Looks like plenty of /.'ers have beat me to posting on this hot button topic but I figure I will throw my two cents in anyways. Ironically, I tend to agree that US/Canada IT graduates are NOT ready for the working world and either are most graduates for that matter. Most freshly schooled folks don't usually have the opportunity to home their skills if they don't put serious initiative into learning the glory details of tech and development which does not usually include any sunshine and lollypops. However, to argue to that India's graduates with limited access to subpar technology and weaker institutional standards are better than US graduates is a total farce. The truth is that the employee from India has likely been "thrown" into more situations than the US graduate before, during, and after graduation and therefore are more likely come up with some type of hackjob response faster than a fresh US grad. Most Indian graduates are working during their academic career and freelancing at ridiculously cheap rates to gain experience in the real world with real North American clients. So when time comes for them to enter the job market they already have experience working professionally that US graduates don't.
I work both professionally and in academia and most of the time the people I meet with the same degree as me (either BSc. or MSc.) makes me ashamed that they have the same degree as me. It is a well known fact that its not the degree that makes the professional but its how they use it. I don't have a computer science degree, infact I have an Environment Sciences MSc. and a BSc. in Biology. However, I can score an IT position faster then someone with a PhD in computer sciences because I have real life experience working with clients, government, and organizations which are dependent on qualified developers and techs. When I am not working in IT I follow all of the latest technologies and languages and work well beyond that typical 40 hours a week in open source and online development projects (as a hobby!). If you are not totally immersed in your field you are only there for the pay cheque. Most grads I know were and are still only interested in the bottom line and unfortunately for those people their dream job just doesn't exist right now.