 90 per cent of India’s labour force cannot work from home simply because their work has a manual component.
India’s World of Work in the next few decades will be very different because we finally agree that our problem is not jobs but productivity. These changes will manifest in many ways.
More formalised: India’s biggest productivity challenge arises from its 63 million enterprises translating to only 22,500 companies with a paid-up capital of more than Rs 10 crore. As an entrepreneur, I have learned that we can create two kinds of companies — a dwarf, something small that will stay small, or a baby, something small that will grow. India has remained a nation of corporate dwarfs for many decades since 1947 because of regulatory cholesterol in our land, labour and capital markets. But change has reached critical mass, and we don’t need so many enterprises. The US economy, for example, is eight times the size of India’s and has only 25 million enterprises. In the future, we will have much less subsistence from self-employment. About half of our labour force being self-employed shows not some hyperactive entrepreneurial gene among Indians but self-exploitation. We will have a much more formal wage and employment structure as not everybody can be an entrepreneur and not all entrepreneurship is viable. We will have much larger firms. Right now only 3 per cent of Indian apparel manufacturers have more than 500 workers, compared with China’s 30 per cent. We will have many more social security payers. Using this metric, 25 per cent of India’s labour force is already formal and we can expect this to rise to 50 per cent soon.
More urbanised: India has six lakh villages, of which two lakh have less than 200 people, and we only have 52 cities with more than a million people. China has 375. This poor urbanisation has created a painful divergence between real and nominal wages. A while back, a young worker at a job fair in Gwalior said that to work in Delhi and Mumbai, he wanted wages that were two and four times higher, respectively, than what he needed to work in his hometown. This urbanisation apartheid will further be amplified by a regional divide over the next 20 years. Five states in the south and west of India — Gujarat, Maharashtra, Tamil Nadu, Karnataka and Andhra Pradesh — will account for half of the country’s GDP growth but only 5 per cent of population growth. But change is coming. In the next few decades, India will have 250 cities with more than a million people. India can’t be run from Delhi. Power has to be devolved.
More industrialised: India’s prosperity is held back by 11 per cent manufacturing employment and 42 per cent agricultural employment (which accounts for only 14 per cent of GDP). China became the workshop of the world because of robust infrastructure, low wages and high foreign investment. In the future, India will have 20 per cent of its labour force working in manufacturing. The first wave of this will be driven by Make-in-India becoming Making-for-India. Domestic consumption is reaching critical mass as is reflected in the concentration of foreign direct investment in manufacturing for domestic consumption. But these factories could easily become hubs for exports. An inevitable and positive consequence of this increase in manufacturing jobs will be agricultural employment dropping to less than 10 per cent of our labour force — an important reminder of Nobel Laureate Arthur Lewis’s wonderful advice that the only way to help farmers is to have less of them.
More skilled: India’s human capital was hurt due to primary education being neglected after 1947. But this mistake has been compounded over the years by regulatory cholesterol and changes in the world of education. Lifelong learning matters more than knowing because Google knows everything; soft skills matter more than hard skills; curiosity matters more than intelligence; and Stanford psychologist Carol Dweck’s growth mindsets (people who believe capabilities are like muscles) matter more than fixed mindsets (people who believe capabilities are like shoe sizes or height). Also, changes in the workplace—through automation, machine learning, artificial intelligence—mean that the three ‘R’s of reading, writing and arithmetic are key foundations for new jobs. To be employable, one needs to add a fourth ‘R’—relationships or soft skills. The National Education Policy 2020 is a holistic roadmap, but let’s reduce the implementation glide path from 15 years to five.
Nobel Laureate Robert Solow once said, countries don’t need more cooks in the kitchen but a different recipe. Let’s imagine the World of Work in a $10 trillion Indian economy: 80 per cent of our labour force works outside farms; there are 200 cities with more than a million people; our cities meet the Marchetti constant of a 30-minute work commute; Chinese factory refugees come to India instead of going to Vietnam and Malaysia as they do today; policies encourage formal hiring unlike current labour laws that are like a marriage without divorce; and a reformed social security system that covers 60 per cent of workers versus only 20 per cent now as provident fund and employee state insurance provide poor value for money. All this will make India the third-largest economy in the world by finally leaving Japan, Germany and France behind.
(The author is Executive Vice Chairman at Teamlease Services)