The Free Press Journal | By Bharat Jhunjhunwala | Apr 01, 201 | Opinion |

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THE impact of competition on our engineering colleges will similarly depend on the underlying economic conditions. The portents are not good. Large numbers of these colleges are already in trouble. Around 70 per cent of the total seats in engineering courses are lying vacant in the state.  Human Resources Minister Prakash Javadekar has laid a new philosophy of higher education. Until now the government provided funds to engineering colleges and they churned out graduates while charging nominal fees. The Minister has challenged this proposition and has brought in the new factor of competition. Speaking at a function at Jalandhar, he said, “We feel, whether government or private, only good institutions will flourish and bad will go. Survive through competition and that is 21st Century India.” This market-driven approach is welcome. But competition can be either killing or invigorating depending upon the underlying conditions. Competition leads to invigoration and innovation if the market is growing. Businesspersons find new ways of producing better and cheaper goods. The same competition becomes killing in a slowing economy. Businesspersons have to cut costs in order to survive. They compromise on quality of the goods produced by them. A destructive cycle is set in motion. A slowing economy lead to less demand, which leads to losses for businesses, which forces them to cut costs, which leads them to producing low quality goods, which impose hidden costs on consumers, and in turn it kills the economy.

The impact of competition on our engineering colleges will similarly depend on the underlying economic conditions. The portents are not good. Large numbers of these colleges are already in trouble. The number of students taking admissions has dropped from 89,000 to 79,000 in Maharashtra. Around 70 per cent of the total seats in engineering courses are lying vacant in the state. Many engineering colleges have been put on sale in Andhra Pradesh. They are finding that their graduates are unable to secure jobs. New applicants have vanished and colleges are in trouble. The employers blame this on poor quality of the graduates being churned out of the private colleges. While that is true on the surface, the malaise lies deeper. This can be understood by looking at the controversy regarding H1B Visas. Companies in the United States say they are not able to find skilled workers hence they have to employ foreign nationals. But this often is a ruse used by private companies to access cheaper imported labour. A report in the Los Angeles Times gives the example of Qualcomm, an American multinational semiconductor and telecommunications equipment company. The Company claimed that they “face a dire shortage of university graduates in engineering.” But only a few weeks later it cut its work force by 5,000 people. Qualcomm was making a phony plea of shortages to put pressure on the US Government to allow more foreign nationals on H1B visas that are willing to work at lesser wages. Another study quoted by the Atlantic Magazine says, “No one has been able to find any evidence indicating… widespread labor market shortages or hiring difficulties in science and engineering occupations…  Were there to be a genuine shortage, there would be evidence of employers raising wage offers to attract the scientists and engineers they want.” These examples show that there is actually reduced demand for engineers and the talk of shortage of skilled engineers is more due to the unwillingness of the employers to pay the salaries demanded by the graduates. The situation in our country is similar. Employers complain that they face difficulty in finding candidates of good quality. What they mean to say is that they are not willing to pay the correct price for a candidate of good quality.

There is a dynamic connection between the demand and supply of any item in the market. Consider the supply of potatoes in the market. Good quality potatoes are available at Rs 30 a kilo while those of poor quality are available at Rs 15 a kilo. Now a buyer wants good quality potatoes at Rs 20 a kilo which is not available in the market. So he complains there is ‘shortage’ of good quality potatoes in the market just as Qualcomm complained that there was shortage of engineering graduates. Now, let us say there is a huge demand for good quality potatoes in the market. Customers are willing to pay Rs 40 a kilo for them. The increase in price is proof that there is a shortage. The message will go back to the farmers. They will produce more of good quality potatoes and the price will come down to Rs 30 a kilo in the next season.  The same applies to engineering graduates. Let us say there is a huge demand for good engineering graduates. Employers would then be willing to pay higher salaries, say, Rs 50,000 per month. The message will go back to the youth that engineers can get high salaries. They will apply for admission in engineering colleges in large numbers. The colleges will be swamped with applicants. They will increase the fees which the students will be willing to pay in expectation of high-paying jobs after graduation. The colleges will be able to pay good salaries to the faculty, and the supply of good engineering graduates will increase in a few years. The fact that there is no increase in the salaries offered to good quality engineers in our country today in proof that is problem is lack of demand for the graduates.

We must understand the saying of the Mr. Javadekar in the above backdrop. Let us consider the private sector first. Competition between the private colleges is taking a toll because jobs are not available. An owner of a private college in West UP said that they are getting more applicants in their diploma courses. Employers prefer diploma holders to degree holders because they are willing to do all types of jobs. Degree holders have a sense of superiority. Thus, both diploma and degree holders get the about the same salary in the market.  That shows the state of the market. There simply is no demand for higher skilled degree-holding graduates. Competition among private colleges in this situation will only lead to the production of more low-skilled diploma holders and fewer high-skilled degree holders. That will not take the country forward. But the Minister of Human Resources cannot do much. The state of the economy is outside his domain.  He can do much in respect of government colleges, however. They have less constraints of money. Teachers are paid according to the scale. But teachers have no interest in teaching. Thus graduates of government colleges often get lower salaries than graduates from private colleges. This is where the Minister must focus his attention. The way forward is to make student evaluation of teachers mandatory in all government institutions. All teachers should be subjected to an external review and the lowest 10 percent should be dismissed every year. That will revive government colleges and provide good quality engineers to the country. The private sector will follow suit. –    The author was formerly Professor of Economics at IIM Bangalore.  –  Courtesy