An opinion ... Steve Ballmer, chief executive of Microsoft, has an idea on how to stop the US from losing computer software jobs to India: produce more engineers.
"People focus often times on the labour rate differential. But the thing that's most troubling is the graduation rate of technical graduates," Ballmer lamented at a conference in NewYork last month. "In the US, we have fewer computer science graduates today than we did five years ago."
US universities graduated 100,000 engineers and computer scientists in 2001. In comparison, Indian colleges produce 167,000 engineers a year, or 67 per cent more. Ballmer says that low supply is keeping US engineers' wages too high and causing job losses. Software engineers in the US earn an average annual salary of $75,000 and those jobs pay about $20,000 a year in India. The huge difference means most US companies will send work abroad.
Lower the pay of US professionals to $50,000, Ballmer suggests, and it won't make sense for employers to put up with the hassle of doing business in theThird World. (Kent Hollenback, a spokesman for Microsoft, declined to say what the company pays employees.)
As for Microsoft, it started a software development centre in the southern Indian city of Hyderabad with 12 people in 1998. Now it employs 250 workers in the country. The Indian unit is "on track" to double its workforce to 500 by 2005. In July, the world's biggest software maker said it would move some customer service jobs to India from the US.
Other US corporations are looking at India. Among them is Time Warner's America Online, the world's largest Internet-access service, which says it's considering hiring software engineers in Bangalore. From a computer industry perspective, Ballmer's solution has appeal. Higher supply should reduce the salary per engineer. The solution also doesn't involve protectionist legislation or executive action, such as what the state of Indiana did last month. It cancelled a $15 million software contract to India's Tata Consultancy Services to keep the job of upgrading government computers in Indiana.
US wages should also fall because the productivity advantage that US engineers enjoy due to their proximity to customers is being eroded by overcapacity in global telecommunications infrastructure and the resultant fall in telecom costs. So much so that "from a technical and productivity standpoint, an engineer sitting 6,000 miles away might as well be sitting in the next cubicle", Andrew Grove, chairman of Intel, said in October.
Yet, there are good reasons that the gap between US technology wages and Indian programmer salaries may not narrow significantly. For one, Ballmer's proposed $50,000 is unrealistic. And why would top US educational talent choose to study
computer science, knowing salaries would fall by more than half by the time they graduate from college? The US can keep its technology workforce from shrinking - and labour prices from rising still higher - as long as it can keep attracting talent, especially from developing countries.
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