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The Muse

March 30, 2006

Labor Issues and India

In keeping with my recent thoughts on India, here's another one on a critical issue we are likely to face in the near future - labor.

India is supposed to the labor capital of the world. Indeed, much of the brouhaha about India has revolved around its seemingly unlimited supply of human capital - its high tech engineering graduates, who are proficient in english language skills. Well, I'm here to tell you that while we might have a lot of people, we're reaching a plateau and things are going to level off pretty quickly. The balances and checks of supply-demand processes will ensure that there is some level of stability in terms of hiring needs and graduates available, but India is floundering in terms of the classic quality vs. quantity paradigm.

McKinsey did an analysis of the Indian labor pool and came up with the amazing statistic that India will face a labor shortage as early as 2007 in some areas [previous post here].

A quote from the McKinsey article: [free subscription required]

"Yet rather surprisingly for a country with one of the world's largest labor pools, they (Indian managers) see the high cost and low availability of talent as the single greatest constraint on their companies—a problem that worries them much more than it does their counterparts around the world..."

Another quote from Kiran Karnik, president of the National Association of Software and Service Companies [NASSCOM]:

"The root cause is certainly the adequate number of people with the right skill sets. In my estimate, only a third of the pool has the right skills to be absorbed into the industry right away."

There have been all sorts of studies on this issue, some interesting ones from the NY Times here and from BusinessWeek here.

This argument seems to appear a bit ridiculous when you think back to your engineering days [hyper-competitive colleges, populated classrooms, mile long queues in admission offices]. There are also a huge number of colleges that are opening shop - seemingly by the hour. India produces 2.5 million college graduates and 350,000 engineers a year! It almost seems as if every Indian who passes high school has the option of becoming a professional if he/she wishes. How can we possibly have labor shortages with these kinds of demand for technology and professional colleges? Even our society has a tendency to push us towards these occupations and careers.

While all this appears to be a good thing in terms of equality of opportunity and all that, think a little deeper and you will see the problem. Half these colleges don't have quality instructors. Most of the time students who graduate come back to teach because they couldn't find a better job. Seriously, I can't imagine someone graduating from - oh I don't know, let's say a college near Madurai - with the ambition in life to actually teach there.

Besides the quality of teaching, we are not using accurate methods to gauge the suitability of students who we admit in colleges [entrance exams are a joke]. Once the right people are in place, we need to determine the necessary aptitude and attitude skills that are being demanded by corporate India and provide education that is aligned with these requirements.

NASSCOM is calling for a deregulation of India's education industry. This kind of makes sense, as our education system needs to become leaner and meaner if we are to be able to provide talent in accordance with the demand. This could be reflected in several different ways, not the least of which would be bringing in much needed multidisciplinary facets to engineering as it exists today. There is scope to bring in research based activities, much like educational models in the US. Faculty members need to be provided with policies [and facilities] that will allow them to work closely with the industry [consulting, training and so on].

Another offshoot of this has been the efforts being undertaken by the industry itself. In yet another illustrative example of India overcoming issues despite the government, companies are starting to fill the skills gap by starting training initiatives on their own. There has been a spurt in training and certification trends, HR processes are getting increasing attention, and performance improvement is now a buzz word. Perhaps those of you reading this in India are even recognizing these trends in your workplace. I predict that the next few years will see a huge push towards trends like corporate learning/training, instructional design and eLearning, all of which will help companies put raw engineers through focussed and intensive training sessions that will fill performance and skills gaps.

If you are one of those people with skills that are readily applicable in certain areas, India is the place to be. Wages are skyrocketing, and with this labor shortage there is a huge demand for true talent. Have you read about the market for pilots? I would be hardpressed to name an industry where salaries or headcount have actually gone down.

Ultimately, all we have are people, technologies are just tools. India needs to focus on leveraging this human capital by providing its technology workers of tomorrow with the necessary knowledge today. I would be interested in hearing how you think we can improve our professional colleges - what features would have made your education more relevant and effective in terms of the work you are doing today?

7 Comments:

  • Very well written Ram. I totally agree with you. Its just a matter of time before quality and "supply-demand" economics gets into the picture.

    But unless the BPOs find another alternative (may be from china?, philipines?, israel?) India will be an obvious choice as the other alternatives aren't as well versed with english.

    By Blogger NaiKutti, at 6:47 AM  

  • Ram:

    Nice post. I am not an engineer by profession (cos I dont have the "knack" ;)) but I would like to comment about the broad area of education. I think it would greatly help if the faculty are chosen more carefully and also make sure they are motivated individuals. Also, I think, especially in the field of education, there needs to be a constant check to see if the educators are equipping themselves with the recent updates in the specific field they teach. I have seen even school teachers in the US go through self improvement programs now and then. Also, a system where the file of a particular faculty gets reviewed every 5 years, will be helpful I believe. Lot of them are complacent about their jobs and are jus laid back bcos there is no system to monitor their progress. Basically, we need people who are passionate about their jobs.

    By Blogger Sattvic, at 8:44 PM  

  • Karthik: Thanks.And yes, English remains an advantage that India continues to hold over others. Perhaps this won't make as big of a difference when we see more sophisticated work moving offshore.

    Sattvic: You don't know how happy I am to talk with someone who is not an engineer:). You make some very interesting points. Some teachers do tend to take their jobs for granted.

    By Blogger Ram, at 9:15 AM  

  • from a mechanical engineer's perspective my opinion is,if education in india needs to be modernised there needs to be greater practical exposure.as a student of CEG,Anna University i can tell u,the no of factory visits or inplant training opportunities initiated by our college is nil.it's ultimately upto the students to visit factories out of their own interest.and everyone doesn't go on such trips unless prodded to.

    in such a scenario companies have no other choice but to start training their employees themselves.but i guess this training hasn't yet transcended to mfg companies.

    this probably is the reason that nearly half the students from our dept opt for the software sector during placements.there are probably several reasons for this but one of them is the fact that indian IT/ITES companies don't expect freshers from non cs or it dept to know much in programming and this gives us a greater opportunity to et placed in these companies that in our own "core" companies.

    By Blogger Paurna, at 6:27 AM  

  • Hi Paurna - I could not agree more. Practical exposure is something that is sorely lacking. Especially for mechanical engineering/manufacturing etc., I can understand how essential that experience could be. Interesting though re: why mech people switch to cs. Thanks for stopping by, and hope you did your exams well!

    Ram

    By Blogger Ram, at 10:38 AM  

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    By Blogger LIJO, at 10:04 PM  

  • Thnaks a lot ...

    Really nice post...

    MBA

    By Blogger SYCO, at 11:31 PM  

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