Why IT Salaries for New Graduates are so Low: Explained

Wages of freshers in Indian IT organisations have been unchanged for two decades, in sharp contrast to skyrocketing CXO compensation. Wipro has invited candidates previously given Rs 6.5 lakh per year (LPA) to join immediately at Rs 3.5 LPA. What is the reason for the low IT salaries for new graduates?

Engineering graduates with poor quality reason for low IT salaries?

Many studies have found that most fresh engineering graduates are not immediately employable, raising concerns about their quality and the prices they can fetch. According to Aspiring Minds, just 2.5% of engineering graduates have technical capabilities in new technologies such as artificial intelligence (AI), which are required for the digital era.

Furthermore, the country's IT sector demands proficient and well-versed individuals in English since they must deal with a worldwide clientele. Many graduates lack excellent communication and other soft skills, which is considered a considerable disadvantage when requesting better wages.

Is there a mismatch between academic curriculum and corporate needs?

IT freshers form 20-30% of the five-million workforce in the sector. As a result, the curriculum appears to be updated despite the gaps in competency at the fresh-graduate level. Simultaneously, there is a need to restructure the academic curriculum at engineering institutions. Analysts feel that engineering institutions should arrange with stakeholders in the relevant industries to introduce students to industry-initiated courses. This will boost industry-academia engagement and the graduates' employability.

What is the outlook for new hires in FY24?

IT services firms will continue to hire freshers as a cost-cutting tool to right-size their workforce pyramid even though they may be offered low IT salaries. According to a Motilal Oswal analysis, the cost of acquiring employees with exceptional talents in AI, machine learning, and data science is quite expensive due to the scarcity of these people. As a result, IT firms prefer to hire new employees and teach them these skills once they are onboarded. Nevertheless, fresher engaging in FY24 may be lower compared to prior years due to macroeconomic concerns and delays in client project awarding. In Q3FY23, India's top four IT service companies added fewer than 2,000 personnel. TCS and Wipro reported a decrease in net headcount. TCS's headcount decreased by 2,197, while Wipro's decreased by 435.

If demand is solid, significant corporations may continue to employ. It's difficult to say at what levels. While the prognosis for global growth is less bleak, it remains down. The escalation of war tensions in Europe might hamper the global economy. If growth prospects in Western economies continue to be miserable, it will not bode well for Indian IT services.