The labor cost advantage enjoyed by some Southeast Asian economies over China goes beyond factory jobs, according to a new study by Willis Towers Watson.
Average base professional salaries in China are 1.9 to 2.2 times those of Vietnam and the Philippines, the study said.
Entry-level white-collar professionals in China receive an average annual base salary of about $21,000, or 30 percent more than their counterparts in Indonesia, according to WTW’s “2015/2016 Global 50 Remuneration Planning Report”.
“Wages in China have been rising for a while,” Sambhav Rakyan, WTW’s data services practice leader for the Asia Pacific, said in a phone interview on Friday. “The lower salaries in Association of Southeast Asian Nations economies are giving them a real competitive edge and we feel this will lead companies to reconsider whether they need to relocate operations that were once based in China. The aging workforce and shrinking workforce in China suggest salaries there will remain higher than in the ASEAN markets minus Singapore.”
The report covers the professional level and middle, senior and top management. It shows that, across the board, China base salaries are about five to 44 percent higher than Indonesia, the most expensive labor market in the emerging ASEAN economies.
“If companies are looking at labor costs they see that China wages are getting higher,” said Rakyan. “If they were to move their plant from China to Indonesia or Malaysia, they would be able to save on labor costs. That’s just one factor among a lot of other factors that affect moving operations, such as infrastructure and the availability of labor.
“We have certainly seen a trend where companies have been taking a more conscious approach to looking at whether there is now a competitive advantage for them being in China based on the labor cost alone, which is a big cost.”
However, China still enjoys some advantages that mean it remains attractive to some employers, he said.
“Though China is much more expensive, its more mature infrastructure and skilled workforce will likely continue to attract companies.”
The competitive advantage enjoyed by the low-cost economies may be short-lived. “Wages have gone up in China, it will happen in Vietnam in another 10 years, and then it may be Myanmar after that,” said Rakyan.
“In Vietnam and some of the other markets it’s not easy to find middle management or senior management talent, and that will command a premium compared with the blue-collar sector and entry-level professionals.”
By COLIN SIMPSON Apr. 24, 2016 on Bloomberg
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