Last April, when sharing a stage at Facebook with CEO Mark Zuckerberg, President Obama summed up the conventional wisdom on what's needed to shape American minds for the global marketplace. "We've got to do such a better job when it comes to STEM education," he said. "That's how we're going to stay competitive for the future." If we could just tighten standards and lean harder on the STEM disciplines—science, technology, engineering, mathematics—we'd better our rigorous rivals in India and China, and get our economy firing on all cylinders. As with much conventional wisdom, this is conventional in the worst sense of that word.
If you want the truth, talk to the competition. Phaneesh Murthy is CEO of iGate Patni, a top-10 Indian outsourcing company. Murthy oversees 26,000 employees—not the ones snapping SIM chips into cell phones or nagging you about your unpaid AmEx bill, but the ones writing iPhone apps, processing mortgage applications, and redesigning supply chains—in jobs that would be handled in the U.S. by highly paid, college-educated workers. In other words, you. Yet Murthy, a regular bogeyman of outsourcing, believes American education is by far the best in the world. "The U.S. education system is much more geared to innovation and practical application," says Murthy. "It's really good from high school onward." To compete long term, we need more brainstorming, not memorization; more individuality, not standardization.
Murthy will tell you that the outsourcing industry is not some unstoppable force: It's hitting real limits. Indian engineers are not nearly as cheap or plentiful as they used to be. "Labor costs were so cheap you could always throw more people at a problem," he says. "But wages are up 14% to 15% each year for the last 20 years." A software engineer who would have earned $700 a year in the late '80s now gets roughly $12,000 a year—still a huge discount compared to the U.S., but not peanuts. Despite the lure of these higher wages, India's schools can't keep up with demand. In the late '80s, Indian software companies hired about 100 graduates a year; 25 years later, they need about 200,000 every spring, an astronomical increase in demand. And yet the supply of engineering grads has merely doubled, making it harder than ever for Murthy to compete for talent.
As a short-term solution, iGate Patni is hiring grads who majored in other disciplines, including math and physics. The company is also spending more on training, which is both a necessity and a virtue. "We've developed much stronger training programs in-house," Murthy says. "Four months of training in engineering fundamentals, and then for eight months the new hires are paired with a senior person for mentoring." This commitment to ongoing education is something U.S. companies would be smart to adopt, says Vivek Wadhwa, an entrepreneur and tech-industry scholar with appointments at the University of California, Berkeley; Duke; and Harvard Law School. "These companies have perfected the art of workforce development. At Infosys, it's four months of intensive training and an additional week of training each year. At IBM in the U.S., new hires get a day and a half of orientation and they're lucky to get a week of vacation." Wadhwa argues that such training justifies India's enormous annual wage leaps, in that workers are becoming more valuable and productive each year.
Yet this kind of corporate training can only move the needle so far. A few times during our interview, Murthy repeats, "Overall, in iGate Patni, we want to re-create the McDonald's model." This means, he explains, that the company will set forth standard routines for as much of its business as possible, to provide "a consistent level of service." This McDonald's-ization of the company would allow it to spend less on training; as creative achievements are translated into checklists and routines, the high-quality, high-pay jobs of today become the high-turnover, low-wage jobs of the future. Pity the Indian software engineer!
Or don't. This is simply the natural progress of economies, says David Autor, an MIT economist who has drawn the clearest picture anywhere of the impact of technology and globalization on labor markets. He describes the pattern as "labor-market polarization." At the bottom of the market, there's a growing number of service-sector jobs that require hands-on interaction in unpredictable environments—driving a bus, cooking food, caring for children or the elderly. These are impossible to outsource or replace with technology (at least until the robot revolution takes off). In the middle are jobs requiring routine information processing: accounting, typing, filing, approving a mortgage application or an insurance claim. These were once well-paid jobs held by relatively educated Americans; now they tend to be done by iGate Patni's employees, and in the future, says Autor, they are likely to be performed by a computer.
At the top of the market are the jobs everyone wants. And guess what? These are the jobs that many graduates of the American education system are well prepared for. These jobs require creativity, problem solving, decision making, persuasive arguing, and management skills. In this echelon, a worker's skills are unique, not interchangeable. "These jobs deal with a tremendous amount of information, but the added value of the worker is in doing the non-routine parts," says Autor. Technology and outsourcing routine tasks make these top workers even more powerful and productive, giving them even more data and tools with which to innovate.
So with all due respect to Bill Gates, Zuckerberg, and President Obama: Science, technology, engineering, and math are not the future. Or more precisely, they're not enough. Workers at every level benefit from an education that emphasizes creative thinking, communication, and teamwork—the very kind of excellence already offered at top American colleges. Once in the workforce, the U.S. should take a leaf from the Indians, and steadily train and update practical and technical skills. Indian workers, meanwhile, could stand to take a few lessons from the U.S. "The irony is that in India it takes engineers two to three years to recover from the damage of the education system," says Wadhwa, who believes that engineers require real-world experience and training before they can excel at complex work such as R&D. "They're used to rote memorization."
Our education system has plenty of critics; I've been one of them. But when facing the mercurial demands of today's job market, it seems there's still a profound need for the social, discursive, American liberal-arts model at its best. Which may explain why 100,000 Indians are currently studying in the U.S. One of them is Murthy's elder son, who just started his freshman year at UC Berkeley.
A version of this article appeared in the October 2011 issue of Fast Company magazine.