The Salary Monster!

Saw this link which got me thinking-

1. The salaries in the Indian market have become obscene. So much so, that even though I think I am making good money, I feel that there is scope for improvement. Everytime I think I am doing well for myself, I meet at least 5 other people who can cause discontentment. By telling me how much they are earning! Whats the end figure? I don’t know! What’s a good salary? No idea!!

Faint memory – When my sister took hom Rs.7,500 as her first TCS salary in 1997, I was pretty excited. When I was completing my Economics undergraduate studies in 2000-2001, I believed a salary of 15-20K to be a good salary to have. Enough to start my career and achieve a few important financial milestone. and I am at a number several times my aspired salary. And I am still not happy…
2. The Indian offshoring industry is bringing its own demise – For me, two things have changed – one, the talent price has gone up and companies are finding their basic cost structure become gradually unfavorable. Two, there is an immense amount of billing rate pressure from clients. Combined with inflation, and the concentration of economic growth in a few cities/metros (NCR, Mumbai, Bangalore, Hyderabad, Chennai) which has led to unprecedented cost of living in these cities, supply of money is still not able to cope up with the increasing demand for things money can buy. Net result.. everyone’s running. Everyone’s unhappy.

Aside : A friend is looking for a 1BHK. Preferably wants it in the Bandra to Dadar region. Budget – 20k. Don’t laugh.
For those who are in Mumbai, thats a paltry amount to look for a 1BHK in this stretch.
For those who don’t understand Mumbai, 20k for A ONE BEDROOM HOUSE!!!! Is he looking for a palace? NOOOOO!!! a kholi will do!
What could the companies have done? Not gone berserk with the salaries paid. Kept a check on where they are headed. Thought through a basic requirement – how to differentiate between campus and off-campus hiring. People who join form campus get a salary of X. They spend 6 months with a firm, and are out in the market, because they know they can get 2X. In a hurry to poach trained (for 6 months) talent, IT ocmpanies are ready to offer 2X. However, the talent is in a bigger hurry. He jumps again within 6 months to get 3X, 3.5 X and so on. Sooner than they realize, an Indian IT company has trained someone for 6 months (paying him X) and converted him into hiking monster who is never going to be happy with his salary. And we have a whole lot of companies ready to fuel their desire.

3. If the Rupee run continues, what will happen to the Indian IT industry – Now, this is a fundamental question that a lot of economists are debating. I don’t think I need to waste my breath gasping over it. However, the long and short of it is that the fundamental driver of growth of Indian IT industry, the cost arbitrage, will get eroded far more rapidly if the dollar becomes weaker. Even if the salaries were not to go up obscenely, the strengthening of rupee can damage the margins enough to make businesses unfavorable.

But I hear the government is noticing all this! 🙂

What do I think will happen? A lot of acquisitions. Smaller fries will get wiped out. Salaries will stagnate. And there will be more unhappiness all around! 🙂 But all that.. in good time! Make hay while the sun shines. And if you can, save cash! it may become more valuable than any other thing!

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About Amit
Conventional, boring, believer, poet, Shayar (to be precise), lover of music, musical instruments, and all that can be called music (theoretically or metaphorically), jack of all master of none, more of a reader less of a writer, arbit philosopher, foolish debater.. and many more such things.. like so many people!

4 Responses to The Salary Monster!

  1. Sreejith says:

    No matter what we make, we will never be contended 😦 cliched but so true.

  2. Amit says:

    Duh! who would mind ever increasing salaries? Not me! But I surely do mind the depleting value of my monies. Yesterday, a tarbooj in Bandra was rs.40 per kg. damnit! The same tarbooj in Aligarh (courtesy Meesum) would cost abt 5-6 bucks per kg.

    Now.. de-concentration of growth? It won’t happen in the near terms.
    1 .Because, what you are also witnessing as a big side-effect will be erosion of business value. Headstrong, I hear, may hit the negative if Rupee appreciates more. Thats a decently big company.. more than 500-1000 people I guess..
    2. Infrastructure development is still concentrated in the metros and big cities. A project like Golden Quadrilateral gets shelved halfway. Is anyone thinking of converting the messy roads into something better? C’mon. Even educated elite mumbaikars are not thinking about their roads! 😉
    3. Classic case of rich become richer and poor become poorer. people migrate to cities to look for opportunities/earn more, get lost in the fray, villages lose required skills to survive. There is only one job for the masses in the modern Indian economy. Information technology! Why? because it employs hundreds of thousands of people and gives all of them that one dream – Jana hai humko hollywood!

    India’s competitive edge, as I hear, is not really about quality. Its about the large bar at pennyfeathers! I have my reservations. Cautious growth is better than insane rage! Haven’t we seen that in our lives?

  3. AJ says:

    Every fact mentioned here is correct. Though I would still want this to continue for another 15-20 years, without the government’s or RBI’s intervention. I would let the rupee appreciate, and salaries sore –> why?

    This would mean “de-concentration” of growth. Eventually, when companies can no longer afford talent in the metros (or not enough talent for scalability anyways), some of them will take the plunge to move to smaller towns, meaning jobs for the students of small universities, and infrastructure development. This would eventually mean that metros would not be the only preferred areas for firms to setup their offices, and hence the advantage these few cities enjoy will evaporate. Ideally, this will come to a full circle.

    Though this would still be very gradual. Mumbai will continue to drown in deeper water every year, and 1 BHKs will still cost north of 20k in rentals. Gurgaon will continue to have 2000 sq feet apartments costing 2 crores without having any public transport system or security or quality of life to speak of.

    I hope the SEZ boom is the beginning of the solution. Although I have digressed quite a bit from the topic of this post, I do not see a danger to India’s competitive edge in the IT/ITes/BPO/KPO/LPO/xPO space for some time to come. And while its firms who are serving US/European clients paying 2x->3x->4x salaries to Indians to keep them on board, I don’t mind that at all!

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