Observations, deductions and feelings fueled by tequila, tea and tobacco

*cough cough* … dutch cold anyone?

In Economics, Education, Nation, Youth on May 12, 2007 at 01:46

Lots of people have been hinting about the economy catching Dutch disease due to frantic growth being seen in the new economy sectors .. specially IT/ES and retailing that are absorbing all skilled labour available around. So far I’d been reading about it in all the newspapers and blogs I follow, and experiencing it once in a while when my mom back home in Karnal complained about that lack of good help at home. This week, while meeting people in the distribution sector – specifically traders and C&Fs – I got a first hand account of initial symptoms of this disease.

All (or most) channel partners these days are IT enabled with systems connected throughout the chain. This creates a requirement at their end of people with average computer skills to operate these systems. And the feedback I got is that out of all the things required for the business, its these people who are the toughest to manage. As one of the owners said, entry level salary for someone who only has basic typing skills (read really slow typing) and no exposure to any ERP or Office programs would be about 6K in a place like Kalyan. 6 months down, with some exposure on the computer but still with only rudimentary knowledge of ERP systems, the salary would already be in 7-8K range. And end of the year, it’d stand at 10K. 67% raise in the first year!! And the reason for this? As stated by the owner – all these operators are immediately plucked by the BPOs and retailers for their ERP skills… or sometimes just because they can speak english and use a computer.

The employee view? One warehouse manager put it very simply. People who can’t afford big training institute fees come to work here for any salary, with a clear view to leave within 2 years. End of two years, they easily move to any BPO/Retailer/Manufacturer on salaries that are 3-4 times what they get here. The employees use this as a training school that pays them for getting trained in some highly valued skills.

How was it earlier? Another trader complained about his manpower costs as percentage of sales – they grew around 5% throughout the 90s compared to 80s when he took over the business from his father. And in the last 5 years? 70% increase in manpower costs. When the actual number of people employed has stayed the same. Given that his business has been growing at ~15% and the headcount has remained same, some of the wage increase can be explained using the wage-productivity hypothesis, but that surely won’t amount to 70%!!

I had couple of more things to write about this from my observations in the recent past but this movie just started on TV and i’ve lost all my thoughts. sometime later 🙂

Addendum: One thing I wanted to write about was the huge gap in incomes emerging between even those with basic education and those without any at all. Another was correlating the emerging sector growth with productivity growth and inflationary trends to check whether its just the stock, real estate and commodity markets driving inflation or is it the increased money supply or is it in reality this Dutch disease taking root and creating those inflationary pressures. All that sometime later 😀

  1. am waiting for ur next post on this… 😀

  2. a very basic questn..wats a dutch cold??

  3. inflation will tend to rise if the unemployment rate falls below the natural rate..but its actually skewed to give too much significance to the ‘Inflation rate’ without adequate and corresponding developments in food supply, public distribution systems, etc will not help..but then ya..its the markets which ultimately decide right?…and where poor socialists fail..hehe..ok enuff..i hope u write the rest of it…

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