Breaking the cycle of poverty - A true story

“The journey of a thousand miles starts with a single step”
— Lao Tzu
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Story behind an aspiring Indian Software Engineer

Satish is a typical student hailing from a working-class family in India. He has just completed his 10+2 schooling (high school through 12th grade) and is thinking about pursuing college. Satish's family falls in the bottom 22% of India's population classified as living below the official poverty line (BPL families). Most of Satish's friends dropped out of school either because they did not find school motivating, did not see value in the education they were receiving, or had to support their families.

Satish, himself had to go through immense odds to finish school. His family had to sacrifice a lot for his education- giving up on their savings and dreams of a slightly better lifestyle - in order to provide the best education they could afford for Satish. He has been fortunate to receive constant support and encouragement from his family. Satish's family could not afford to buy him expensive books for the preparation of various prestigious public examinations and neither could they afford to pay for his tuitions. Even then, Satish has been an above-average student throughout his school.

Satish's family has a lot of hopes pinned on him. They hope Satish, empowered with good education, will be able to pull them out of the poverty cycle which they have been a part of since generations. If Satish decides to go to college, he will be the first generation college student in his family.

Satish is aware of only a few options he has for college. He has heard stories of a distant cousin who made it as a software engineer and works for a big IT firm now. His cousin serves as a role model for him. Satish also wants to be an engineer and join an engineering college. With the scarcity of the resources that poverty brings, Satish does not have the mental bandwidth to evaluate his decision to join an engineering college or look for other options.

Satish wrote the common entrance exam for engineering and scored in the top 20% among the 2 million students who appeared for the tests. For a person coming from the bottom 20% of the population financially, this was an incredible achievement. Yet, he is facing a difficult time getting into college. He could not procure a seat in the aspirational IITs classified as Tier 1 colleges – he would have had to be in the top 2-3% for that. He also failed to get through the NITs or any of the Tier 2 colleges where he would have needed to be at least in the top 10-15%.

Satish is facing a difficult choice to either opt for a Tier 3 college or drop out of the system and look for work. Tier 3 colleges are known for their average engineering programs and he may not get a guaranteed job placement after graduating. Moreover, if he decided to go to college, he will have to get an education loan which would be several times his current family income. Engineering education in India is expensive. Faced with the prospect of graduating without a job, the education loan would be a huge burden to his family.

What can go wrong?

If Satish decides to go to college and graduate out of it after 4 years, he will be a part of more than 1.5 million techs graduating out every year looking for a job. This will be against less than 0.2 million jobs projected to be available in this space.

Even though Satish's college is accredited by AICTE, the engineering program offered there is outdated and does not fit the market requirements. Even if Satish works very hard at college and gets a very high CGPA, he may end up not having the skills needed to secure employment in the tech industry. In addition to that, being a first generation college graduate he faces unique psychological challenges in acquiring the soft-skills that are in huge demand in the sector.

World Bank reports that only 20% of the engineering graduates can be trained to be industry ready. Not being able to get placed in on-campus jobs, Satish might end up being underemployed or unemployed with the burden of an education loan. Thus the vicious cycle of poverty and scarcity in his family will perpetuate.

Current Employment Trends in IT

Followed by the IT boom in the 1990s, the Indian IT industry expanded rapidly. The service and export-oriented IT sector was responsible for creating maximum jobs in the economy. They followed a linear model of growth where they captured the relatively mundane jobs – infrastructure development, server maintenance etc- at the bottom of the pyramid and billed their clients on a per-person per-hour basis. In order to grow and expand, their linear model relied on getting a large number of employees with basic coding skills. This resulted in mass recruiting by IT companies. Since there was a huge dearth of talent in the space, the companies even started recruiting students from non-technical backgrounds and training them to make them job-ready.

The talent supply gap inevitably led to four times growth in the number of engineering colleges in India. Since the training and placement were taken care of IT companies, most of these colleges only offered mediocre programs without imparting any employable skills. Yet, for more than a decade, getting an engineering degree was the surest way to land a job.

Today, the IT space has started to shift significantly. There are several indicators which convey us this shift:

1) The number of entry level jobs created by the IT sector is on the decline. This year, NASSCOM has projected a 13% decline in the number of available jobs.

2) The average entry-level salary of Indian IT software professionals has stagnated at 2.75 lac - 3.25 lac for the past 8 years. This is in spite of the significant inflation during this time.

3) Most major IT companies (Microsoft, Ebay, TCS, Cognizant, Wipro) laid off thousands of employees last year.

There are two very strong reasons which have precipitated this shift:

a) There has been an increase in adoption of automation in IT sector which has resulted and is projected to result in significant job cuts.

b) With increasing maturity in IT industry, the model is shifting towards a more non-linear model where companies expect to see a higher revenue per employee compared to the traditional services offered by the service companies.

However, the current truth is that there is a workforce of 1.5 million tech graduates graduating every year in need of a job against the 0.2 million available jobs. Add to this the fact that majority of employers hiring from such a large supply pool are still unhappy with the quality of their hires. McKinsey and World Bank's report claims that 64% of the employers are “somewhat satisfied or worse with the quality of their new hires.”

The Indian IT industry will suffer in silent crisis if the demand and supply gap both are not adjusted in terms of skills and numbers.

A Story of Hope

There still is hope for students like Satish. Based on our study, we have identified the following levers that can adjust the imbalance between supply and demand in the IT sector:

a) Strengthening the programs in colleges: The various programs offered in engineering colleges should be aligned with the skills required by the current market. The graduates should be upskilled with newer and more in-demand skills – machine learning, automation, and artificial intelligence. The quality of the programs offered in all engineering colleges should be standardised and regulated by the accreditation agencies. There is already some efforts taken by NASSCOM to standardise the computer programs in colleges using QPs (Quality Packs). However, most engineering colleges are unaware of these initiatives.

b) Enabling sound career decisions through counseling: Students like Satish should be enabled to make more informed decisions towards their career. There are other sectors such as translation services which are staring at the dearth of qualified people.

c) Encouraging innovation and entrepreneurship: There should be more focus on increasing innovation and encouraging entrepreneurship among the students. These skills should be a part of the graduate programs. Innovation and entrepreneurship will lead to more demand in the domestic market in India. Entrepreneurship is already witnessing a boom in India but the idea should be to encourage it across all sections of the society.

The Progressive Programming perspective

Progressive Programming (P2)’s mission is to provide high-growth career opportunities for all students regardless of their economic backgrounds – and especially for students like Satish. Initially, we envisioned imparting coding skills as a way to help them disrupt the cycle of poverty and help them acquire jobs as entry -level software engineers in the IT space.

P2's operating model was to create an alternative source of talent for the corporate IT workforce by training disadvantaged students in coding skills. The idea was to scale the model to thousands of students.

In the face of failing computer programs in colleges, this model was based on the assumption that well trained IT talent is rare. We assumed that the market is big enough to accommodate talent with skills marginally better than the current workforce. We failed to understand the macroeconomic questions around supply-demand in the IT space.

When we started talking to the IT companies about this idea of this alternative talent source that we started hitting the wall. Despite initial encouraging responses, the IT players showed moderate to no interest in working with us on the model.

On the recommendation of our advisors, we did a literature review on the macroeconomic aspects of the Indian IT labour market. The study made us realise the huge imbalance between the supply of IT workforce and the demand in the industry. There are more than 1.5 million tech graduates competing for the 200,000 entry level jobs available. With such a large supply of talent at their disposal, the IT firms are focused on improving and filtering the existing talent pools. We now understand why the major IT players are so averse to the idea of grooming talent from an unconventional background.

We’re proud of the work we’ve done so far and are excited to use our new knowledge to become more effective. We know that few non-profits have the opportunity to evaluate their efforts and shift appropriately.

What does this mean for P2

We realize that P2's model of training additional students with coding skills will only contribute to this glut of IT talent. Thus the model must evolve to be viable and scalable amidst the existing shifts in the IT industry.

We are following the principles for hockey stick growth and are continuing to learn before fully committing all of our resources on an intervention model. We’ll be conducting experiments regularly, cheaply, and compassionately. Through open collaboration with our great partners (Teach for India, Udayan Ghar, CS Pathshala - ACM India / Google backed, etc.) we’re able to fail fast, while helping in small ways.

As always, we greatly appreciate your love and support in the form of sharing on FB / twitter / other social media, time, donations, and your ideas. Feel free to see what we’re experimenting with, here: P2 Model Experiments. We’ll keep updating this as we experiment.