[OPE-L] Study warns of China/India wage gap

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Nov 14 2005 - 23:12:02 EST

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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.

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

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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