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Asia leads the world on wage growth and even China’s solid salary gains are not dulling its competitive edge

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April 10-16, 2017
By HAKY MOON
in Hong Kong
For China Daily Asia Weekly

With some of the cheapest labor in the world, wages in Asia are growing faster than anywhere else.

Wage growth in emerging and developing G20 countries dropped to 2.5 percent in 2015, according to the International Labour Organization (ILO), but this year, in Asia Pacific, data provider ECA International expects real wage increases to hit 2.6 percent — higher than all other regions.

Real wages are wages that have been adjusted for inflation over time.

“Labor markets in Asia are fairly flexible, in the sense that government rules and regulations do not have a major impact. As a result, the wage increases that we see typically tend to be consistent with market developments and are economically sustainable,” said Louis Kuijs, head of Asia economics at Oxford Economics, a Hong Kong-based consultancy.

Some of the greatest gains in East Asia were visible in China, where average hourly manufacturing wages trebled to $3.60 between 2005 and 2016, according to consultancy Euromonitor International.

Wages in China have been rising in tandem with the country’s breakneck growth. The average wage of the country’s manufacturing sector is now outstripping Brazil and Mexico and quickly catching up with weaker eurozone economies like Greece and Portugal.

“Minimum wages in China increased for different regions, and (the growth) has been constant since 2010, but at a different pace,” said Daniel Kostzer, senior wage specialist for Asia Pacific with the ILO.

“All the (minimum wages in Chinese) regions increased above 30 percent between 2010 and Dec 2016, but others, such as Jiangxi, almost doubled the nominal wage. Beijing had an increase in the nominal minimum wage of 63 percent in that period.”

The major municipalities of Beijing, Shanghai, Tianjin and Chongqing, as well as the provinces of Liaoning, Jiangsu, Hainan, Shandong and Hebei, all saw gains in monthly wages in 2016 of an average of 10.7 percent.

This is a slower rate than previous years, which can be attributed to weaker economic growth, but it is far more than other economies.

According to ECA International, the average real wage increase of 4.7 percent forecast for Chinese workers in 2017 is considerably higher than the global average forecast of 1.5 percent and the Asia-Pacific forecast of 2.6 percent.

These high salary increases place China fourth in ECA’s ‘global real wage increase’ rankings for 2017, up two places from the previous year.

Shanghai remains the city with the highest minimum wage, with workers entitled to 2,190 yuan ($317) per month. Shenzhen (2,030 yuan), Guangzhou (1,895 yuan) and Beijing (1,890 yuan) round out the top four.

Workers test micro motors for mobile phones in Huaibei, East China’s Anhui province. Credit: AFP

“China’s wage growth remains solid, driven by a relatively favorable position of employees on the labor market due to continued demand for labor in China’s cities, demographic pressures and improved conditions in the countryside,” said Kuijs from Oxford Economics.

While this could mean that China will lose its competitive edge to emerging Southeast Asian countries, experts say otherwise.

Kuijs noted that the impact of rising wages on the corporate sector varies across the spectrum.

“Higher wages are leading to the movement of lower value-added manufacturing activity to other Asian countries with lower wages, such as Vietnam, Cambodia and Bangladesh.

“However, fairly rapid productivity increases and movement up the value chain means that in middle and higher value-added manufacturing activity, China is eating away market share of other countries.”

As a result, Kuijs said, the overall solid wage growth is not eroding the competitiveness of the manufacturing sector.

Some experts say that China’s wage increases are not as generous as previous years, mainly due to authorities trying to shift from an export- and investment-led model to one more reliant on domestic consumption.

Lee Quane, regional director for Asia with ECA International, said in a news release that “inflation-busting salary increases” offered by employers suggest that attracting and retaining staff is still a key challenge in China.

Going forward, Chinese employees will see their salaries rise by an average of 7 percent in 2017, according to ECA’s latest Salary Trends survey.

And Chinese consumers have the highest wage growth expectations in Asia, foreseeing real wage growth of 6.1 percent over the next six months, according to a new survey by Credit Suisse and Nielsen.

In Asia Pacific, most countries boosted the minimum wage over the inflation rate, which remained fairly low in most of the region.

South Korea recently increased its minimum wage to 6,470 won ($5.70) per hour for 2017, up 7.3 percent from last year.

South Korea’s Ministry of Employment and Labor said the pay rise would affect an estimated 3.36 million workers. But the Federation of Korean Trade Unions had wanted a greater increase and said this raise would serve only to put more burden on smaller companies facing tough economic conditions.

“We expected a double-figure pay rise, if not 10,000 won,” said the federation last year. “The decision does not take into consideration those suffering due to a low income.”

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In Japan, hourly wages for part-timers in the metropolitan areas surrounding Tokyo, Osaka and Nagoya topped 1,000 yen ($9.05) for the first time last November.

According to Japan’s Ministry of Health, Labour and Welfare, part-time hourly wages came in 2.5 percent higher in January than a year earlier, outstripping growth in full-time workers’ pay.

Moving away from East Asia, wages in parts of Southeast Asia also climbed.

Minimum wages in Cambodia rose to the equivalent of $153 per month this year, up from $140 in 2016. Wages also increased in Vietnam, where monthly minimum pay is now 3.75 million dong ($165).

Kostzer of the ILO said that with reduced demand for exports in developed countries, Asia-Pacific countries saw the minimum wage as a central policy tool for boosting domestic demand and compensating the negative effects of the slowdown in the rest of the world.

“Looking at the changes in minimum wages in relation to changes of domestic prices, a proxy to the purchasing power of wages, the result is positive in all the countries.”

In terms of real wage increases in Southeast Asia, Vietnam, Indonesia, Cambodia, Thailand and Singapore topped the charts in the ECA’s 2017 Asia-Pacific rankings.

Kuijs said that in rapidly developing countries, pressures arise that are challenging for individual firms. “But, for the economy as a whole, the wage growth tends to be sustainable,” he said.

Southeast Asia has some of the cheapest labor, and is often seen as stealing China’s thunder as a manufacturing hub.

Regional minimum salaries are in place in Vietnam, Malaysia, the Philippines and Indonesia, and they may vary greatly between poorer provinces and capital cities.

In some countries, only certain economic sectors have regularized minimum wages, such as the garment industry in Cambodia.

Kostzer said increased interest in minimum wage policies has not been driven by a call for the “end of cheap labor” but by more calculated political concerns over social instability and rising inequality.

That said, Cambodia agreed to raise the minimum monthly wage for textile workers this year to $153 — a hike of 9.3 percent. The country has around 700,000 workers in the garment industry.

Kostzer said that strategies to keep wages low in order to attract investment are being replaced by ways to increase competitiveness.

These include the improvement of human capital by investing in education and health, and improving infrastructure to make goods and services more accessible to markets.

However, these initiatives are not enough to completely curb vulnerable employment as laid out in the recent ILO report, World Employment and Social Outlook– Trends 2017.

“Entering 2017, working poverty (both extreme and moderate) is projected to continue to decline, in both rate and absolute number, while vulnerable employment numbers look set to rise, despite decreases in the vulnerable employment rate, largely as a result of population growth, especially in Southern Asia.”

Keeping the best and brightest As salary budgets shrink and workers seek better pay, Asia’s employers place more emphasis on rewarding high performers

April 10-16, 2017
By KARL WILSON in Sydney
karlwilson@chinadailyapac.com

A moderate easing of economic growth in Asia has not stopped workers demanding better pay and conditions as companies struggle to retain skilled workers.

International recruitment agencies say those employed in this region will be seeking pay increases far greater than their counterparts elsewhere in the world.

Recruitment consultants Korn Ferry Hay Group said the highest “real wage growth” globally this year will be in Asia, where salaries are forecast to increase by 6.1 percent and real wages by 4.3 percent. A salaried person is paid a fixed amount per pay period while a wage earner is paid by the hour.

The biggest real wage increases are expected to be in Vietnam (7.2 percent), Thailand (5.6 percent), Indonesia (4.9 percent) and India (4.8 percent).

China, however, is expected to see real wages increase by only about 4 percent this year, after 6.3 percent in 2016. This is a reflection of lower growth forecasts for 2017, according to the US-based consultancy in its latest survey on global wage growth.

“Asia continues to drive growth in wages globally as companies look set to increase pay across the board,” Benjamin Frost, global manager with Korn Ferry Hay Group, said in a statement.

“However, the global labor market is in flux as slower economic growth in mature economies keeps a check on pay rises,” he said.

“In emerging economies, upskilling workers is crucial for companies to maintain a competitive advantage — and those skilled employees can expect to see wages rise as talent shortages in certain regions drive salaries up.”

Office workers taking a lunch break at Singapore’s financial district. Credit: AFP

The Korn Ferry Hay Group survey is based on data collected from more than 20 million workers in 25,000 companies around the world.

Sambhav Rakyan, data services practice leader, Asia Pacific, at consultancy Willis Towers Watson, said: “We are seeing lower salary increase budgets across much of the region.

“Back around 2012 and 2013, companies in Asia pumped a lot of money into their salary budgets and drove salaries up, but they didn’t see the revenues rise in tandem, so it made such increases unsustainable.

“Now these companies are being much more prudent.”

Rakyan said as salary budgets shrink, companies need to be “smarter” about how they use and retain their talent.

“It’s important to prioritize the best performers and also to review how employees are rewarded with other incentives, such as more attractive benefits,” he said.

Greater emphasis is now being placed on rewarding high performers rather than across-the-board increases.

“Without such differentiation, companies will face pressure in attracting and retaining talent, especially for in-demand areas, such as sales and digital roles,” Rakyan said.

“Employers have to think beyond inflation-linking and look at more nuanced factors such as affordability, growth expectations, both employee and company performance, and specific talent and skills needs.”

This is a key challenge facing Chinese companies trying to retain talented workers, especially in sectors such as IT, robotics and financial technology, or fintech.

Another factor in labor costs in China is the rise in living standards.

“By moving the lower-level end of production roles to second- or third-tier cities in China, or simply relocating them in other countries where labor is cheaper, it frees up budget and keeps the senior level roles in China,” said a spokesperson for global recruitment consultancy Morgan McKinley, adding that “this is a healthy development”.

United Kingdom-based global recruitment agency Hays, in its salary and wages review for 2017, said 45 percent of China’s employers expect to make salary increases of between 6 and 10 percent this year.

The annual guide examines salary and recruiting trends in the Chinese mainland, Hong Kong, Japan, Malaysia and Singapore and is based on research from more than 3,000 employers representing 6 million employees.

In terms of salary increases across the region, companies surveyed by Hays in Hong Kong, Malaysia and Singapore expect to offer pay increases of between 3 and 6 percent, while in Japan, increases will be no higher than 3 percent.

While companies are juggling staff salaries, they are also looking at increasing or offering extra benefits.

According to the Hays survey, 75 percent of employers in China offer staff benefits in addition to their salary and bonuses.

Across all countries surveyed by Hays, 85 percent of employers provide benefits.

Health and medical remains the most commonly offered benefit in the region (79 percent of employers). It is followed by life assurance (40 percent), a car or car allowance (34 percent), pension (31 percent), housing (26 percent), club or gym membership (16 percent), hardship allowance (10 percent), children’s education (8 percent), tax equalization (6 percent) and private expenses (5 percent).

For companies in Asia, the hiring, retaining and engaging of talent will continue to be a top priority.

“In a talent-led economy, the employee experience has never been more critical to attracting the best and brightest,” said Jackson Kam, regional practice leader for global consultancy Mercer’s career business in Asia, the Middle East and Africa.

“Getting it right is even more challenging now, in a more diverse workplace that must embrace five generations with different norms and expectations,” he told China Daily Asia Weekly.

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Kam said if the “employee value proposition” (EVP) is not authentic to the company’s DNA — in other words “how we do things around here” — then this passion of attraction will not be translated into passion for the job.

“Business executives, human resources (HR) leaders and employees have differing perspectives on what makes their company’s EVP unique and compelling,” he said.

“HR and employees agree that compensation and benefits — the contractual aspects of the ‘deal’ — are a core component. Leading on responsible rewards and pay equity can help, as can focusing on health and flexible work options.”

With the contractual aspects of the ‘deal’ sharply in focus, it has never been more critical to effectively communicate the total reward package, Kam said.

“Part of this equation is employees’ desire for more flexibility. Organizations are now evaluating the type and degree of flexibility inherent in each role and intentionally modeling flexibility into job design.”

As for retaining staff, “personalization is now becoming the differentiator” more than a list of “cool benefits and perks”, Kam said, adding that one way to achieve this is through flexible work options.

According to Mercer’s 2017 Global Talent Trends Study, the majority of employees want more flexibility. Some, however, expressed reservations, saying that working part-time or remotely would have a negative impact on their promotion opportunities.

“Certainly there is more work to be done to create a culture where flexibility is not seen as a benefit, but as an opportunity for workforce optimization and personalization,” Kam said.

“Flexibility comes down to finding a way to integrate one’s work and personal life.”

When asked what would make employees choose one company over another, time off was a clear winner, Kam said. “Either more of it, or at least the flexibility to spread it out or even work fewer hours for less pay.

“Perks such as fitness and recreation facilities, well-being services and financial advice were all present, but ranked lower down the list.”

The race for talent China’s rise as a leader of financial and technological innovation is being threatened by a global skills shortage

April 10-16, 2017
By KARL WILSON in Sydney
karlwilson@chinadailyapac.com

In just a few short years, China has gained a reputation as the global center for innovation and adoption in financial technology. But like so many sectors in the high-tech sphere, the problem for China fintech is finding and retaining skilled workers.

Simon Lance, managing director in China for global recruitment agency Hays, said the areas most affected include Internet, big data, augmented reality and virtual reality.

He said the skills shortage is global, and Chinese employers are competing for related talent.

The problem is not with the low-end, labor-intensive manufacturing sector, which is now moving offshore or becoming automated, but with the skill sets needed to take China to the next level of its development.

The country aims to shift from ‘made in China’ to ‘designed or developed’ in China.

“The sector lacking talent is the fintech sector,” said Rio Goh, China managing director of employment agency Morgan McKinley.

While Silicon Valley, New York and London compete to position themselves as the world’s fintech hub, China has leapfrogged ahead as a leader of fintech innovation and adoption. This is due to developments across multiple hubs, such as Shanghai, Beijing and Shenzhen.

The speed, sophistication and scale of development of China’s fintech ecosystem have been at a level unmatched in more established markets. As banks and financial services institutions in the West look at ways to incrementally innovate, China’s technology leaders are revolutionizing many aspects of financial services.

Fintech is the sector driving innovation, Goh told China Daily Asia Weekly. But companies are finding it difficult to fill positions.

According to Goh, “banking technologists for payments businesses, software developers, data engineers, user experience and product talent” are all areas where there is a shortfall in skills.

The automotive sector is another problem area.

Although local talent is preferred as it is comparatively cheaper, when it comes to key development areas, such as connected vehicles and advanced driver assistance systems, overseas technology experts from Germany and North America are often hired to provide their industry know-how.

Technicians work on the assembly line of a car factory in Qingdao, East China’s Shandong province. Credit: AFP

Bruno Lanvin, executive director of INSEAD Global Indices in Singapore, said the major challenge for China and India lies in their ability to attract talent.

“They both face the issue of local higher-skilled workers leaving to live and work abroad,” he said. “To improve their attractiveness, they have to further boost their regulatory and market landscapes.

“However, delving deeper and looking at the city level, the two countries have metropolises exemplary in terms of their talent attractiveness.”

Apart from Singapore, Lanvin said, Shanghai and Mumbai are the only Asian cities identified and ranked in INSEAD’s Global City Talent Competitiveness Index, a benchmarking study released in December.

“But future editions will undoubtedly include more, confirming the growing attractiveness of Asian cities,” he said.

The concern Chinese employers have with finding skilled labor has been borne out in repeated annual surveys of regional corporations by recruitment agencies such as Hays.

The 2017 Hays Asia Salary Guide, released in February, noted that some 70 percent of employers in China said they did not have the right talent to “achieve current business objectives”.

The report also claimed that 53 percent of employers in China believe skills shortages have the potential to hamper effective business operations this year.

The report highlights salary and recruiting trends drawn from more than 3,000 employers across the Chinese mainland, Hong Kong, Japan, Malaysia and Singapore, representing 6 million employees.

“When the efficiency of a business is threatened, planning your business strategy and your talent pipeline has never been more critical,” according to Christine Wright, managing director for Hays in Asia.

She said the focus for many businesses should be to build a highly talented and productive workforce.

“To do that, companies need to ensure they have access to the right candidates if they are to benefit from emerging conditions.”

The survey showed that over the last 12 months, 54 percent of employers in China tried to combat skills shortages by upskilling their employees, while 41 percent improved their attraction strategies. Only 5 percent said they took no action.

In the skills areas, 60 percent of employers in China said they would consider sponsoring or employing qualified candidates from overseas.

The workforce on the Chinese mainland is the least ethnically diverse in Asia, with only 6 percent of workers coming from another country. That compares to 9 percent in Japan, 11 percent in Malaysia and 12 percent in Hong Kong, while Singapore is the most diverse in the region, with foreigners accounting for 21 percent of employees.

China’s changing dynamics — economic, social and demographic — are creating a distinctive set of problems, according to McKinsey & Company. The management consulting firm said companies are failing to find the high-skilled workers they need, while individuals find themselves ill-prepared for the jobs that are available.

“As China evolves from an investment-led economy to a consumption-oriented one, from being the workshop of the world to, perhaps, being a services powerhouse, it will need more high-skilled workers, in particular post-secondary vocational graduates,” said McKinsey.

The shortage of skilled workers is one of the priority concerns of the government. Last month, the Ministry of Human Resources and Social Security called a meeting to discuss how to fully implement the 13th Five-Year Plan for China’s vocational education.

The meeting covered how to raise the core competitiveness of vocational schools, strengthen recruitment and training, and raise the wages of highly skilled laborers.

By the end of 2015, there were 2,545 vocational schools in China, including 434 technician schools with 3.22 million students. The employment rate for graduates from these schools was as high as 97.4 percent, according to the ministry.

Nevertheless, China is currently in need of nearly 10 million highly skilled workers, according to reports.

That group accounts for only 5 percent of all industrial workers in the country, much lower than the ratios in Japan and Germany, where skilled workers account for 40 percent and 50 percent of industrial workers, respectively, according to Li Shouzhen, an official with the All-China Federation of Trade Unions.

Last month, Premier Li Keqiang delivered the 2017 Government Work Report, pledging to promote craftsmanship and foster a culture in which laborers display a strong work ethic and seek improvement.

In last year’s report, Li also encouraged enterprises to use flexible and individualized production processes, and to foster the spirit of craftsmanship so that higher quality products would be made.

But will that be enough?

According to McKinsey, by 2020 at the lower end of the labor market there will be 23 million more people than jobs.

At the upper end, McKinsey projects that Chinese employers will need 142 million more high-skilled workers — those with university degrees or vocational training — or about 24 million more than the country will likely supply.

“Companies could fill this high-skilled labor gap with less-skilled workers, but this would result in productivity losses or poorer quality products and services,” McKinsey said.

McKinsey estimates that if China does not bridge this gap by 2020, the opportunity cost could reach some $250 billion, or about 2.3 percent of GDP, greater than the economic output of Israel.

And that is an enormous amount of money and talent to leave on the table.

ASEAN ‘not ready’ for uniform wages A regional minimum benchmark could harm efforts to close the development gap between Southeast Asian countries

By DAVID HO in Hong Kong
For China Daily Asia Weekly

At the World Economic Forum on ASEAN last June in Kuala Lumpur, Indonesia put forward a far-reaching proposal that seemed, from the outset, unlikely to go far. Citing wide wage disparities between countries in the region as setting up a potential race to the bottom in terms of price wars and labor exploitation, Indonesian officials called for a minimum wage throughout the Association of Southeast Asian Nations (ASEAN).

With the exception of Singapore and Brunei, all ASEAN countries have minimum wage regulations, but income differences across those 10 member countries are as diverse as their levels of economic development.

While nice in theory, a uniform, ASEAN-wide minimum wage would benefit only about half the countries involved, according to Jayant Menon, lead economist in trade and regional cooperation at the Asian Development Bank (ADB).

“A standard minimum wage would only really benefit the ASEAN-5 nations (Indonesia, Malaysia, the Philippines, Singapore and Thailand),” Menon said. “It would be like putting a heavy tax on the development of emerging economies like Laos, Cambodia and even Vietnam,” he said, hitting their competitive edge on pricing.

“With higher trade costs and underdeveloped infrastructure, (the emerging economies) need their low labor cost to help attract foreign investment. ASEAN wants to close the development gap between its members. A regional minimum wage policy would divert capital flow from these countries, and it would actually stagnate development in certain areas and cause an overflow in others.”

With daily compensation starting at only $2.74, Myanmar stands as the cheapest source of labor in the ASEAN region. But the divide in labor costs among member countries is startling. For instance, daily rates can be well over $10 in the Philippines.

In 2013, Thailand implemented a national daily minimum wage of 300 baht ($8.66). However, this had been scrapped by 2016, replaced with the old system where workers were paid different wages in different provinces but without enormous disparities. In 2017, the daily minimum wage rates range from 300 to 310 baht.

In other countries, minimum wages differ greatly. A case in point is Indonesia. The 2017 provincial minimum wage for workers in the capital Jakarta is set at nearly 3.36 million rupiah ($252) per month. Meanwhile, the rate in the rural province of East Nusa Tenggara is less than half that, at 1.65 million rupiah.

Michael Kang, president of the SME Association of Malaysia, which represents small and medium-sized enterprises, believes that the region as a whole needs to be on more even ground economically before such a proposal is feasible.

“The priority should be on creating an ASEAN standard. We need to streamline market conditions in the region first before we can discuss and effectively implement a regional minimum wage,” Kang said.

“At the moment, each country has different policies and incentives and there isn’t a one-size-fits-all solution. An example would be the Made in Indonesia policy requiring foreign companies to manufacture their products domestically in order to enter the market. It won’t work in a neighboring country like Singapore, which is a knowledge-based economy,” he said.

Implementation seems to be the biggest issue with Indonesia’s proposal. Menon from the ADB reckons that countries in ASEAN are too diverse for a practical application of such standards.

“A standard minimum wage would require a very effective monitoring solution. Corruption, politics and general enforcement issues are rife in the region and would seriously hamper such a resolution,” he said.

“Even on a domestic level, many countries have difficulties enforcing laws and policies. On a regional level, ASEAN countries are not very confrontational by nature, so policing each other’s implementation would also prove challenging.”

Menon said if workers’ rights in ASEAN are the focus, the priority should not be a minimum wage “as there are too many factors that come into play when deciding that”.

A worker checks bottles at a beer factory on Indonesia’s Bali island. Credit: AFP

To improve worker rights, the focus first should be on work conditions, child labor prevention, health standards and safety regulations, he said.

“Also, it is not fair to consider wages alone as a factor, because benefits will also act as a trade-off on the wage component. For example, employers are required to contribute to a social security fund in the Philippines. Things like that will also factor into labor costs.

“If the job market in any given country is tough, workers will accept lower wages due to the competitive conditions, and that will make it harder to monitor,” he said.

Southeast Asian economies are as diverse as its geographical landscape, and workers’ economic conditions differ vastly throughout the region. But in most cases labor is relatively cheap, and that translates into a big incentive for investment in labor-intensive industries like manufacturing. The cost of labor in parts of Southeast Asia is already much cheaper than in China, which is climbing rapidly up the value chain.

According to a report by management consulting firm McKinsey & Company, the average cost of factory labor is about $7 per day in Vietnam and $9 in Indonesia — far lower than the $28 average in China. In a 2014 study, the firm found that labor costs in China had grown by about 19 percent per year since 2007.

The availability of cheap labor gives the region a competitive edge in certain industries, even taking some business away from China, the world’s manufacturing powerhouse.

The other side of this coin is that access to Southeast Asian workers can help Chinese companies produce goods at lower cost. For example, smartphone maker Xiaomi announced that its phones sold in Indonesia will now be manufactured locally in 2017. This compliance is part of the Made in Indonesia rule introduced by the government in 2014, which saw the exit of competitors like China’s OnePlus from Southeast Asia’s largest economy.

Chinese workers earn double and sometimes quadruple what some of their peers in the ASEAN region earn. But with better infrastructure and a much higher productivity rate, China remains a desirable option for companies.

McKinsey reported that from 2007 to 2012, labor productivity increased 11 percent a year in China compared with just 8 percent in Thailand and 7 percent in Indonesia. So, potential investors in ASEAN labor would also have to weigh the productivity versus cost comparisons.

And then there is Menon’s argument — that setting a regional minimum wage would cripple the flow of capital toward less-developed areas and cause stagnation in development and rural job opportunities.

Research skills shortage worsens Amid vigorous calls for innovation, companies in China search worldwide for the right professional talent

By SHI JING in Shanghai
shijing@chinadaily.com.cn

The sudden resignation of Chen Xiangli, former president of the GE Technology Center in China, announced at the beginning of this year, raised concerns over the talent pool of research professionals in China.

Having served GE for 16 years, Chen applied to the company’s global headquarters to set up the China technology center in 2000.

As the founder of the GE Technology Center in China, Chen left the company without giving any explanation or notice.

Worse, following Chen’s resignation, a number of researchers, especially scientists specializing in fundamental studies, are expected to resign, seek transfer to other posts, or go back to the United States.

Chen said at a public conference last year that a large number of multinational companies’ research centers in China are in a dilemma. These centers have not been allowed to operate fully in spite of China vigorously calling for innovation.

He said: “Companies such as GE, Siemens and Honeywell have very mature research and development systems. They have accumulated this experience for a century or even longer. China needs this accumulated knowledge greatly.”

Tens of thousands of jobseekers attend a fair in Liuzhou, in South China’s Guangxi Zhuang autonomous region. Credit: Xinhua

Sun Chao, a partner with consulting firm Strategy&, said the higher costs of hiring mid- to high-level management talent deter multinational companies from setting up their core research sectors in China.

On the other hand, the shortage of the right research staff has been a real problem for most companies in China.

According to a survey by global talent recruiter Hays, 97 percent of 1,200 Chinese employers polled said they are “struggling to find the skilled individuals and the situation is worse than ever”.

They are worried that the deteriorating skill shortage will severely affect their operations this year.

Simon Lance, managing director of Hays in China, said: “Chinese companies are looking for opportunities to work with top engineering universities all over the world, so that those future graduates will enter their talent pool. Chinese entrepreneurs have come to a consensus that big data, artificial intelligence, speech recognition and natural language processing are the key areas awaiting further exploitation.

“But the talent shortage they are faced with now has forced them to look for talent all over the world,” Lance said.

In the automotive sector, for example, the shortage of research talent is the most serious problem, according to Rio Goh, international employment agency Morgan McKinley’s managing director for China.

Although local talent is preferred most of the time as it is comparatively cheaper, when it comes to key development areas, such as connected vehicles and advanced driver assistance systems, overseas technology experts from Germany and North America are always hired to provide their industry know-how.

The central government has noticed the talent gap. The Ministry of Education, the Ministry of Human Resources and Social Security and the Ministry of Industry and Information Technology launched a guideline in mid-February that focuses on training and talent development in the manufacturing industry.

Seven important tasks were listed in the guideline, such as speeding up the integration of industry with education, promoting key abilities and qualities that are adaptive to advanced manufacturing industry, and establishing a high-level management skills pool.

Employers wage war to win talent Bosses on the Chinese mainland outperform with generous salary packages to attract and retain skilled staff

By SHI JING in Shanghai
shijing@chinadaily.com.cn

Despite global trade uncertainties and a skills shortage, Chinese employers are still offering more generous salary packages than their global peers to attract the right talent.

According to the latest salary guide from recruiting specialists Hays, 45 percent of 1,200 Chinese mainland employers expect to increase salaries by 6 to 10 percent in 2017, slightly up from 44 percent a year earlier. Roughly 11 percent of the employers said they would offer a salary increase up to 11 percent this year. In 2016 that figure was 16 percent.

However, the majority of the employers in Hong Kong, Singapore and Malaysia will keep the salary increase between 3 and 6 percent. Seventy-six percent of employers surveyed in Japan will offer a salary increase of no more than 3 percent.

In the next 12 months, roughly 65 percent of Chinese mainland employers intend to award bonuses to all employees and 28 percent said they would award bonuses only to some employees.

For most accounting and finance professionals, the salary increase will be limited in 2017. More digital and technology companies will offer stock option plans to senior management staff to retain talent.

China banks’ operations centers will set a higher bar on enhancing efficiency and controlling costs. Therefore, people with such expertise will be in demand this year and their salaries can be expected to increase accordingly.

Financial companies — both traditional and online — are short of talent with infrastructure technology knowledge. Therefore, employers will continue to use high salaries and clear career development paths to attract the right people.

As Hays discovered, online financial companies are more attractive as they offer better salary packages and stock options.

Christine Wright, Hays’ managing director for Asia, said: “Recruitment and retention of talented employees will be one of the biggest challenges facing employers this year in the midst of a war for top talent.”

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