Recent studies show that China and India are failing to equip university students with the necessary skills to qualify for specialized jobs available in their countries. This is a particularly difficult situation for foreign companies operating in these countries, who are facing dire talent shortages in many fields. According to a McKinsey survey, only 25% of India-trained engineers and 15% of finance and accounting degree holders are considered to have qualified skills to work for multinational companies. Another study conducted by Merit Trac indicates that just 23% of Indian MBA graduates are qualified to work for top local companies. For Chinese graduates, the numbers are even lower.

This phenomenon is in fact causing two serious problems for both China and India. First, both countries suffer from a shortage of domestic talent. In India, the shortage is particularly evident in the education, biotech, banking, and financial sectors. Second, the shortage is creating wage inflation since China and India are forced to find qualified workers from other nations, including unlikely locations like Ukraine, Estonia, South Africa, and Vietnam. An excessive emphasis on rote learning over critical thinking in India and China is often criticized as a root cause.

The implications for multinational companies are also significant. Under the current conditions, foreign companies and HR managers are sometimes forced to hire foreign executives on an expatriate basis or to offer exceptionally competitive salary packages to attract from the limited local talent pool. Countering the wage inflation, some companies have set a cap on compensation. HR managers should keep in mind that the shortage of quality candidates will continue for at least the next few years since education reforms, if ever taken, will require time to yield positive effects.

Source: http://www.pacificbridge.com/asianews.asp?id=341