India and China might have untapped human resources, but both countries, with their ravenous appetite for jobs and weak educational systems, are actually causing a talent deficit.
Economic and human resources experts alike are starting to say that India will drain the world’s human capital rather than boost it.
“We can already see that the shortage in skills is becoming a major constraint to growth in India and may soon be threatening the current services outsourcing dynamic,” says Sanjeev Sanyal, director of global markets research at Deutsche Bank in a recent report.
“By expanding the global economic base, India and China have expanded the demand for skills but do not themselves have tertiary education systems that can deliver the human capital,” he adds.
Experts say that countries in the West and East do not have the talent they need to take their companies forward. Daniel Thorniley, senior vice-president at the research and advisory company Economist Intelligence Unit in Vienna and a HR specialist, says that companies tell him they are growing at 15% to 20%, but could be growing at 50% if they had the right staff.
“The talent shortage is a drain on all business,” he says.
Some experts say that India and China appeared to offer an untapped talent pool, but they are only putting pressure on existing skills as neither of these countries have the university systems to help replenish the talent shortage that they are deepening.
“A supply-side response from Asia’s university systems will take at least a decade,” Sanyal says. And the current schools do not churn out enough people who could succeed in the global business world.
Sanyal noted a 2005 McKinsey study, which showed that only 25% of engineers, 15% of graduates in finance or accounting and 10% with generalist degrees from India, have the skills to work for an international company. Given the talent shortage, potential sources of underutilized talent are being identified.
“The biggest exiting pool of underleveraged human capital is in western Europe,” Sanyal says. “This is not about high unemployment rates (the jobless are mostly low-skill workers anyway), but about the short hours worked by employed (and skilled) workers in this region.”
He expects Germans to increasingly work more hours because of economic incentives and tax reforms.
On the other hand, Indian companies in areas such as entertainment and export-import, are looking to eastern Europe as an unexploited source for skilled talent. Thorniley foresees Russia as a potential medium-term solution to the world’s shortage problem. He said, “you can get a great return on your investment in Russia’s talent.”
Without a clear solution, companies in India have found their own band-aid: sky rocketing salaries.
“If you focus on capacity gaps, you get on the treadmill of irresponsible compensation,” says Rajan Shrikanth, head of Mercer Human Resource Consulting’s human capital advisory services in Asia. “You are doing a disservice to yourself as a company if the only leverage available to you is to pay more.”
He says Indian companies must find other solutions by training and developing employees better and systematically exploring every market to find the talent.