Friday, March 2, 2007

McKinsey reports on Indian and other offshore labor markets

McKinsey had come out with 2 reports some time back - "Sizing the emerging global labor market" (Report 1) and "Ensuring India's Offshoring future" (Report 2). It has some very interesting data that goes beyond the hype on the actual state of offshore workforces. The core employee numbers in different locations are based on studies by the McKinsey Global Institute. But they also have figures from a survey of HR professionals on suitability of these employees in MNC's.

The major data presented...
-- In India, 4% of the total university educated workforce hold engineering degrees compared to 20% in Germany and 33% in China. Most grads in India have a generalist education (Report 2).
-- In India, currently there are 14 million employees with <= 7 years of experience (All fields combined). 2 times that if the US and 1.5 times that of China (Report 2).
-- 2.5 million graduates are being added every year in India (Report 2).
-- But only a small % of these are suitable for employment in MNC quality companies. 25% of engineering graduates and 10% of generalist graduates. Better than the 10% in China but Central Europe figures are 50%.
Reasons for low suitability: "A lack of language skills, an emphasis on theory at the expense of practical knowledge, and a lack of cultural fit (meaning interpersonal skills, as well as attitudes toward teamwork and flexible work, that are at odds with the norm in multinationals)"
(Report 1 & 2).
-- Salaries will rise until they cap at 30% of US figures, same as Mexico and Brazil. Beyond this figure, labor cost arbitrage doesn't make sense. But there can be local maxima if all the offshoring in a country is centered in 1 or 2 locations leading to huge attrition(Report 1).

The full articles can be found here (Free registration required)
Sizing the emerging global labor market
Ensuring India's offshoring future

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