Nov 16, 2005

The China vs India wage gap

According to the FT

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.

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.

The question that companies need to ask themselves is, which country does what kind of work better? Apart from that, the cost of doing business (setup time taken, government bureaucracy, infrastruture bottlenecks) will become important. That, and not wages alone, will determine the kind of work coming into the countries.

As the outsourcing juggernaut climbs higher, the organizations who can do higher value/level of jobs becomes critical.