Arnold Kling  

India's Achilles Heel

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Basic Decision Theory... Papers that look interesting...

This article would be good to give to freshman econ students--and others.


India has technical institutes that seldom have electricity, and colleges with no computers. There are universities where professors seldom show up. Textbooks can be decades old.

Instruction is by rote learning, and only test scores count.

...From the outside, this nation of 1.03 billion, with its immense English-speaking population, may appear to have a bottomless supply of workers with enough education to claim more outsourced Western jobs.

But things look different inside India, where technology companies spend hundreds of millions of dollars in frantic attempts to ensure that their profit-making machine keeps producing.

...A shortage [of trained workers] means something feared here: higher wages.

Much of India's success rests on the fact that its legions of software programmers work for far less than those in the West - often for one-fourth the salary.

If industry can't find enough competent workers to keep wages low, the companies that look to India for skills such as software development will turn to competitors, from Poland to the Philippines, and the entire industry could stumble.


Read the whole thing.


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COMMENTS (3 to date)
Bruce G Charlton writes:

In his new book A Farewell to Alms,

http://www.econ.ucdavis.edu/faculty/gclark/Farewell%20to%20Alms/ftahome.html

Greg Clarke describes how Indian cotton mill workers in the nineteenth century had one eighth the productivity of English workers. He also says that large productivity deficiencies persist even today. So Indian software workers probably need to have _much_ lower wages than US ones, to be worth subsitituting.

But the description of Indian colleges in this article doesn't sound so bad to me - sounds like Indian students might be spending more of their time on tough abstract learning tasks evaluated by proper examinations, and less time plagiarizing coursework off the internet.

Heather writes:

The advantage India has for software development and other white collar jobs is that they speak English well. When you try to communicate a complex idea to someone who does not speak English well, there will be far more errors and product development will slow down. For this reason, companies will continue to use India before choosing countries with poor English skills, regardless of infrastructure.

That said, currently the biggest problem I have seen in all of the countries that people go to outsource is that the highly skilled workers job hop all the time. It is normal for turnover rates to be 50% in three months. This makes project continuity a huge problem. The reason for this is there are not enough workers, so companies keep raising salaries to lure the ones they can. Once salaries reach ~1/3 of a US worker's salary, this will probably slow down because the overhead associated with outsourcing makes this person about as expensive as someone in the US.

Bisaal writes:

That India is too poor to afford a lots of modern textbooks (non-science) may be a good thing since it saves Indian students from being steeped in modern American academic leftism.

Visit a bookshop in India--they are filled with 19th century classics as they sell for $2-3 compared with
$10 for modern American fiction.

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