Multinational corporations have been sending jobs to India, seeking to cut costs with the help of fiber-optic cables and the country’s affordable, educated workforce. The number of information-technology jobs in India rose from 50,000 in 1990 to two million in 2010. That has created technology hotspots in Bangalore, Chennai, and Hyderabad—and many firms are launching in smaller cities, as well.
This transfer of jobs is having an effect on children, according to research by Chicago Booth's Emily Oster and Harvard University’s Bryce Millett Steinberg. The boom is prompting poor people in India to invest in a better education, helping keep some primary students in school.
“Outsourcing has created a new class of high-skill jobs, which have increased overall returns to schooling,” the researchers write.
Oster and Millett Steinberg studied new locations for information technology–enabled service (ITES) firms, which include a variety of businesses from data processing and call centers to medical imaging. They also looked at school enrollment data. In India, 20% of children aged 6–14 are not enrolled in primary school, according to data from the 2005 National Family and Health Survey.
The researchers find that the high level of education required to work in the ITES field is encouraging more children to pursue their formal schooling. After a center was introduced in a local area, there was a 4%–7% increase in the number of children attending school in that area during the same year.
The researchers’ data shows that ITES firms employ a median of 80 people. Their employees have a median age of 28, are often childless, and come from the local area. Since the majority of ITES firms work in English, English-language schools see the biggest uptick in enrollment, the researchers find. While most children won’t end up working in their neighborhood firm as adults, the perceived job advancement is enough to encourage local children to return to school, the researchers say.
One limitation is that ITES firms only help to revitalize education in the immediate area. New centers can increase school enrollment by 180 students, but only within 3 miles, the researchers find. Because it’s difficult to disseminate information within the country, “centers even slightly further away have little or no impact on enrollment,” they write.
Part of the draw for more schooling is that ITES firms working with overseas companies or as multinational subsidiaries “require relatively high rates of education and pay high wages,” the researchers write. While some ITES workers undertake standard customer-service duties, some others perform complicated quantitative analysis.
Yet jobs are competitive, since monthly pay is about $175, or 8,000 rupees, per month, almost twice the country’s average salary. International companies that own outsourcing divisions can pay even higher salaries than that.
The presence of these employers sends a powerful message to Indian children not in or considering leaving school, write Oster and Millett Steinberg. But the benefits of pursuing education to land some of the country’s better paying jobs could be conveyed to students living in an even broader vicinity of newly opened outsourcing centers. Right now, “impacts of IT centers on school enrollment are large but localized,” they write. “From a policy standpoint, the results provide support for interventions which inform students about returns to schooling.”
Emily Oster and Bryce Millett Steinberg, “Do IT Service Centers Promote School Enrollment? Evidence from India,” Working paper, May 2013.