TN Hari writes: Wipro salary cuts show that skills matter for bargaining power, not college degrees

Wipro’s decision to cut fresher salaries by nearly half raises more interesting perspectives than merely one of whether the move was fair or just. (Getty Images/Representative )

Wipro's move to cut the salary of freshers, who are yet to be onboarded, from Rs 6.5 lakh per annum (LPA) to Rs 3.5 lakh per annum has generated some controversy and attracted criticism. The clamour for unionisation has acquired some fresh momentum, and  the IT sector employees’ union NITES (Nascent Information Technology Employees Senate) has called this move “unethical”.

However, this is not the first time something like this has happened. In the past too, IT services companies in India have routinely revoked offers made to freshers at campuses whenever there was a decline in the global business sentiment. This time around, Wipro has instead offered an option to candidates to join at a nearly 50 per cent cut in compensation.

Entry Level Injustice

And this is not an entirely Indian phenomenon either. Obsession with quarter on quarter financial results and what it means for the share prices (and market cap) of companies will always result in such measures. On such occasions, companies tend to issue politically correct and meaningless statements to the effect of “we are committed to the growth and success of all our employees”, and these statements really mean nothing.

In my opinion, Wipro’s decision to cut fresher salaries by nearly half raises more interesting perspectives than merely one of whether the move was fair or just.

I recall from my days at Virtusa, an IT services firm, that the salaries offered to freshers in 2006 was Rs 3.5 LPA. In the past seventeen years, this has remained exactly the same! If you account for the erosion in the purchasing power of the Rupee because of inflation, the value of Rs 3.5 LPA in 2006 would be equivalent to Rs 9.5 LPA today. So, what we are seeing is a decline in real wages for entry level employees at IT services firms by a whopping 170 per cent.

Trodden Path: Minimum Wage Protection

The situation hasn’t been this bad even for the blue-collar workers in any industry. Over the twelve-year period from 2000-2012, the average salary of the factory worker in India remained flat in real terms. At least it kept pace with inflation and didn’t see a decline. The minimum wage too kept pace with inflation.

If market forces were given a free run, the excess supply of labour would have ensured a decline in the minimum wage of blue-collar workers too in real terms. It needed the government to intervene periodically and keep adjusting minimum wages upwards to keep pace with inflation.

Today, one can clearly earn more by working as a delivery partner with an e-commerce company, a taxi driver with Uber, or a beautician with the Urban Company as opposed to an entry level engineer at Wipro. Quite unmistakably, freshers who are being hired by these IT services companies are hardly doing work that has anything even remotely got to do with “Information Technology”. The obvious question it raises is whether these companies really need people with an engineering degree, or for that matter any degree. In reality, these are blue-collar workers disguised as white-collar staff.

An excess labour supply situation has allowed companies a free hand in setting wages at levels that are not fair. And it is quite evident that employees at the bottom of the pyramid at IT services companies need the same kind of protection from exploitation that their blue-collar colleagues have enjoyed.

Better Alternative: Match Skills To Jobs

If this steep decline in real wages at the fresher level at IT services companies does not end, the Indian middle class’s love affair with college degrees, I don’t know what will. I have said in the past that China got old before it got rich and India got educated before it got skilled. It is seriously time to focus on skills and accord the required dignity of labour to any kind of work, like in the western world, and get over the obsession with education that has little or no employability potential.

With more than 10 million youth entering employable age every year and the number of well-paid real white-collar jobs very limited in number, India’s need of the hour is skilling. And the biggest gap in skilling programmes is in being able to efficiently match the supply and demand of skills.

This needs multiple approaches including building technology platforms that can track the journey of every worker from hire to retire and the journey can span several companies. Apprenticeship needs to be revived and every state must work with technology savvy nonprofits to create execution excellence. India’s quest for job creation will be about executing simple ideas around skill development and skill matching very efficiently.

Therefore, I see Wipro’s decision in a very positive light. It has created the right trigger to review some of our longstanding positions on education, dignity of labour, skill development etc, and take the right steps.

TN Hari is Co-founder, Artha School of Entrepreneurship. Twitter: @TNHari. Views are personal, and do not represent the stand of this publication.