Starbucks Economics

I am not a big Starbucks fan but today afternoon I was a little bored and I thought I would go for a walk and have a coffee at Starbucks on the way. I had a Chai Tea Latte and including the tip the total came around to $4. I found it a little bit difficult to digest that a cup of tea can cost so much and that quite a lot of people doesn’t seem to mind. From where I come from (India), $4 will buy you about 40 cups of tea (yeah, I know it is not a fair comparison).

Starbucks is not the only place where I find that people are overpaying without complaint. Just drive by any wealthy neighborhood and we find shops and boutiques waiting for their wealthy preys. When I find myself in such circumstances (i.e. goods being sold at a price seemingly more than what it deserves) I usually get a little stressed and angry at the system – “Let us boycott this and teach them a lesson”. But when I thought more about it today (sitting at Starbucks and drinking their latte) I think I was being totally stupid. Nobody should lose any sleep over this.  Such a system can thrive only when a reasonable number of people are willing to buy from them. Otherwise they will have to close down. The simple fact that Starbucks is thriving means that many people think that the coffee (and the environment) is worth the price. Why somebody would pay $4 for coffee is something that I might never understand but I felt a lot more comfortable, a lot more Zen, when it dawned on me that the system is self balancing. No war is required !

P.S. I hate it that Starbucks have a “Small” size but they never advertise it on their menu, I think it is a sleazy tactic.

Infosys directors get 81% hike

As I wrote recently, Infosys is very concerned about the increasing salaries of its mid-level employees. But an article in IndiaTimes reports that:

The directors of the country’s second largest IT company, Infosys, saw an 81 per cent jump in their cash compensation in the fiscal year 2007-08.

According to the company’s annual report, the cash compensation to Infosys directors went up to Rs 10.45 crore during the year ended March 31, 2008 compared with Rs 5.76 crore a year ago.

At Infosys, the compensation includes basic salary, allowances and taxable value of perquisites.

The Bangalore-based IT major paid Rs 4.19 crore as commission to its non-executive directors, which was a 135 per cent increase over the previous year’s Rs 1.78 crore, according to the company’s 2007-08 annual report.

The increase in commission was high despite the rupee appreciation against the dollar. The non-executive/independent directors at Infosys include Deepak M Satwalekar, Prof Marti G Subramanyam, Sridar Iyengar, Claude Smadja, David L Boyles and Dr Omkar Goswami.

Anothing interesting fact is that even though the dollar has gained against the rupee, no company is adjusting the paycuts (or no hikes) for employees that they made recently citing the reason of rupee appreciation. Now they are focusing on the recession in US although it has been reported from multiple sources that the recession has not affected the IT industry.

Indian IT firms to cut allowances of staff abroad

I had heard about this news before but couldn’t find any sources online to confirm it. So here it is.

Faced with imminent recession in the United States, Indian IT services companies with major exposure to the North American markets are likely to cut the onsite allowances of employees deployed at clients’ offices abroad by 25 to 30 per cent from April 1, 2008.

Not surprisingly, the companies mentioned here are TCS, Infosys and Wipro.

Infosys pays a per diem of $45 (around Rs 1,780) currently to its onsite employees. Now, there is a proposal to reduce it to $35 per day (around Rs 1,380) — a Rs 400 cut per day — according to sources.

Wipro, on the other hand, is hiring more local talent at client locations to reduce deployment of staff from India for onsite assignments.

Recently Wipro Chairman Azim Premji had said: “If we hire people locally, it will displace people we send from here on H1B visas. So net-net, it will not mean an extra cost to us.” If this happens, there will be fewer plum jobs for the boys in India.

TCS pays Euro 1,900 per month to each onsite employee in Europe. “We have been told that the per diem rate for the US is being revised. But the per diem for onsite employees in Europe will not change,” a TCS employee said on condition of anonymity.

Obviously, this is not good for the employee morale. But does anybody even care ?

Salary of Freshers in Indian IT Industry

Freshers Home provides a list of salaries for freshers working for major IT companies in India. According to the list, Google pays the highest for freshers (INR 12,00,000/annum) followed by T-Mobile (INR 8,00,000/annum) and Microsoft (INR 7,80,000/annum). Amazon and Trilogy shares the fourth place at INR 7,50,00.

A notable thing is that the biggies of Indian IT industry like TCS, Wipro, Infosys, Patni etc are the lowest payers.

Tech Pay At An All-Time High

Here is something thats very interesting. While there is a lot of clamoring everywhere regarding H1-B system bringing down the pay scale for tech employees, a study found out that the pay for technology professionals are approaching an all-time high.

Based on data compiled from 75 Yoh field offices and 5,000 technology professionals contracted in short- and long-term projects, pay increased an average of more than 5.5% for the quarter ended Sept. 30, compared to the same period last year.

Compared to the same months in 2006, hourly wages for techies in 2007 rose 6% in July, 4.64% in August, and 5.79% in September.

Another interesting part of the report is that

Among the hottest skills being demanded right now by Yoh clients are Java and .Net developers, database administrators, SAP functional and technical consultants, and project managers, said Jim Lanzalotto, Yoh’s VP of strategy and marketing. Last quarter, SAP consultants on average earned $88.07 per hour, while Java developers earned $50.89, per hour, according to Yoh’s research.

Read the complete article here. There are a few insightful comments to the article at the bottom, don’t forget to read them.

Most Expensive Cities in the World

According to CNN Money, the most expensive city in the world in Moscow, Russia. It kepts its #1 spot from last year. The #2 spot is for London, United Kingdom which moved up from the #5 spot last year. Seoul, Tokyo, and HongKong take up #3, #4 and #5 spots respectively.

What is unbelievable is

A luxury two-bedroom in Moscow now rents for $4,000 a month; a CD costs $24.83, and an international newspaper, $6.30, according to Mercer. By comparison, a fast food meal with a burger is a steal at $4.80.

The most expensive city in USA is New York which is at #15, down from #10 last year. Los Angeles, the second most expensive city in USA, is at #42. LA was at #29 last year.

Here is the list of top 20 most expensive cities in the world.

  1. Moscow
  2. London
  3. Seoul
  4. Tokyo
  5. Hong Kong
  6. Copenhagen
  7. Geneva
  8. Osaka
  9. Zurich
  10. Oslo
  11. Milan
  12. St. Petersburg (Russia)
  13. Paris
  14. Singapore
  15. New York City
  16. Dublin
  17. Tel Aviv
  18. Rome
  19. Vienna
  20. Beijing

I Googled these facts after having a chat with my college mate Kiran Swaminathan (who is currently in London) when we compared living expenses in UK and USA :-)