Econ 101 Works: Call Centers

It’s pretty much a staple of Econ Development 101 that all economies start with crap jobs and that, overtime, competition for workers grows, productivity grows, and thus salaries grow. The amazing thing about India is how quickly we’re seeing it work right before our eyes –

Young people say it is no longer worthwhile going through sleepless nights serving customers halfway around the world. They have better job opportunities in other fields.

…As recently as four years back, the choice was pretty clear,” Karnik said. “Either you got a high paying, good job at a call center or no job at all. Today, not only are there other options, but they are pretty close to the call centers [in terms of salaries].”

“Earlier it was considered cool to work at a call center,” said Nishant Thakur, 19, after the group had dispersed. “That died out quite quickly.” Added Thakur’s friend, Vishal Lathwal, 19, “If you work at a call center today people will think you don’t have anything else to do or were a bad student.”

From wired to tired in 4 years…. wild stuff.

42 thoughts on “Econ 101 Works: Call Centers

  1. That’s awesome! The increasing returns to education are a good thing–hopefully gov’t + private sector will be able to continue improvements/increases in capacity in education.

  2. Once again, the problem I have with articles like these is that they are so thin on Data. This present article which KXB linked to the news tab, talks to one professor from one South Delhi college which is hardly a decent population. This to me is a classic example of lazy journalism where three fourths of the post is rife with previously reported articles which add no substance to this story.

  3. It’s pretty much a staple of Econ Development 101 that all economies start with crap jobs and that, overtime, competition for workers grows, productivity grows, and thus salaries grow

    What you described here was wage inflation, isn’t it. On the other hand, what the article seems to refer to is the ability of Indian companies to ride up the value chain. Two different phenomena altogether. The first would simply make India less competitive vs. other regions; the second makes India the Japan and Korea of the service sector.

  4. it’s exciting. my little cuzins are doing well for themselves for this very reason.

    additionally, finally, indian professionals and graduates are being recognized for their potential universally. which means only a few years of experience in india, lands some of these kids high paying jobs over here (and canada and europe).

  5. Thing is, at least from what I’ve seen first hand, they ditch call center jobs for other jobs with ridiculous/nocturnal hours. It may utilize their talents more, but I’m waiting for the day that the option won’t be to transfer to an overseas office or suffer getting home at 10pm/12am/3am and so on.

  6. I know about folks in India that have good jobs not related to ‘call centers’. There are people in management/consulting companies like Delloite, others who are doing well as Chartered Accountants, Mobile services, automotives, etc.

    With a more liquid environment for capital and investment/development going on in all sorts of sectors (services, infrastructure, automotive, manufacturing, real estate, etc), jobs are opening up to more than ever before.

  7. It’s pretty much a staple of Econ Development 101 that all economies start with crap jobs and that, overtime, competition for workers grows, productivity grows, and thus salaries grow.

    … this seems to be restricted, in this case, to the middle and (urban/peri-urban) working class. I don’t know if I’d say that it’s a staple of DevEcon that competition –> increased productivity and salary growth. There’s also the argument that productivity can work both ways — either by generating structural unemployment through technological advances or by increasing income and feeding that back into the macroeconomy. This seems like more of a micro phenomena than a macro one. Just saying. :)

  8. … this seems to be restricted, in this case, to the middle and (urban/peri-urban) working class. I don’t know if I’d say that it’s a staple of DevEcon that competition –> increased productivity and salary growth. There’s also the argument that productivity can work both ways — either by generating structural unemployment through technological advances or by increasing income and feeding that back into the macroeconomy. This seems like more of a micro phenomena than a macro one. Just saying. :)

    you make me wish i was less vapid….

  9. good on camille for pointing out the problems with blithe pronouncements. you also have to consider the effects of cumulative causation (first explored by this guy in development economics).

  10. to the middle and (urban/peri-urban) working class.

    well, it’s a start. but yeah, sorry to be a grouch but every time i read articles like this go to nationmaster and look at human development and macroeconomic indicators for brown nations. crowing over IT & service sector india would be like w.e.b. du bois crowing over the relative success of the black american ‘talented tenth’ in opening some doors in the early 20th century. what about the other 9/10th? i think a wealth 1/10th is better than none of course…but too many people on SM are drawn from the 1/10th so i think we tend to lose perspective.

    (as brown americans of course the IT & service sectors is what really matters to us, but as humans not so much)

  11. There is another trend too, where call center workers are quitting their jobs which support overseas customers and moving on to call center jobs that serve desi customers.

    My cousin who did this as stop gap said that Indian customers are much more easy and pleasant to deal with than arrogant customers from US/UK who has this grudge that Indians are stealing their cousin’s or girlfriend’s cousin’s job!

    Oh and wait, they can have a normal 7-4 or 1-9 job :)

  12. Despite the so called improvement in the so called ‘BPO’ sector, the situation remains quite grim for the small to mid level farmers in India. Suicides are so common that its not even talked about anymore. I read somewhere that India is importing wheat again after years of self sufficiency. This is the situation that leads to Maoist rebels. Farming is one occupation that is generally passed down from one generation to next. If we lose the farmers who is going to produce the food? All western countries provide large farm subsidies? More attention needs to be given to farmers and making sure that grain doesn’t rot due to inadequate food storage, than ensuring shiny arrival airport lounge for tourists. Just saying.

  13. 13 · Vic Farming is one occupation that is generally passed down from one generation to next. If we lose the farmers who is going to produce the food?

    Vic, I think that the long-term goal would be to have a lot fewer farmers, more productively growing as much or more food, with the children of most farmers getting good educations and office jobs. Like Canada.

    Razib, Didn’t know you were such a utilitarian at heart! ;-)

  14. Despite the so called improvement in the so called ‘BPO’ sector, the situation remains quite grim for the small to mid level farmers in India.

    Help wanted.

  15. Farming is one occupation that is generally passed down from one generation to next. If we lose the farmers who is going to produce the food? All western countries provide large farm subsidies? More attention needs to be given to farmers and making sure that grain doesn’t rot due to inadequate food storage, than ensuring shiny arrival airport lounge for tourists. Just saying.

    More structure is flowing into the agricultural business. For example, a distant relative has a secured 3 year contract with McDonalds to supply some taters for fries. All produce will be purchased by McDonalds. Reliance is getting into the business and wants to control the whole supply chain from production to selling (through their supermarkets). Agricultre in India has significant room for improvement when it comes to infrastructure, storage, transportation, markets, etc. So much food goes to waste there due to poor storage and transportation conditions (rats, bugs, pests). Cold storages in agricultural areas are popping up to remedy this. Plenty of food also gets wasted because it is past it’s expiry. A frozen foods market will/is emerging to ensure longer shelf life.

    Government can only do so much since agriculture is such a vast enterprise. Industrialization/standardization of logistics is where the industry will go (as it has in most developed nations). The success of the BPO sector is one indicator that reforms insituted earlier are working, not the root cause or sole source of change. It is visible and a fast paced industry. Other areas of the economy, such as industrial manufacturing are robust as well. India is one of the largest, if not largest, supplier of automotive spare parts.

    Is that enough for the 250 million or so poor? No, but it’s a start. Shiny airports and agricultural reform/imporvement are not mutually exclusive ventures.

  16. My cousin who did this as stop gap said that Indian customers are much more easy and pleasant to deal with than arrogant customers from US/UK who has this grudge that Indians are stealing their cousin’s or girlfriend’s cousin’s job!

    Plus you can talk normally and keep your real name.

    From wired to tired in 4 years…. wild stuff.

    The BPO boom started in the summer of 2001 when IT jobs completely dried up. Further, heaps of IT jobs are available in India now and more than a few use BPO as a segue into IT.

    There are people in management/consulting companies like Delloite

    Management consulting is for MBA’s from top schools and IITians. These folks had it easy even in the darkest days of the Licence Raj. The BPO revolution is about the aam junta who were given the opportunity to earn a livable wage.
    I have a more fundamental question – If the USA retaliates against India for not being its serf will the Indian economy grind to a halt? New Zealand suffered the effects of a economic retaliation from the US for several years.

    Earlier it was considered cool to work at a call center

    plus heaps of sex. Often one just had to show up to get some action. I was a born a decade early – damn.

  17. plus heaps of sex. Often one just had to show up to get some action. I was a born a decade early – damn.

    WAIT a second…wait a second…….how does that work?

  18. 19 · Puliogre WAIT a second…wait a second…….how does that work?

    Puli, We should found a private university in Desh–we can go in 50-50–you can be Chancellor & I’ll be Pres.

  19. Management consulting is for MBA’s from top schools and IITians.

    My former classmate is not from a top school or an IITian. He was/is a smart guy with an education. Another former classmate used to work for them before he went to work for his fathers firm. Again, not an IITian or top school guy. My point was it just isn’t BPO while everything else is static. The Indian economy is far more dynamic, although the tech sector gets a lot of attention.

    If the USA retaliates against India for not being its serf will the Indian economy grind to a halt? New Zealand suffered the effects of a economic retaliation from the US for several years.

    Even during the sanction years prior 2001, guys like Infosys were doing well. I remember Infosys doing on campus interviews here in 2000. I’m assuming New Zealand’s contribution to the US economy wasn’t great, so cutting trade off when one can’t reach political agreement doesn’t really have a cost to the USA. Also, China isn’t USA’s serf, yet is the heaviest trader with the United States. If the US decides to ‘punish’ India, it will cost the United States money, too, which won’t go well with business here. Considering geopolitical realities, it isn’t happening anytime soon (unless communists/isolationists rout the government and roll back the clock).

    India’s economic data, reference Ministry of Finance.

  20. Whenever my parents feel I am straying too far from my roots, they call their favorite credit card company to speak to CSR “Bobby and Tiffany”

  21. well, it’s a start. but yeah, sorry to be a grouch but every time i read articles like this go to nationmaster and look at human development and macroeconomic indicators for brown nations.

    razib, then I will join you at the grouch party :) I was definitely thinking along the lines of what you wrote when stating that this “success” is limited in who it affects.

    Also, I don’t know that I fully buy the linear model of economic development for agrarian/developing economies. I haven’t really thought through what would be better or preferable, but I’m not sold on rob’s argument (which is of course, well documented and much argued in “applied” DevEcon). I think there is a lot of rhetoric about recreating developing countries in the image of developed countries (which is actually quite a Marxist argument), and I wonder to what extent — in the popular sphere — we think about options for growth that do not require countries to go from agrarian –> urbanized & industrial –> post-industrial. I also always wonder what happens when we all (theoretically) become post-industrial. What happens to comparative advantage then? What does that really mean given the current set up of states? What does it mean given that geography and (natural) resources are changing rapidly? Oh the questions, they’re endless!

    you make me wish i was less vapid….

    Why, Puli? [not saying you're vapid, just not gathering the underlying intent]

  22. WAIT a second…wait a second…….how does that work?

    Seriously mate, all one had to do was have a job in a call centre /BPO and the sex would happen. It was considered one of the side benefits of working. Even if you were the office peon, you would see action. Again this information is a couple of years old.

    My point was it just isn’t BPO while everything else is static. The Indian economy is far more dynamic, although the tech sector gets a lot of attention.

    Agreed. India’s auto pharma and heavy industry gets little attention. Has anyone checked the stock price of SAIL over the last five years – 40X growth.

    Considering geopolitical realities, it isn’t happening anytime soon

    I hope my fears dont come true.

  23. 23 · Camille I wonder to what extent — in the popular sphere — we think about options for growth that do not require countries to go from agrarian –> urbanized & industrial –> post-industrial. I also always wonder what happens when we all (theoretically) become post-industrial. What happens to comparative advantage then? What does that really mean given the current set up of states?

    Interesting & worth thinking about–but do note that, e.g., Japan, US & France still seem to have “comparative advantages” & cert. do trade a lot….

  24. Sure, some sectors (IT/Pharma/Auto parts) have benefitted more since liberalization than others (agriculture) but that is to be expected right. Globalization initially benefits the better educated groups in the country and will result in increased inequality (as measured by the gini co-efficient). Plus, India’s liberalization is a work in progress and ,by some accounts, the difficult reforms have not yet been implemented. Agricluture is a case in point. Infrastrucure supporting the industry is abysmal, plus the government keeps on putting road blocks in front of private companies that might help in agriculture industry in the long run (Eg: the UP govt. closing down Reliance Fresh store in the state.

  25. Interesting & worth thinking about–but do note that, e.g., Japan, US & France still seem to have “comparative advantages” & cert. do trade a lot….

    Very true, but I think it’s also fair to say that all three of those countries hold onto “non-advantageous” industries, most likely for non-economic reasons. The quintessential example of this is agriculture. I guess I just wonder if, at this moment in time, we have examples of countries that are truly post-industrial AND actively exercising their comparative advantage without heavy government intervention. I’m not saying it can’t happen, I’m just wondering if we will soon get very creative about how we define economic systems and economic growth/health.

    I hope I’m not drawing the thread too far off track.

  26. An acquaintance migrated from canada to india a few months back. He has a dauter in grade 10 who doesnt speak any indian langwige. Schooling was initially thought to be a problem. get this! Indian school board systems have recently started administering exams in non native-indian lanwiges as an option to hindi. Girl took up french as her 2nd languitch. my point… the next gen is prepping for european bpo. the wheals are in moshun.

  27. Indian school board systems have recently started administering exams in non native-indian lanwiges as an option to hindi.

    Hardly recent. This has been going on for over 60 years. I did French as a second language 20 years ago. My father studied Latin and so did my grandmother.

  28. Indian school board systems have recently started administering exams in non native-indian lanwiges as an option to hindi
    Hardly recent. This has been going on for over 60 years. I did French as a second language 20 years ago. My father studied Latin and so did my grandmother.

    In the caste system of languages all Indian languages are at the lowest possible level. European languages are the “Brahmins” of the language caste system.

  29. melbournedesi – i am sure your family studied french and latin in your times, but latin is definitely a private school affair – the other languages have become more accessible to the masses. I heard there are even classes on ‘bpo’ training offered in public schools these days.

    In the caste system of languages all Indian languages are at the lowest possible level. European languages are the “Brahmins” of the language caste system.

    surely this isnt as morbid a development as you are making it out to be. i went through the course syllabi at cbse.nic.in for the non-native languages and the examiners arent paying lip service. th coursework is pretty hairy. heck if studying towards a doctorate, one is expected to learn another language in some schools here.

  30. It’s pretty much a staple of Econ Development 101 that all economies start with crap jobs and that, overtime, competition for workers grows, productivity grows, and thus salaries grow.

    yes, but the growth in india is not ground-up, but restricted to the middle class. if anything, it is increasing the income disparity in that consumer goods and services (restaurants, movie theaters, sodas, whatever) have in fact been priced up to account for the increased buying power of this newly rich middle class, and is pushing them out of the range of the still poor majority. unless manufacturing takes off (and there are some efforts towards this, although i haven’t seen too much uptake yet), there is a serious risk of this economic growth posing class conflict, not a trickle-down utopia.

    you make me wish i was less vapid…. Why, Puli? [not saying you're vapid, just not gathering the underlying intent]

    awwww… puli likes camille :) but c’mon man, stop being such a beta!

  31. Rob

    Large farms in India are limited by legistlation in most states in India. There is a ceiling on how much land an individual can own. The impetus for that was to eliminate the large feudal landlords….something that Pakistan still has. Large farms do not produce better yields, and 60% of India is still engaged in agragarian occupation. They may have less costs, but then you have issue of landless labor. If there is no reform in that sector, the core of Indian nationhood could start to rot.

  32. Why, Puli? [not saying you're vapid, just not gathering the underlying intent]

    nah. its just that I am not sure how you have the energy to post such insightfull comments on diverse topics. I apparently have a degree in economics, and I just dont have the energy to say anything as insightfull as the stuff you casually drop….

  33. Aw, thanks Puli. It helps that the mutiny posts on so many different topics that I find interesting, so the praise deservedly belongs to the mutineers.

  34. pulled from the staple Economic Development 101 textbook by Todaro and Smith:

    When interest in the poor nations of the world really began to materialize following the Second World War, economists in the industrialized nations were caught off guard. They had no readily available conceptual apparatus with which to analyze the process of economic growth in largely agrarian societies characterized by the virtual absence of modern economic structures. But they did have the recent experience of the Marshall Plan, under which massive amounts of U.S. financial and technical assistance enabled the war-torn countries of Europe to rebuild and modernize their economies in a matter of a few years. Moreover, was it not true that all modern industrial nations were once undeveloped agrarian societies? Surely their historical experience in transforming their economies from poor agricultural subsistence societies to modern industrial giants had important lessons for the “backward” countries of Asia, Africa, and Latin America. The logic and simplicity of these two strands of thought–the utility of massive injections of capital and the historical pattern of the now developed countries–was too irresistible to be refuted by scholars, politicians, and administrators in rich countries to whom people and ways of life in the developing world were often no more real than U.N. statistics or scattered chapters in anthropology books. Because of its emphasis on the central role of accelerated capital, this approach is often dubbed “capital fundamentalism.”

    Then they cover Rostow’s stages of growth, Harrod-Domar (or Harold-Kumar as I called it) and then this biting bit:

    Unfortunately, the mechanisms of development embodied in the theory of stages of growth did not always work. And the basic reason they didn’t work was not because more saving and investment isn’t a necessary condition for accelerated rates of economic growth–it is–but rather because it is not a sufficient condition. The Marshall Plan worked for Europe because the European countries receiving aid possessed the necessary structural, institutional, and attitudinal conditions (e.g., well-integrated commodity and money markets, highly developed transport facilities, a well-trained and educated workforce, the motivation to succeed, an efficient government bureaucracy) to convert new capital effectively into higher levels of output. The Rostow and Harrod-Domar models implicitly assume the existence of these same attitudes and arrangements in underdeveloped nations. Yet in many cases they are lacking, as are complimentary factors such as managerial competence, skilled labor, and the ability to plan and administer a wide assortment of development projects. But at an even more fundamental level, the stages theory failed to take into account the crucial fact that contemporary developing nations are part of a highly integrated and complex international system in which even the best and most intelligent development strategies can be nullified by external forces beyond the countries’ control.

    throw in the sectoral constraints that have been mentioned above and the linear stages theory becomes less of a staple and more of a solitary piece in an eclectic puzzle that informs us on development issues.

  35. 34 · vic Large farms in India are limited by legistlation in most states in India. There is a ceiling on how much land an individual can own.

    Vic–thanks–interesting. Do you happen to know if this legislation applies to “legal persons” (i.e., corporations), or just natural ones?

  36. yes, but the growth in india is not ground-up, but restricted to the middle class. if anything, it is increasing the income disparity in that consumer goods and services (restaurants, movie theaters, sodas, whatever) have in fact been priced up to account for the increased buying power of this newly rich middle class, and is pushing them out of the range of the still poor majority. unless manufacturing takes off

    The difference between the wealthy, modern sections of an Indian metropolis and an Indian village or small town are more appearant than between those sections of the Indian metropolis and an American small town. It’s always a major cultural shock for me to take the bus from our village to New Delhi and back than it is to fly from NY to New Delhi and back.

  37. I heard there are even classes on ‘bpo’ training offered in public schools these days

    You mean private schools ? Private schools in India are normally called Public Schools.

    Yes, BPO training is being offered in government schools or what used to be called in chennai as ‘st.cobbs’ – short form for Madras Corporation schools.

    latin is definitely a private school affair

    Latin was taught by Christian missionaries as it was the language of the Church. Every altarboy needed to learn Latin. Further, if you had any desire to participate in church prayers one had to learn Latin. So many men and women learnt Latin. Latin was not private school in the sense of Doon / Bombay Scottish. Now, I dont think anyone learns Latin – I could be wrong.

  38. I am working in Bangalore on assignment from the US. Some random observations from here: 1. The newspapers are filled with interesting tech/nontech jobs. 2. The traffic & pollution has increased exponentially in the last 4 years. 3. The mall rats of Bangalore could easily be confused with American mall rats. 4. Women’s fashion is highly segmented: Saris (older/poorer), Salvars (semi-modern) & jeans (mall girls).
    5. Nobody wears shorts… occasionally I see it while playing tennis. 6. Indian Institute of Science is filled with hungry, confident and smart people.
    7. The big US companies in tech (Intel, HP, IBM, Dell, ATT, etc.) are hiring like mad in India.
    8. Germans are everywhere in the infrastructure buildup of India. 9. Cricket is a national obsession. 10. Cost of living is expensive… the mall prices are no different than US prices.

  39. When the phone rings years from now, the call center may be in another country entirely.

    I read the article except for this part, there isn’t much to disagree with the article. India’s workforce is huge. Even with 40% turnover rate, BPO will not run out of people willing to work. The only troubling thing is salary growth has been faster than anticipated, due to poor quality of workforce and those with right skills being highly in demand.

    Wake me up when BPOs actually have trouble recruiting ppl, which is not the case.