Thursday, December 3, 2009

LabourNet's Question: How Do You Formalize an Entire Country’s Informal Economy?

Maybe when you were younger, like me, you mowed lawns for extra cash, or maybe on a hot summer day you’ve spent a nickel on a glass of lemonade from a cute kid. Of course, neither of you are paying taxes, have any kind of company health insurance, or given social security half the thought of SpongeBob or your next baseball card. Now think of the same situation, only with adults too, and on a much bigger scale – emphasis on much.

That’s the situation in India, where close to 90% of India’s workforce is informal. So you’ve got all these migrant workers looking for work, sometimes working only half the month or just whenever something comes up. The people at Maya Organic, the first organization founded by Mr. Solomon, saw builders looking for workers, saw workers right down the road twiddling their thumbs, and noticed the workers had cell phones. Maya put 1 and 2 together, carried the 4, rounded up, and presto, LabourNet was born. Well, it wasn’t quite that easy – there were failures along the way and LabourNet is still in the development process – but the business model is forming.

Notice I said “business model”. The way it works is workers come to LabourNetand say, “I want to be a part of your organization.” They pay a $3 annual fee, and are added to LabourNet’s system. Then, clients such as construction companies or households come to LabourNet for anything from a plasterer to a maid. If the project is located in the north part of town, LabourNet sends a text message to every registered worker that matches the desired profile in that area (the picture at the right is the Coordination Center where this happens). A Gujarti family might specify they only want a maid from the same state, and LabourNet will check its database. The first one to call back after the text message gets the job. The company gets secure labor with only one pay point – LabourNet. Meanwhile, LabourNet makes a small profit and sends 70% of the revenues to the workers, who are happy to have more consistent work.

But the ancillary components of LabourNet’s package are actually more valuable than the job security to some workers. LabourNet provides continuous training, health insurance, and maybe most importantly, a bank account, which allows a worker to join in the crucial process of wealth creation. Imagine being a migrant worker in a slum where everyone knows you’re alone and stashing a wad of money under your mattress. Good luck.

As workers move up the ladder from unskilled to skilled labor, LabourNet allows them to stay in their roles as wage earners or try their luck at entrepreneurship (they can even leave LabourNet if they want). Their move out of thesystem allows LabourNet to focus on the next batch of unskilled workers. Herein lies their biggest problem, which refreshingly, they were quick to admit. They want to market their workers as ones who can do the best job, but LabourNet’s best workers aren’t the ones who need the help the most – it’s the newbies in the system.

And certainly, no LabourNet employee is bankrolling here. That’s what makes it a social business: it has the social passion of an NGO but the business mindset of a CEO. Explains Jayaram Krishnan, who heads up the 3-month old marketing department, “When we do earn money, that money’s plowed back into worker welfare and into infrastructure. It’s not like any other pure commercial business, where the profits go to the shareholders. Except for that, on the business side, it’s gotta compete and it’s gotta win on its own merit by providing superior services to customers, by acquiring more customers and clients.”

If it seems like I’m excited about what this organization is doing, it’s because I am. It’s easy to talk about sustainable models but to actually implement them is another question. LabourNet sees the value in a model like this: everyone kept talking about scalable this and scalable that. They want to go big, and think profits can take them there: Over the next seven years they plan to expand to the seven largest cities and touch over 1 million workers.

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