Human Capital Development
In countries such as China and India that are seeking to aggressively expand their economies and their capacity for technological innovation, a key limiting factor is human capital. Are there enough competent scientists and engineers to support that growth? Enough technicians? Enough managers who understand technology?
In opening a session on human capital development, moderator Pete Engardio of BusinessWeek said that with the recent dramatic growth of the technological sector in those two countries, companies—both foreign-owned and domestic—are running into a number of practical problems. One of them is that the skilled workforce in those countries is not as unlimited as many had assumed. “Although China and India have, no doubt, tremendous raw talent, a lot of questions are being raised now about the quality of this talent and how prepared Indian and Chinese engineering graduates are for global work.” Retention is also becoming a difficult problem, as wages in many fields of engineering are skyrocketing, particularly in India. And China faces an acute shortage of managers who are able to work effectively in multinational corporations. How China and India deal with such issues will have great influence on how well and how quickly the two countries develop their capacity for innovation.
HUMAN CAPITAL IN INDIA
V.S. Ramamurthy of the Indian Institute of Technology in New Delhi and co-chair of the Indo-U.S. Science and Technology Forum described the Indian challenge as a tension between increasing the number of premier educational institutions and addressing social obligations. The Indian government recently announced a plan to invest $133 billion in education over seven years, with private investment in higher education growing as well. He suggested that the growth of public and private investment will somewhat ease pressures on India’s educational system. Student intake is growing slowly; lab infrastructure is weak but the key constraint may be faculty shortages. Compensation packages for teachers cannot compete with the private sector, and the time required to launch an academic career is much longer than that to prepare for a career in industry. Ramamurthy called this lack of highly qualified faculty “a disaster in the making.” India has the demographic advantage mentioned earlier but faces challenges in its institutional structure for education. The Indian diaspora may be able to play a role in closing this gap.
Devesh Kapur of the University of Pennsylvania offered an equally sobering assessment. As enrollment rates have risen, state funding for education has stagnated; most growth has come from the private sector. Higher education institutions in India suffer from mediocrity and heavy politicization, restrictive centralized control, and endless litigation over policies. The market for talent is global, so the low salaries for Indian faculty will not draw foreign or domestic talent to that market. The fact that the system functions reasonably at all well is due to the “Darwinian struggle” for entry into the best Indian institutes of technology (IITs). An IIT graduate can make a better living by coaching applicants for IIT entrance exams than as a senior member of the IIT faculty. “Most learning in India,” Kapur said, “is not from your teachers but from your peers and yourself.” To address the overall
deficiencies of Indian higher education, large firms have created in-house corporate universities.
In seeking education abroad, there has been a shift away from U.S. universities toward Australia and Singapore as a result in part of U.S. immigration rules and practices. Unlike their counterparts in the 1950s, who returned from abroad for careers in the public sector, most contemporary graduates return to positions in the private sector. Belatedly, the government has stepped up education funding with the fourfold increase referred to by Ramamurthy, but that is designated primarily for “hardware” upgrades. Faculty shortages will almost certainly persist.
It is true, Kapur observed, that the pool of talent going to college will increase, not only with the growing population but also with a higher percentage pursuing higher education. But higher education will continue to be politicized and its deficiencies could even precipitate a constitutional crisis.
INTERNATIONAL PERSPECTIVES ON HUMAN CAPITAL
Vivek Wadhwa, an entrepreneur affiliated with Harvard School of Law and Duke University, has studied the supply of researchers and graduation rates in the United States compared to the surges in graduates produced in India and China from the perspective of U.S. access to human capital. Wadhwa concluded that China is indeed racing ahead of both India and the United States in producing master’s degree holders in science and engineering. In 2002 it surpassed the United States in producing PhDs in computer science, engineering, and IT. Nonetheless, the notion of a U.S. engineering shortage is a myth in his view. On the value of a conventional four-year degree, studies showed that companies were hiring engineers with two-and three-year degrees and training those employees themselves. “Bachelor’s degrees don’t even matter,” Wadhwa said.
Wadhwa found in his surveys that companies go offshore for reasons of “cost and where the markets are.” Meanwhile, Asian immigrants are driving enterprise growth in the United States. Twenty-five percent of technology and engineering firms launched in the last decade and 52% of Silicon Valley startups had immigrant founders. Indian immigrants accounted for one-quarter of these. Among America’s new immigrant entrepreneurs, more than 74 percent have a master’s or a PhD degree. Yet the backlog of U.S. immigration applications puts this stream of talent in limbo. One million skilled immigrants are waiting for the annual quota of 120,000 visas, with caps of 8,400 per country. This is causing a “reverse brain drain” from the United States back to countries of origin, the majority to India and China. This endangers U.S. innovation and economic growth. There is a high likelihood, however, that returning skilled talent will create new linkages to U.S. companies, as they are doing within General Electric, IBM, and other companies.
Jai Menon of IBM Corporation began his survey of IBM’s view of global talent recruitment by suggesting that “multinational” is an antiquated term. IBM pursues growth of its operations as a global entity. There are 372,000 IBMers in 172 countries; 123,000 of these are in the Asia-Pacific region. Eighty percent of the firm’s R&D activity is still based in the United States. IBM supports open standards development and networked business models to facilitate global collaboration. Three factors drive the firm’s decisions on staff placement and location of recruitment -- economics, skills and environment. IBM India has grown its staff tenfold in five years; its $6 billion investment in three years represents a tripling of resources in people, infrastructure and capital. Increasingly, as Vivek Wadhwa suggested, people get degrees in the United States and return to India for their first jobs.
IBM follows a comparable approach in China, with 10,000+ IBM employees involved in R&D, services and sales. In 2006, for the first time the number of service workers overtook the number of agricultural laborers worldwide. Thus the needs of a service economy comprise an issue looming for world leaders.
HUMAN CAPITAL IN CHINA
Cong Cao of the Levin Graduate Institute of the State University of New York painted an unconventional picture of China’s education system and talent challenge. Despite the very large numbers of science graduates frequently reported, Cao suggested that China, too, has a relatively low percentage of students going into science and technology, and there is insufficient business investment in training. China’s leader Hu Jintao recently pronounced that innovation will drive China’s future development and determine the success of efforts to meet energy, environmental protection, and public health needs. That puts a premium on accelerating the development of human resources. A recent Levin Institute study concluded that China faces a shortage of more than 250,000 qualified people, especially in the highly skilled segment of the labor pool. The looming talent shortage has its roots in the Cultural Revolution of the late 1960s and 1970s, the brain drain of the 1970s and 1980s, and the population’s aging.
At the beginning of his remarks, Satyanarayan “Sam” Pitroda of the Indian National Knowledge Commission and WorldTel, Ltd., observed that his personal history reflects the power of innovation and international networks. Raised in a tribal area in Orissa and the first member of his family to get more than four years of schooling, Pitroda graduated from college, pursued higher education in the United States, and developed his entrepreneurial skills here before returning to India to work with Prime Minister Rajiv Gandhi in the 1980s to assist in developing a robust telecommunications industry in an inhospitable policy environment. The dragon and the elephant are as different as the Yellow and the Ganges Rivers. The conventional view, he said, is that China is focused on manufacturing and is far ahead in that field while India is focused on services and is lagging in manufacturing. That impression is partly true, but it is also partly mistaken. Then he set out to provide an up-to-date description of Indian innovation that would dispel some of the misconceptions about that country.
Called upon by the current Prime Minister, Manmohan Singh, to help improve Indian higher education and relieve skill shortages critical to economic growth in the 21st century, Pitroda agreed to head the Indian National Knowledge Commission, charged with making policy recommendations to enhance Indians’ access to knowledge, contribution to knowledge creation, and facility in applying knowledge. The Commission’s recommendations address higher education, science and technology training, libraries, digital networks, and vocational education, as well as E-governance at all levels.
Acknowledging earlier speakers’ observations, Pitroda said that issues in education are highly political and progress in addressing them requires reform within the government. But he expressed optimism for India’s capacity to address those challenges, pointing to its transformation in the IT sector, which 20 years ago faced comparable hurdles. Three main issues are:
Disparities in wealth.
Uneven development: “We are creating billionaires, but we don’t have power 24 hours a day.”
Demography: India’s 500 million citizens under the age of 25 represent “the workforce of the world.”
The Indian government is responding to the question of how to create jobs by pledging at a recent Planning Commission meeting to quadruple the public investment in education over the next five years relative to the previous five years. This will involve establishing 30 new universities, 6,000 new schools and 8 new IITs (Indian Institutes of Technology). “We also recognize it is not about hardware,” said Pitroda, “but about software” -- addressing the critical need for qualified teachers. For that, India needs to change the teaching paradigm, from blackboard and chalk to new media.
Surplus optic fiber installed in recent years will be used to connect schools and enhance educational delivery systems. In view of the fact that India cannot deliver enough “software,” the role of teacher will change to something more like mentoring. In addition, basic assumptions
of the education system are being questioned: why does a B.S. degree require four years? How can space on a university campus, where many classrooms are often unfilled, be better used? The debate has already begun, aided by India’s democratic platform.
The Knowledge Commission’s main priority is improving primary education, but higher education is also critical and may need to be handled differently. For example, the Indian government recently raised quotas for lower caste students in primary schools, but in higher education quotas would entail letting quality suffer. In this respect the Knowledge Commission emphasizes “a process of change, not a product,” Pitroda said.
To address inequality in development, India needs first to identify new measures of economic health and growth. “The models of the past don’t make sense,” Pitroda said, including measures used for decades by the World Bank. Second, India needs to incorporate human capital development in measures of national health and economy. Third, India needs to reform its intellectual property (IP) rights system. “It’s very painful to get a patent in today’s IP system,” said Pitroda. The delay in processing patent applications has increased and the need for translation of applications has resulted in duplicated effort and higher cost. “Basically, the message to would-be creators and entrepreneurs is, ‘Don’t invent.’”
The Commission’s recommendations on IP policy support a single open international platform for intellectual property protection. The system would determine within a year whether the applicant has an invention or not. After that, opportunities for challenges to a patent would be limited. As a result, patent owners would be more certain about the extent and reliability of their IP rights.
In creating these new models of education, health, and intellectual property, India needs to change long-held perceptions. Pitroda underscored the difficulty with a story about a Texas farmer’s visit to an Indian village, where he asked a small farmer, “How big is your farm?” The local farmer pointed out the limits of his land – about an acre, bounded by tree, stone, and building. In turn he asked the Texas farmer, “How big is your land?” The Texan pondered how to reply in meaningful terms and answered, “If I start out driving at 6 a.m. at one end of my farm, it can take me 18 hours to reach the other end.” The Indian farmer considered the answer for a few moments and responded, “I had a car like that once, too.”
Asked by a member of the audience about the scope for and rate of change in a democracy versus an authoritarian system, Pitroda said if the goal is swift change on pre-determined lines, authoritarian systems can respond well; but democracy is better suited to bringing about change where the goal is more far-reaching improvement in the quality of life. Will rapid technological change convince hundreds of millions of Indians not engaged in technology of the benefits of globalization? Pitroda replied, the answer lies in part in how we communicate about the issue. Today “globalization” is widely seen as an attribute of multinational corporations not conducive to improvements in the general population’s quality of life. It needs to be communicated that globalization also means open platform development and collaboration among agile teams bringing widely shared benefits.