IT staff work in a small world

With economic globalisation, talented professionals are on the move. One visible group is the information technology (IT) workers. They hail from select developing countries such as India, China, the Philippines and Eastern Europe who move to the OECD economies.
 
The motivations for moving are mainly economic, seeking better jobs and higher income, although interlocking social factors such as family unions also influence the pattern of mobility.

 

IT is an important part of the “new economy.” Most OECD countries want a share of this sector, but they face challenges in obtaining technical talent locally.
 
The labour market mismatch contributes to international mobility, but is compounded by the spectre of declining fertility rates, an aging population and unpopularity of technical studies. China and India have become the major suppliers of technical professionals, with India having the largest pool of young people.

 

Immigration policies shape the mobility of IT professionals. Because of shortages, OECD governments have eased the entry of foreign skilled workers. There are both positive and negative effects of international mobility.
 
In the 1970s the outflows of talent were viewed as brain drain and public waste. If there is a relatively large outflow of talent over a long period, economic growth could be reduced, poverty increased and inequality worsened.

 

The Philippines may fit this unfortunate bill. Inequality results from a relatively smaller share of and greater demand for highly skilled professionals, evident from the huge income differential between Indian IT professionals and others.

Today emigration is seen as international mobility with several positive externalities such as remittance income, national human capital development and national links to international innovation centres.

 

Remittance-income contributes to foreign exchange and potentially economic development. A World Bank estimate put the total remittance inflows to developing countries at $126 billion in 2004. Remittance income raises the economic well-being of most households.
 
Nationally, this source of income source helps offset international debt obligations and allows importation of critical technologies. The engagement of IT professionals with a globalised industry brings in large export revenues, complementing the remittance income.

 

Today, India’s foreign exchange reserves are nearly $200bn. Too rapid an expansion in foreign currency inflows leads to currency appreciation and inflationary pressure, known as the Dutch disease, commonly associated with oil economies. The rising value  of the Indian rupee could undermine the competitiveness of both non-IT  and IT exports.

 

With international mobility there’s also a migration “premium,” meaning higher salaries for IT workers as they have better prospects to work abroad. Hence, demand for technical education increases and subsequently educational infrastructure expands, thus raising the average education level over time.

 

A migration premium also suggests a wage-cost spiral that could erode India’s wage arbitrage advantage and compel firms to strategically diversify into higher-value production or face bankruptcy. High wages could drive  out small and medium enterprises  too, leaving large firms to cherry pick the best talent.

 

But international mobility also means Indian, Chinese and other professionals get to interact with their international counterparts located in innovation centres in the OECD countries. This facilitates the exchange of technical and commercial knowledge and opens up new export business opportunities.

 

The strong links between Bangalore, Shanghai and Silicon Valley are illustrative of this global network. One such international network is the Indus Entrepreneurs, or TiE, initiated in Silicon Valley in 1992 by Indian IT entrepreneurs. It has more than 40 chapters and 6,000 members worldwide. Similarly the Chinese Institute of Engineers in the US has strong links with its counterpart in Taiwan.

 

Mobility contributes to national human capital development – witness the expansion of educational institutions in the southern Indian states of Karnataka and Tamil Nadu, training tens of thousands of engineers and IT professionals each year.

 

In India engineering admissions increased fivefold between 1992 and 2004. The number of IT admissions increased from 73,000 students in 1992 to 342,000 in 2004. In the Philippines too, mobility has raised the share of mathematics and computer-science graduates between 1995 and 2000 from 7 per cent to 10 per cent of all tertiary graduates.

 

Mobility suggests that sending countries could gain their expatriate talent back if professional and economic opportunities were attractive, as they are increasingly so in China, India and Taiwan. Governments are busy courting talent by establishing R&D centres and science-technology parks.

 

These initiatives are designed to enhance the quality of economic growth by deploying expatriate talent for international competitiveness. Taiwan and China, and to a limited degree India, have experienced the return of high-skilled IT professionals.

 

Rich countries benefit directly from the subsidised supply of foreign IT workers. Foreign talent helps to maintain industry profitability. Indian and Chinese engineer-entrepreneurs in Silicon Valley contribute to US employment in R&D and design. Receiving countries also benefit from foreign students’ revenues but more importantly from the future  availability of highly educated

 foreign professionals.

 

The mobility of IT professionals suggests a range of costs and benefits for both receiving and sending countries, with the latter benefiting handsomely.

 
 
- Anthony P D’Costa is a professor of Indian Studies at the Copenhagen Business School, Copenhagen, and editor of  Technology, Globalization, and Development and India’s Changing Role in the Global Political Economy book series.

(Courtesy of the The New York Times Syndicate’s Global Business Perspectives)


 

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