If you scan the newspapers today on job prospects and salaries, you can be pardoned for feeling a sense of bemusement. There are pessimists and optimists. The former talk of salary cuts and pink slips. The latter point out that Indian pay hikes this year will be among the highest in the world.
The politicians are linking pay hikes to the rate of inflation. The finance minister wants companies to charge less for their products and services and so reduce profits. The Prime Minister says that corporate salaries and lifestyles should be curbed so that the rate of inflation can be brought down. The Prime Minister is an eminent economist, so he knows how illogical he sounds. But if it wins them brownie points with the voters, they dont mind what they say.
But what is the reality? According to management consultancy firm Hay Group, salaries in India are forecast to rise 14.4 per cent in 2008. This is the fifth successive year of double-digit growth and is matched only by Sri Lanka. Salary increases in that country have been higher because of the rate of inflation. So, much to the PMs and the FMs dismay, higher inflation may actually lead to salary increases in the private sector as companies move to reward their top performers to neutralise inflation. For the public sector, take home anyway increases with inflation as dearness allowance is linked to the consumer price index for industrial workers.
The Hay Group says that job hopping is increasing; it could be as much as 20 per cent in high-demand sectors. Thats because employees can expect a 40-50 per cent increase in salaries when they switch jobs. In the information technology (IT) industry, where the doomsayers are talking about a slump, industry body NASSCOM says there will be a shortage of 500,000 people by 2010.
Look at some more numbers. CFO Asia magazine says that Indian finance executives got the highest pay hikes in Asia in 2007. The 2008 Compensation Survey puts the average increase at 25 per cent. The Hewitt Associates 12th India salary survey says that in real estate and infrastructure the hikes were around 25 per cent in 2007. Even in areas that are not booming, the increases were 13-14 per cent.
But look at it from the point of view of the Cassandras. According to the latest TeamLease Services employment outlook report, the global slowdown and the rupee appreciation are expected to impact salaries in India very hard. Business confidence is grim and nobody is hiring.
For the correct picture, turn to Infosys, the bellwether for the IT sector. Head of human resources, T.V. Mohandas Pai, recently unveiled the companys recruitment plans. Infosys will hire 25,000 people in 2008-09, he said. This would be somewhat lower than the 33,177 in 2007-08. The average salary hike for Indian employees would be 11-13 per cent, against 12-15 per cent last year. (Incidentally, the hikes for overseas employees would be just 4-5 per cent, which shows where the shoe is pinching.)
The numbers are lower, but are they alarmingly so? People used to caviar will sneer at simple roe, says Mumbai-based HR consultant D. Singh. Huge pay hikes must come down to earth some day. There were massive increases because of the compensation disparities between India and other countries. Today, the differences have largely gone. Witness the stream of expats and NRIs returning to work in the country.
Subir Gokarn, chief economist for Standard & Poors Asia Pacific, gives a slightly different analogy in his April newsletter. Remember that barely five years ago, GDP growth was below 6 per cent a year, he says. Compared to that, we are now worrying about it falling to around 8 per cent. That is perhaps the best reflection of how dramatically the economy and its investment climate have changed in such a short span of time.
The pessimists on the job front are really the irrational optimists of the past.
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