Thread: India's cost advantage ... dwindling

For the last few years, the battle cry was, "We're cheaper and we're better!" We always scoffed at the last, and now the first is beginning to become undone.

http://www.rediff.com/money/2007/jan/01sal.htm

Have American-style salaries reached India?

BS Reporter in New Delhi | January 01, 2007 08:38 IST

A graduate of one of the Indian Institutes of Technology gets a salary offer of $100,000 (Rs 45 lakh). One from an Indian Institute of Management gets offered more than twice as much. Have American-style salaries reached India?

Yes and no. Those two job offers were for postings overseas, not in India. But many Indian companies, struggling to keep pace with a heated job market, are beginning to find that they have to pay salaries that are beginning to be comparable (after some adjustments) with those in wealthy countries.

Take the field of advertising. A fresh graduate from an American University who gets hired by a large, full-service advertising agency to service its clients in the US, is likely to get a starting annual salary of $25,000-$30,000.

His counterpart in India, if he joins one of the top 10 ad agencies in the country, will be offered a starting salary of Rs 3 lakh ($6,700).

Adjust for differences in purchasing power (Rs 45 in India buy you more than a dollar does in the US; true spending power equates Rs 10 with a dollar-which is what economists call adjusting for purchasing power parity, or PPP), and the two salaries become uncannily comparable.

Those numbers reflect the emerging reality across many rapid-growth sectors in India. As the country tops the salary sweepstakes in Asia year after year, with annual hikes of 15 per cent being the average and some salary surveys in 2006 reporting a 22 per cent increase, the differentials with the rich countries are steadily reducing.

And as employees gain experience and ability, their salaries increase faster in India, and even begin to match American levels, dollar for dollar, with no PPP adjustment.

The head of one of the big accounting firms in India reports that an employee doing audit and tax practice in his firm, with 10 years' experience, would earn anything up to Rs 36 lakh (the equivalent of $80,000); check the websites and you find an ad for a chief financial officer in Orlando, Florida, with the pay offered being $75,000 to $90,000. There is no shortage of CFO's in India who earn the same salary.

Ironically, the cross-country salary differentials seem to be greater in the most happening sector of them all: software. The big three software companies pay their engineers in India a starting salary of about Rs 3 lakh (PPP $30,000).

In comparison, a survey done by the National Association of Colleges and Employers in the US last year reported an average starting salary for a computer engineer of $52,500. The representative of a software giant explained that they are flooded with job applications, and don't need to pay more.

In the sales profession, a reference check with salaries compiled by the US bureau of labour statistics suggests PPP parity with the levels in India; but when it comes to skilled workmen like carpenters, the differentials shoot up.

The moral of the story seems to be that if you are well-educated, have a successful career and hold down a good job in India, you are probably better off than your US counterpart.

Well isn't this interesting. Its no secret to India or any other nation we are using for cheap labor that they make less than their American counter parts. What I see happening in the future is more and more workers in these countries are going to start demanding better wages, working conditions, benefits, etc. and pretty soon every country would possibly be paying close to what American workers would make.

This development has been a long time coming. I've been wondering too, will higher oil prices make it less attractive to import every damn thing? So, if there are higher salaries over yonder, and transportation costs rise, is this an opportunity for American know-how to rise again? I sure hope so.

In comparison, a survey done by the National Association of Colleges and Employers in the US last year reported an average starting salary for a computer engineer of $52,500. The representative of a software giant explained that they are flooded with job applications, and don't need to pay more. "


Is this an American company? If so..."they are flooded with job applications".......I thought they couldn't find qualified people here to do that work, that they had to move overseas.

Someone just might have let the cat out of the bag! We always knew they were lying, but now they are getting caught in the lie.

Originally Posted by BetsyRoss

This development has been a long time coming. I've been wondering too, will higher oil prices make it less attractive to import every damn thing? So, if there are higher salaries over yonder, and transportation costs rise, is this an opportunity for American know-how to rise again? I sure hope so.

I hope the Chinese riot in the streets and demand $8.00 or more per hour...in US dollars!

Flooded with applications - yes indeed. The idea that we IT folk were all getting six figures was 90's hype. It was something people wanted to believe about us nerds - it made us fun to hate, and some actually came onto our job-hunting discussion boards to taunt us about our comeupance as if it had been true. Some were foreigners who treated the salary issue as if it were a yardstick of their virtue over us greedy Americans, completely ignoring the factors of relative purchasing power and the international currency exchange rate. Some had no clue as to what it cost to live in the US. I remember a discussion of basic costs, and someone (me) actually had to explain to our adversaries that in most parts of the US, it gets cold enough outside for part of the year to kill a human, so you have to pay a heating bill. In my area public transportation is so spotty you pretty much have to have a car. They all thought we lived in McMansions and bought a new SUV every three years.

An interesting sidenote. This guy's attitude is noteworthy, as it varies from many of his countrymen:

http://www.rediff.com/money/2007/jan/06job.htm

Racism in the international job market

Sunanda K Datta-Ray | BS | January 06, 2007 | 02:51 IST

Is it likely that the new year might see the global Indian transformed back into the unwanted Indian? I am not thinking only of the latest Indian complaints of being squeezed out of Britain, but also of a revival of certain ominous straws in the wind in Singapore.
Some months ago, an expatriate wrote to The Straits Times describing his problems in trying to rent a decent flat because he was Indian. The irony is that discussing the complaint, a local second-generation Indian sided entirely with the racist (Chinese, I assumed) landlords. "All for them lah," my stout Indian Singaporean bellowed in habitual Singlish. "Indians living so badly, making thorough mess of things. One came for my flat. 'Cannot' I told him. Had to, lah..."

Physically, no one could have looked more Indian than the speaker. But birth in another land entitled him to claim to be different, if not better.

Now comes an even more serious complaint about an online advertisement for a project manager's job posted in late December. "Non-Indians preferred" it said bluntly.

Flabbergasted by this unabashed evidence of prejudice, an IT manager, N Prasannakumar, wrote to Today newspaper, "Many of us would read it as 'Indians not preferred'. This clearly reeks of racism in the Singapore job context and does not augur well for racial harmony in this country."

The advertising company has since explained it was a "mistake" and "an oversight by a new staff." Apparently, "the line was removed immediately when the mistake was discovered." The company says the new project manager "will be part of a team of eight persons, among which currently, there are three Indians, three Chinese and one Filipino."

Accepting this was a genuine mistake, I shan't name the company while readers try to work out what the rigmarole means. But let me add that a recent survey by Kelly Services, a global staffing solutions firm, found that two out of three workers in Singapore complained of experiencing prejudice of one kind or another when applying for a job in the last five years. Age was the main reason but race came next, followed by gender and disability. That, despite the ministry of manpower's efforts to educate employers in fair employment practices.

They are smoother in Britain. When the first Race Relations Act was passed in the late sixties, my elderly English secretary in London and her husband decided to sell their large suburban house in the Home Counties, and move to a smaller place. They lost money by not advertising the sale. "Oh! We couldn't do that to the neighbours, Mr Datta-Ray," she exclaimed. "We've been there 30 years!" What she meant was that a publicly advertised sale would have obliged her to sell to an Asian, African or West Indian. Privately, she could pick and choose among only whites.

After the US desegregated restaurants, a waitress in Atlanta, Georgia, told me they still didn't serve blacks. "Oh, we have ways of making them feel unwanted," she laughed, prepared to make an exception for an Asian who was obviously only passing through. I understood though why my hosts in Washington had booked me into Atlanta's most expensive hotel.

I am told that a British reporting team assigned to expose discrimination in the job market recently went to a recruiting agency posing as an employer's representative, and said it wanted only whites. "No problem!" the team was assured. The recruitment agency would so weed out applications that no disappointed coloured applicant would ever know that he or she had been rejected on grounds of race.

So, too, with the Highly Skilled Migrant Programme which was introduced four years ago when Britain needed specialist skills like cooking in Indian restaurants. That need has gone. Faced, moreover, with an expected influx of Romanian plasterers and Bulgarian cleaners to join Polish plumbers, Tony Blair's government has cannily tinkered with the rules so that non-European migrants must be under 28 years of age and must earn more than ?0 annually to qualify. Two earlier modifications, like a five-year, instead of four-year, residence qualification and sudden restrictions on non-European doctors also indirectly served the same purpose as the blunt Singaporean "Non-Indians preferred" job advertisement.

I am not complaining about this manipulation. Indians do not have a prescriptive right to live and work anywhere else but India. Economic need cannot masquerade as a human right. Every government enjoys the right to decide who it wants as settlers, and I can only think that the 30,000 Indians, who are reportedly suing the British government, somewhat lacking in self-esteem. There is also the funny side of an ageing Scots doctor being prosecuted under the Race Relations Act for advertising for a Scots housekeeper who could cook his haggis and kippers.

The reason for recounting all this is to remind ourselves at the start of another year that Wal-Mart and Lakshmi Mittal notwithstanding, little has changed for ordinary Indians. The rich and the talented have always been global. It's humdrum wage-earners who yearn for the world more desperately than the world wants them.

sunanda.dattaray@gmail.com

And another thing that will drive up their cost - read between the lines here:

"MEGA-TREND #3 is the growth of the middle class -- talked about and anticipated for 20 years, but finally acquiring true scale. In 2001-02, there were 61 million Indians belonging to families that earned more than Rs 2 lakh (Rs 200,000) a year; by last year (2005-06), that number had crossed 100 million.

In 2009-10, the National Council for Applied Economic Research forecasts it will be 173 million. Marry that with growing urbanisation, and it is a safe guess that well over a third of all Lok Sabha constituencies will have a sizeable middle class and urban voter base. Think, then, of the many changes this might bring about. The obvious point is about growth of consumption, but we can go beyond that.

For instance, could it lead to a different type of politics and politician, because the urban voter is usually not thinking caste? The middle-class will expect (and increasingly demand) reliable power, clean water, comfortable mass transport systems. . .

Look at the pressures on the government in Delhi in recent years, to provide clean air, uninterrupted power, fast traffic, and responsive government-and you can see what could happen elsewhere in the coming years. "

http://www.rediff.com/money/2007/jan/06bspec.htm