I joined Genpact as a data analyst in the year 2006, fresh out of college. Genpact was one of the few firms that had visited our campus for recruitment that year, and I was lucky enough to be “placed” along with three other batchmates.
My starting salary? 3.75 lakh rupees, or INR 375,000/-.
I remember thinking how princely an amount this was back then, and I couldn’t for the life of me figure out how I could possibly spend whatever amount I got on a monthly basis. Of course, life very quickly taught me the same lesson that it has taught everybody else – so it goes.
But the reason I bring this up is because of a Finshots write-up that’s been shared with me a fair few times this past week:
That was the typical salary paid out to a fresher in 2010 when they entered one of India’s top IT companies. Think — TCS, Infosys, HCL, and Wipro.
A decade later, they were still being paid roughly the same sum.
So technically, if you were to take into account inflation, freshers in 2020 were far worse than their counterparts back in 2010. And the salary hikes weren’t particularly enticing too.
I’m not sure where they got the data from, but anecdotally, this sounds about right. I’ve been in charge of placements at the Gokhale Institute, where I work, for about four years now, and while we’ve managed to get firms on campus that pay substantially more, starting salaries for most firms at the entry level are at about this number, more or less.
Which, as the Finshots newsletter goes on to point out, is ridiculously low for 2022. And why might this be so?
Well, two ways to think about it. First, as the newsletter itself points out, it’s simple economics. There’s excess supply.
You see, India produces roughly 1.5 million engineering graduates every year. And IT firms hire around 200,000 people every year. This means the effective pool of applicants remains sizeable and IT companies continue to be spoilt for choice. Even others attributed it to cartelization, alleging that IT companies banded together to deliberately suppress salaries. But despite what you want to believe, the bottom line remains the same — Entry-level salaries simply did not budge a lot in the past decade and IT graduates were getting a bit angsty.https://finshots.in/archive/it-firms-great-resignation/
It’s worth learning more about economics to help yourself understand what terms such as excess supply, homogenous goods, elasticity, cartelization, inefficient labor markets mean, because they help you understand why starting salaries are so low. Search for these terms online, on this blog, or begin with MRU videos, but help yourself by learning about these concepts if you are unfamiliar with them.
Or watch AIB videos!
If you ask me, do both. It’s a great way to learn econ theory and have a bit of fun.
But as the newsletter goes on to point out, things are changing, and they say this is because of three reasons: increased attrition, greater recruitment by start-ups and burnout from the pandemic. Each of three, I should add are inter-related, but I broadly agree with their explanation.
Average salaries are up, firms are paying more, and it’s a great time to be out there looking for a job. But, as the conclusion of the newsletter points out, it would seem that there is a recession looming on the horizon, and that may drag starting salaries back to square one.
How does one find out about the probability of a recession? Well, there’s lots of ways, but without being too meta, keep an eye out for the kind of questions that are being asked about the macroeconomic situation:
One data point doesn’t add up to much, I’ll admit, but there’s other ways to keep yourself abreast of the situation:
Or, once again, run searches online (this time for macroeconomics), or on this blog, or begin with MRU videos. Or all of the above, if you ask me.
But trust me on this: a good intuitive grasp of basic economics concepts goes a very long way indeed. And when it comes to wages, we all have skin in the game. (Read the book, if you haven’t already).