Indian Wage Inflation

               Is Wage Inflation the Right Concern?

There's been a lot of discussion about recent earnings reports from Indian outsourcers. The numbers they're reporting are still stellar and yet their stocks were getting a beating due to concerns over salary inflation fears in India.

I think everyone's focus needs to shift.

Indian integrators are hiring oodles of newly minted college graduates. It's the rare college graduate who ever stays at their first employer for more than a couple of years. They don't last long because too few of them really know what they want in a career or employer when they graduate. They do know that they want a job. Almost any job will do. So... a fair bit of this attrition is due to an over reliance on new college graduates.

Next, many college graduates find out that the university or technical school training they received is insufficient for their future success. I went through a lot of staffers who decided that they didn't know anything about finance, accounting or business. They needed an MBA and they were leaving to get these new skills.

Some college graduates find out that the degree they thought they loved isn't so glamorous when it's used in the real world. Again, I counseled a lot of consultants who decided that they'd really rather be a lawyer, teacher or other profession when they finished growing up.

Some recent college graduates find out they really are home bodies. They want to live near their spouse, family, parents, etc. Some cannot stand to be away from their significant other and won't travel to clients. Some decide that they need to develop their community, locally, and find service work incompatible with these desires. Again, college graduates are some of the most fickle people around when it comes to career longevity.

Finally, there's greed. Some workers will leave one employer for a few extra pennies. These folks are the ones creating the free agency market for skills and garnering a lot of the attention.

If the Indian firms want to stabilize wages, they need to find different sources of hires, find out better predictors for career longevity, and offer packages that reward longevity. Rarely does throwing money at a problem help.