Study warns of China/India wage gap
By Andrew Taylor, Employment Correspondent
Published: November 14 2005 18:38 | Last updated: November 14 2005 18:38
Multinational companies establishing low-cost operations in Asia face higher wage costs in China than in India, according to a study of more than 600 companies in the two countries.
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Some senior managers and professionals in China earn more than double the rates paid to Indian managers, the study, by Mercer Human Resource Consulting, concluded. However, it said increased demand for highly skilled Indian workers was threatening to mop up much of the available local supply and force up pay rates.
“Although wage costs are lower in India, there is a high demand for skilled workers there, particularly at the executive level,” said Mark Sullivan, worldwide partner at Mercer. “If demand continues to outweigh supply then we can expect wages to increase substantially over the next few years.”
Average pay rates have risen 11.5 per cent in India in the past five years compared with 7.5 per cent in China.
India had “an enviable pool of high quality, talented professionals” and the largest population of English speakers outside the US, while China had attracted foreign manufacturers with its production facilities and low-cost labour. China was now “acclaimed as the world’s preferred manufacturing hub?.?.?. companies are increasingly looking to outsource their back-office operations to these countries to reduce overheads”.
Annual salaries of Indian project managers averaged $10,039 (€8,600, £5,780) compared with $23,409 in China. The pay of Chinese financial analysts, at $13,194, also outstripped Indian salaries of $8,408 for the same job.
Living costs in Chinese cities were much higher than in India and “compensation levels of over 100 per cent of Indian pay levels” were abundant in Beijing, “particularly for senior level marketing, IT, human resources and logistics positions”.
Chinese pay was higher for 95 per cent of the 42 jobs considered in the study. But pay differentials were “less stark at lower levels”. Indian skilled production workers earned $2,334 a year and customer care assistants $2,418, compared with $1,853 and $1,601 respectively in India.
Mercer said wage costs were only one factor that needed to be considered when deciding where to outsource operations. Companies also needed to “to weigh up other operational costs, as well as factors such as proximity to markets to determine the most cost-effective option”.
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