High salaries at IITs don't mean job market is recovering

It’s likely the broader job market is still uncertain in an economy that continues to struggle for recovery from its weakest growth in 10 years. 

There is nothing official about the numbers, but the selective dissemination of news from the Indian Institute of Technology (IIT) campuses on the first day of placements this season seems to indicate green shoots in the job market.

Offers of more than Rs 1 crore (Rs 10 million) a year have made a comeback after three years, and a larger number of recruiters are visiting the IITs this year.

While the improvement in offers for overseas roles can be attributed to the bouncing back of the US economy (it’s not a coincidence that the highest offers are from US-based companies), what is encouraging is that more and more Indian companies are also showing signs of confidence.

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The good news from IIT campuses is also in tune with the latest job outlook survey by Manpower, which shows India Inc’s fourth-quarter hiring plans are the most optimistic across the globe.

This represents a significant turnaround in employer confidence following four consecutive quarters of relatively lacklustre forecasts. 

While this is encouraging news, celebrations could lose much of their cheer when one considers the grim reality that the bargaining power of companies with respect to entry-level employees is at its peak: real wages are at their lowest in more than 15 years.

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Credit Suisse has conducted detailed research on employment and salary patterns of employees of India’s largest software services company, Tata Consultancy Services.

Its findings, which were made public last week, show that the average wage hike (seven per cent) for offshore employees in 2013-14 was at a multi-year low. In 1996-97, a TCS fresher was offered an entry-level salary of Rs 1.45 lakh.

This year, it rose to Rs 3.16 lakh - but, adjusted for inflation, that amount is equivalent to a mere Rs 1.15 lakh. Credit Suisse says this happened since the capacity of engineering colleges in 2013-14 rose to a whopping 1.5 million as against 600,000 in 2006-07, and the sharp slowdown has meant reduced competition for engineering talent from other sectors.

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Thus, it’s likely the broader job market is still uncertain in an economy that continues to struggle for recovery from its weakest growth in 10 years.

In the first six months of this financial year, 116 engineering colleges and business schools asked the technical education regulator to let them shut down, compared to 100 in the whole of 2012-13.

In at least four relatively prosperous states, over 200,000 engineering seats have had no takers this academic year.

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Reason: only a fifth of the class of 2013 got jobs, which has led many experts to conclude that the job crisis now is in no way better than the situation that prevailed during the 2008 global financial meltdown.

For example, job losses across the country might touch 500,000 in 2013-14, similar to those seen in 2008-09.

It isn’t surprising, therefore, that more than 7,000 employee-search firms catering to mid- and junior-level positions have shut their businesses over the last two years since they could not cope with pruning of commissions by employers and delayed payment of bills.

It may, therefore, be prudent to defer the celebrations over the news emanating from the IIT campuses.