[OPE-L] [Fwd: India's Skills Famine]

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Wed Apr 11 2007 - 23:08:31 EDT

---------------------------- Original Message ----------------------------
Subject: India's Skills Famine
From:    bhandari@berkeley.edu
Date:    Wed, April 11, 2007 8:02 pm

with even Alan Blinder raising the specter of 40 million US jobs being
outsourced to skilled labor abroad...



The Financial Page

India's Skills Famine

by James Surowiecki

April 16, 2007

The economic transformation of India is one of the great business stories
of our time. As stifling government regulations have been lifted,
entrepreneurship has flourished, and the country has become a high-powered
center for information technology and pharmaceuticals. Indian companies
like Infosys and Wipro are powerful global players, while Western firms
like G.E. and I.B.M. now have major research facilities in India employing
thousands. India's seemingly endless flow of young, motivated engineers,
scientists, and managers offering developed-world skills at
developing-world wages is held to be putting American jobs at risk, and
the country is frequently heralded as "the next economic superpower."

But India has run into a surprising hitch on its way to superpower status:
its inexhaustible supply of workers is becoming exhausted. Although India
has one of the youngest workforces on the planet, the head of Infosys said
recently that there was an "acute shortage of skilled manpower," and a
study by Hewitt Associates projects that this year salaries for skilled
workers will rise fourteen and a half per cent, a sure sign that demand
for skilled labor is outstripping supply.

How is this possible in a country that every year produces two and a half
million college graduates and four hundred thousand engineers? Start with
the fact that just ten per cent of Indians get any kind of post-secondary
education, compared with some fifty per cent who do in the U.S. Moreover,
of that ten per cent, the vast majority go to one of India's seventeen
thousand colleges, many of which are closer to community colleges than to
four-year institutions. India does have more than three hundred
universities, but a recent survey by the London Times Higher Education
Supplement put only two of them among the top hundred in the world. Many
Indian graduates therefore enter the workforce with a low level of skills.
A current study led by Vivek Wadhwa, of Duke University, has found that if
you define "engineer" by U.S. standards, India produces just a hundred and
seventy thousand engineers a year, not four hundred thousand. Infosys says
that, of 1.3 million applicants for jobs last year, it found only two per
cent acceptable.

There was a time when many economists believed that post-secondary
education didn't have much impact on economic growth. The really important
educational gains, they thought, came from giving rudimentary skills to
large numbers of people (which India still needs to do-at least thirty per
cent of the population is illiterate). They believed that, in economic
terms, society got a very low rate of return on its investment in higher
education. But lately that assumption has been overturned, and the social
rate of return on investment in university education in India has been
calculated at an impressive nine or ten per cent. In other words, every
dollar India puts into higher education creates value for the economy as a
whole. Yet India spends roughly three and a half per cent of its G.D.P. on
education, significantly below the percentage spent by the U.S., even
though India's population is much younger, and spending on education
should be proportionately higher.

The irony of the current situation is that India was once considered to be
overeducated. In the seventies, as its economy languished, it seemed to be
a country with too many engineers and Ph.D.s working as clerks in
government offices. Once the Indian business climate loosened up, though,
that meant companies could tap a backlog of hundreds of thousands of
eager, skilled workers at their disposal. Unfortunately, the educational
system did not adjust to the new realities. Between 1985 and 1997, the
number of teachers in India actually fell, while the percentage of
students enrolled in high school or college rose more slowly than it did
in the rest of the world. Even as the need for skilled workers was
increasing, India was devoting relatively fewer resources to producing

Since the Second World War, the countries that have made successful leaps
from developing to developed status have all poured money, public and
private, into education. South Korea now spends a higher percentage of its
national income on education than nearly any other country in the world.
Taiwan had a system of universal primary education before its phase of
hypergrowth began. And, more recently, Ireland's economic boom was
spurred, in part, by an opening up and expansion of primary and secondary
schools and increased funding for universities. Education will be all the
more important for India's well-being; the earlier generation of so-called
Asian Tigers depended heavily on manufacturing, but India's focus on
services and technology will require a more skilled and educated

India has taken tentative steps to remedy its skills famine-the current
government has made noises about doubling spending on education, and a
host of new colleges and universities have sprung up since the
mid-nineties. But India's impressive economic performance has made the
problem seem less urgent than it actually is, and allowed the government
to defer difficult choices. (In a country where more than three hundred
million people live on a dollar a day, producing college graduates can
seem like a low priority.) Ultimately, the Indian government has to pull
off a very tough trick, making serious changes at a time when things seem
to be going very well. It needs, in other words, a clear sense of
everything that can still go wrong. The paradox of the Indian economy
today is that the more certain its glowing future seems to be, the less
likely that future becomes. ?

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