When you talk about China and India's seemingly unstoppable growth, nobody's surprised. After all, the increasing economic strength of the two countries has dominated the news for the past few years. But both China and India face some substantial demographic hurdles to continued expansion. Despite the billion-plus citizens of each country, both may simply lack sufficient qualified workers.
China is a rapidly aging society whose current challenges of unemployment and overpopulation will, within a decade, shift to different problems: labor shortages and an elderly population with too few children. In fact, China may be the first country to go gray before it reaches developed status. The World Bank estimates that by 2020 the mainland will face a lack of even unskilled labor due to aging.
China is already facing a shortage of skilled labor. Construction sites lack welders, skilled machine operators, and plumbers. And a recent NASSCOM-McKinsey report said the country is short some 750,000 managers. Despite a 95% literacy rate among all but the oldest citizens, there are not enough well-educated Chinese. This is in part due to a lack of schools that combine basic theory with practical skills and a focus on passing the elite university exams. So despite rising salaries, many of those entering China's workforce cannot learn the skills they need.
TROPHY DEGREES. India seems to have an age advantage, with half its population under 25. In the long run, this gives them the upper hand. But at present, India shares China's problem of an insufficiently educated workforce. Citigroup reports that India's talent pool isn't deep enough to meet demand in industries including textiles, aviation, telecom, retail, and engineering.
By some other measures, both countries look pretty good. China graduates about 1.7 million students from 1,500 colleges and universities annually, of whom 350,000 are engineers. India produces about 3 million college and university graduates, including 440,000 engineers. Those numbers, though, don't tell the whole story. The McKinsey report states that only 10% to 25% of these graduates are employable by multinationals, and this is only partially because of language challenges. Every human resources executive I've met who works in China or India agrees with this evaluation.
The source of the problem is cultural. Young people in these countries are highly motivated to study and learn, but only in theory. There is no tradition of practical application. So engineers don't go into operations, factories, or mines, and don't really know the machines and conditions for which they are designing processes. Chinese and Indian students who have just earned BAs want to pursue MBAs right away, and neither they nor their parents understand the value of practical experience. The degree is seen as a trophy, a traditional ticket to higher status.
APTITUDE VS. EXPERIENCE. These trophies are worth very little in the workplace. In India, outsourcing businesses that do back-office work for international financial institutions, professional services firms, and technology companies do the most hiring. Especially in business process and knowledge outsourcing, Indian employees must interact with their Western counterparts, participate in conference calls with colleagues or customers, understand their clients' needs, and add value.
Young Indians are faced with cultural issues that range from having to be on time for conference calls with Swiss clients to thinking laterally and pushing back when appropriate. These behaviors are difficult to learn within the Indian cultural framework.
China faces similar struggles. Multinationals with flat hierarchies grapple with the discomfort Chinese middle managers feel in speaking up during meetings—even within their own group of colleagues—if a boss is present.
YOUNGER, BOLDER.China and India share the problem of new graduates who become managers before they are 30 because they are smart, speak English well, and are willing to learn. But their lack of experience in dealing with others both above and below them can cause problems in managing people and in dealing with clients who expect someone more senior.
These young managers, however, are communicative and willing to question authority and give feedback. Their direct superiors, meanwhile, may have the professional knowledge and experience that companies need. But they're often more withdrawn socially and unwilling to push back in meetings with their own superiors.
In 20 years, as the latest generation learns the ins and outs of dealing with Western companies and clients, this cultural gap will take care of itself. In the meantime, companies must find ways of keeping their older managers engaged as they watch the young ones overtake them.
TIME FOR CHANGE.There are some hopeful signs of change. In India, a "National Knowledge Commission" formed last year under Prime Minister Manmohan Singh is working with educational institutions and the private sector to introduce more practical training into the educational system, recognizing that this is key to long-term economic growth.
With luck, this will raise the level of primary education and improve tertiary education beyond the excellent but very elite Indian institutes of technology and management and Indian School of Business. In China, primary education is good, but tertiary education is restricted, though this is changing as more private colleges open.
As multinationals continue to expand in China and India, they face difficulties in finding the right people to build and run their operations. Unless the two countries reform their educational systems to emphasize practical application of skills as well as theory, they may have trouble providing enough qualified workers for all those new jobs—despite their huge populations.