Saturday, June 27, 2009

The market for vocational skills

Sample this from Louis Uchitelle in NYT about the professions that have bucked the trend druing the recession,

"Welder is one... critical care nurse is another. Electrical lineman is yet another, particularly those skilled in stringing high-voltage wires across the landscape. Special education teachers are in demand. So are geotechnical engineers, trained in geology as well as engineering, a combination sought for oil field work. Respiratory therapists, who help the ill breathe, are not easily found... And with infrastructure spending now on the rise, civil engineers are in demand to supervise the work."

The recession may have taken its toll with many well paying, high-skilled, knowledge-based jobs being lost over the past few months. However, as the NYT report indicates, demand for skilled labour with experience appears to be immune from the vagaries of the business cycle. The market evidently puts a premium on specialized technical (or vocational) skills honed to near-perfection through years of experience.

The cycle-proof nature of such vocational skills stems from the inelastic nature of the demand for these jobs. Plumbers, carpenters, electricians, and those offering specialized engineering (environmental, transport, hydraulics, structural, marine etc) and para-professional services have a well established and more or less invariant market in any economy, irrespective of the conditions. Add in experience to the basic set of occupational skills, and their market demand increases considerably.

And in economies like India, where infrastructure driven construction activities will play a dominant role in the economy for the foreseeable future, the demand for such occupational skills will be insatiable. And among them too, those with experience will command a very high premium, far out of proportion to their basic educational qualifications.

Since these jobs do not require long duration and expensive college degrees, and can be attained by attending specialized vocational tranining institutes (it is an altogether different matter that there is dire shortage of such institutions in the country) for shorter duration courses, there is a clear case in favor of more students embracing careers involving such occupational skills. The market forces, manifested in the ever increasing demand for such professionals and their wages, will in due course of time incentivize more and more people to venture into such careers. The demand for experienced professionals will continue to remain uncleared for such time till large enough numbers of those joining such careers gathers adequate experience over the next decade or so.

Free Exchange points to a "rigidity premium" associated with such professions, since workers who entrench themselves in these specialized skills find it difficult to find alternative employment opportunities in the unforeseen event of a disruptive change that undermines their professions. It writes that this is "a strong disincentive to attempt to develop the experience that is now so valued... employers of experienced workers... have to compensate their employees for the fact that their skills do not readily translate into alternative employment options".


Anonymous said...

How would you relate this to the relative unemployability of Weavers, particularly when demand for their products is vastly reduced.

gulzar said...

I would have thought that it is a simple case of demand-supply imbalance. There are more weavers on the supply-side than there is demand for their products. There may be many reasons for this insufficiency in demand for hand woven fabrics - displacement by synthetic ones, not competitive on cost, market getting differentiated etc.

It is also possible that there has been a deterioration in the general standards of handwoven fabrics. In other words, the general quality (skill levels) of weavers themselves may have fallen. I am inclined to believe that there has been a considerable dilution in the rigour and intensity of training weaver apprentices undergo today (for various reasons), when compared with their forefathers. This trend is similar to the decline in the quality of people in other professions too - unemployable graduates, engineers, doctors, teachers etc.

Irrespective of all the aforementioned, skilled and experienced weavers will always command a premium. And this premium can be increased by more attractively packaging and marketing the product. Innovative and diligent entrepreneurship, with some government assistance, can help these skilled and experienced weavers get even higher value for their produce.

Traditional artisans like weavers and handicraftsmen cannot compete with the mass producers in the same market. They will invariably end up being uncompetitive on both cost and quality. They will therefore have to cater to a niche (most often higher-end) segment of customers who are relatively price insensitive (low price elasticity), and whose attraction lies in the uniqueness of the product. This invariably puts a premium on quality and demands artisans who have both skill and experience.

In conclusion, it appears that the only way for weavers to survive is to create a niche market for their specific fabrics and then nurture and expand this market. And here too, quality of workmanship will be of critical importance, implying that those deficient will fall by the wayside.

lateralviews said...

You are a prolific writer. Keep up the good work.