The Consequences of Globalisation: India's Software Industry and Cross-border Labour Mobility

摘要

The software industry has epitomised the shift to a world in which cross-border flows of skilled workers have become integral to the way firms in developing and developed countries connect and transact. Large order differences in compensation across countries have also persisted and have been central to promoting such mobility. These flows have, in turn, given rise to a preoccupation that they might be detrimental to developing countries and constitute a brain drain. Indeed, there is some evidence - mostly anecdotal - that suggests that the top part of the talent distribution has indeed moved to developed countries. In the case of the Indian software industry, this has primarily meant permanent migration to the USA, not least because of active solicitation and screening on the latter's part. While such permanent migration may indeed have had negative consequences for the sending country, the evidence presented in this paper suggests that mobility has not been limited to this type of migration. Indeed, the survey evidence used in this paper has shown that temporary migration has been a major feature of the Indian software industry. Firms in our sample reported that very significant shares of their workforces performed some part of their work on-or off-site in developed countries. Further, there was evidence of significant numbers of those employed having work experience abroad in a developed country. Moreover, the share of skilled workers with such experience has tended to be positively associated with the current and lagged incidence of skilled migration from the firm. This may point to the presence of network effects as well as confirming the importance of temporary mobility. The paper has also examined in detail the consequences of skilled migration for the sending firm. In terms of the impact on performance - as measured by the change in turnover per worker and the change in the employment size of the firm - little evidence was found of a strong adverse impact of exposure to cross-border migration on these performance variables. Further, although there was evidence of some wage pressure at the height of the software boom, it would appear that this has subsequently abated, partly due to the industry downturn in the developed countries, as well as to outward shifts in the domestic labour supply curve for skilled workers. In sum, a close look at the level and dynamics of skilled migration from the software sector to developed countries has found evidence of significant flows of workers. However, the picture that emerges is not one of large permanent migration, rather of a highly mobile world in which temporary mobility has been an important characteristic of the industry. Further, the post-2000 downturn in the United States has clearly reduced the flow of skilled workers from India. Analysing our survey data, a general view that emerges is that firms do not perceive migration to have had a strong negative effect on performance or in terms of their strategic decisions. Rather, in many instances cross-border mobility has been viewed as positive for the firm and the industry more generally. Moreover, there are clear indications that the industry's strong growth has been met with a powerful educational response, not least through the entry of private training providers. This has clearly helped limit shortages and dampen the rate of wage increase.