Training only solution to talent crunch

The talent war now going on in India is happening within the contours of a peculiar paradox. On the one hand there is rising unemployment even among the educated youth and on the other there is a talent war raging. More intriguing is the fact that while the developed world is likely to see a “shortage of 40 million working people”: by 2020, India by that time will have a surplus working population of 45-50 million people. This article takes a look at some of the issues so that HR managers have a better insight about current trends in the talent market.

The first trend is, of course, the way globalization and the outsourcing boom has completely changed the labor market. Indian companies have managed to grow at a break-neck speed despite going up the value chain with the result that we have now become a knowledge hub instead of being just a low-cost destination.

In the financial year 2006-07, the IT/ITES sector recorded export revenues to the tune of $39.6 billion, contributing 5.2 per cent of India’s GDP. The sector is expected to grow at a compound annual growth rate of 24 to 27 per cent and is poised to record exports of $60 billion by 2010.

This sharp growth is brining in its wake an acute shortage of skilled manpower and consequently steep increases in salary levels. While the IT and ITeS sector alone would need about 8,50,000 skilled workers during the next three years, the demand for skilled workers is causing shortages in several other industries such as the biotechnology and pharmaceutical industry, banking and finance, real estate, retail, hospitality and the oil and gas sector to name only the most badly hit.

The result is sharp increases in salaries that are far outstripping the rates at which salaries are rising in the rest of the Asia-Pacific region. A spokesman for “ECA International,”: which surveyed 45 countries, told reporters at the beginning of this year that: “Indian workers are set to receive the highest raises, with firms forecasting annual salary hikes of 12%, resulting in a real wage increase of 7%, once inflation has been taken into consideration.”

According to Asia Times Online, the “ECA survey”: found that wage rises in Hong Kong are forecast at 1.5%, while those in Japan, Taiwan, South Korea and Malaysia are likely to be between 2% and 3.5%.

Indonesians, along with mainland Chinese, are expected to record a real wage increase of about 6%, while the Philippines and Thailand, with a hike of 4% each, come in at fourth and fifth respectively.

Vietnamese managers are expected to receive the lowest real wage increases in Asia, with high inflation canceling out a sizable salary increase, the survey said.

The talent shortage in many Asian economies is most evident at senior management levels, where the most significant salary increases are occurring, leading to a widening gap between junior and senior management levels, the survey said.

The salary hikes in India and China at all management levels are exceeding increases in more developed Asian economies, such as Singapore and Japan.

“While one does not expect senior salary levels to be in line with more mature economies in Asia within the next couple of years, the fast growth of salary levels in the rapidly developing markets in Asia presents a huge challenge to human resources,” ECA International general manager Lee Quane said, reports Asia Times Online.

ECA, the world’s largest membership organization for international human-resources professionals, establishes actual and predicted salary hikes in local markets around the world, and multinationals use the survey to benchmark future wage hikes.

The author of the Asia Times Online report points out that the ECA report follows similar assessments. According to the 2006 Salary Guide issued by “Kelly Services India,”: India has the highest average salary increase at 13.9 %, with employees in the information-technology (IT) industry receiving the highest increase across all five groups surveyed at 17.9%. Earlier, surveys by “Hewitt Associates”: and “Mercer Human Resource Consulting”: on projected salary increases in the Asia-Pacific region found that India came out on top.

In India, sectors such as IT, manufacturing, banking and financial services, infrastructure, human resources, marketing, retail and hospitality are likely to see the biggest raises, the ECA survey says.

The talent shortage is forcing companies to not only spend more on salaries, the bigger and better companies are spending a lot on training as well. While market estimates put the total spending figure for the IT/ITeS industry alone at a whopping $3 billion to train and make employable an additional 1 million professionals, other industry sectors too are investing on training and education.

Thus “Gujarat State Petroleum Corporation”: is setting up an Institute of Petroleum Technology and Petroleum Management, ICICI Bank has already set up in collaboration with NIIT an “Institute of Finance, Insurance and Banking”: while telecom major “Bharti”: has started a school of telecommunication and management in collaboration with the Indian Institute of Technology, Delhi.

Top IT and BPO companies anyway have major training facilities at nearly all their locations. Some such as “Infosys”: have set up huge dedicated training facilities while some are tying up with academic institutions. “Hewlett-Packard,”: for example, has tied up with Jadavpur University to exchange knowledge in mobile computing, while “Cisco,”: the networking major, has set up more than 130 networking academies across 20 states and union territories in India, training more than 6,000 students.

Interestingly, a recent study done by global HR consultancy Manpower Inc found that talent crunch is hounding many economies and India is among the least hit. The study called “Talent Shortage Survey; 2007 Global Results,”: says 41 per cent of employers worldwide are having difficulty filling positions due to a lack of suitable talent available in their markets.

The countries hit by this acute talent shortage are Costa Rica (93 per cent), the US (62 per cent), Japan (61 per cent), New Zealand (62 per cent) and EMEA (31 per cent). Talent shortage appears to be the least problematic in India (9 per cent), Ireland (17 per cent) and China (19 per cent), the survey points out.

The key point here is that given our abundance of raw material, the existing talent shortage can be overcome if concerted efforts are made by industry to bring about fundamental changes in our education system which is currently producing 3 million graduates and 4 lakh engineers every year although only 10-15% of these people are employable.

Once the education system is tuned to meet industry needs, the talent shortage should disappear just as mysteriously as it has appeared during the last few years. If the education system begins to produce more employable people many of the problems HR managers are facing today should disappear. In the meantime, spend on training or tie-up with an educational institute to meet your specific training needs. Training whatever is available seems to be the only way out in the short run.

  • Shilpi Wadhwa

    Thanks for such a wonderful info. actually I was really looking for this kind of info on Talent Shortage with facts and figures to be included in one assignment of me where we are presenting to our JVs the talent shortage problems and steps we could take to retain them.

    If u have any other info on same topic.Plz do mail me.

    Thanks & Regards


  • anto

    excellent article, thanks for sharing