Bankers, members of the tribe that commands amongst the fattest pay packets in the land, call it the inverted yield curve. It refers to interest rates. Normally, the longer the period of the loan (the tenor), the higher is the interest rate. There are times, however, when the demand for short-term money is so high that a lower tenor commands higher rates. This gives rise to the inverted yield curve.
An inverted yield curve —which apparently goes against commonsense — can be found in other areas too. In the US, investment in getting a master’s degree is around $50,000. Yes, you can end up with a job that pays you more than a common-or-garden graduate, but it seldom compensates for the money spent.
Schools don’t like to talk about it; after all, their business will be impacted. But, screams a headline in Bloomberg: “Trapped by $50,000 degree in low-paying job is increasing lament.” The article quotes Debra Stewart, president of the Washington-based Council of Graduate Schools: “Advanced schooling is still the pathway to success in the modern economy. The more education you have, the more highly regarded you are going to be in the workplace.” Not true, say the thousands who have taken large loans for their education and will take more than 15 years to repay the amounts.
Today, with the economic slowdown, things may be taking a turn for the worse. Employers prefer plain vanilla graduates as their expectations are not that high and, additionally, they tend to have their feet on the ground. Men with masters tend to be more research and theory oriented. And studies show that women with masters get even lower salaries than their male counterparts.
In India, the inverted yield curve is a fact of life in some disciplines. Engineering is a prime example. A study conducted at the Indian Institute of Technology (IIT) Bombay a few years ago, showed that the best offers were received by those with bachelors’ degrees. Remuneration went down a notch for the MTechs and another notch for those with doctoral qualifications.
“This should be absurd on the face of it,” says Mumbai-based HR consultant D. Singh. “Why should anybody spend more years and more money to get a lower starting salary? The sensible thing would be to join the workforce immediately after graduation.”
There are reasons for this anomaly, of course. People with MTechs and PhDs would probably be looking for research jobs even in a corporate environment. Research is only today coming into its own in India; public sector undertakings and labs — the earlier retirement homes for the PhDs — are famous for their comparatively poor pay. The marketing man or the engineer implementing projects and leading from the frontline make money for their company. The research scientist is a cost centre. Does an improved formula for toothpaste sell more of the stuff? It is more likely that Mr Smarty Pants, who suggested increasing the diameter of the nozzle (research suggested that people judge the amount of toothpaste they put on their brush by length) had a bigger role in increasing volumes.
There is another factor that companies know and institutes like the IITs do their best to conceal. Only the second raters from the IITs do their MTechs. It’s a different matter for engineering graduates from other institutes. First, they do not know that the MTech standards are so abysmal. Secondly, they may be willing to accept that for an IIT stamp. That’s the reason why people go there to do physics and mathematics. Ask the Reserve Bank of India.
The inverted yield curve is not going to go away overnight. Thus is a country where politicians and cricketers — generally the least academically qualified — make the most money. Life itself is upside down — inverted.
WHERE MORE MEANS LESS
Starting salaries of the engineering stream in India
Bachelor Rs 5.50 lakhs
Masters Rs 5.29 lakhs
Doctoral Rs 5.17 lakhs
Starting salaries of the engineering stream in the US
The Indian salaries refer to IIT Bombay 2005-06. The US salaries are for the Massachusetts Institute of Technology.
Source: Study on Engineering Education in India by Rangan Banerjee and Vinayak P. Muley