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Minimum Wage Comparisons Between China and India

Discussion in 'World Affairs' started by IndoCarib, Jun 7, 2012.

  1. IndoCarib

    IndoCarib BANNED

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    China two to three times more expensive than India for skilled labor

    Comparing labor costs is always a difficult art, not least because different countries have different ways and mechanisms of measuring these. China, for example, levies a minimum wage across the board irrespective of employment type, whereas India imposes different minimum levels dependent upon specific types of work. However, as the population demographics are now shifting to a younger workforce in India from China, such comparisons, while not exact, provide some clues about the nature of costs associated within the labor pools of each.

    In this example, we have researched seven cities in both China and India, to try and provide a general geographic spread in both countries. The minimum wage levels in each are set by the respective state and provincial governments. In the case of India, we have taken skilled construction workers as the base target. The results are as follows:

    [​IMG]

    It should be noted that in China, a mandatory welfare payment is added to the minimum wage as paid by the employer and this typically adds an average 40 percent to 50 percent on top of the minimum wage identified above. India does not levy a uniform welfare payment upon salaries, and this can either be discounted completely or is a typical maximum of 10 percent of wages.

    The figures adequately demonstrate that Chinese minimum wages are two or three times the level of their Indian counterparts, and even higher when welfare payments are added on top. This bears out our previous findings that China now has the third highest employment costs in emerging Asia and that the population demographics now favor India.

    In India, the development of a large, yet young labor force with an average age of 23 is showing itself in lower minimum salary levels, whereas in China, where the average age of a worker is now 37, the higher minimum wage and more expensive welfare to cater for that age is now having a significant effect in demonstrating the labor cost gap. The message for labor intensive industries is clear – India is now a key market for establishing operations.

    Minimum Wage Comparisons Between China and India | 2point6billion.com - Foreign Direct Investment in Asia
     
  2. Martian2

    Martian2 SENIOR MEMBER

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    I think you're focused on the wrong metric. The more important comparison is the average wage.

    Since China's GDP is five times larger than India's and the population are roughly equal (e.g. China's $1.3 billion vs. India's $1.2 billion), this means the average Chinese wage is five times higher than India's.

    The point is that average Chinese wages have been many times higher than India's for 10 to 20 years. If manufacturing was going to move, it would have moved a long time ago.

    We can only conclude that Chinese patents are more important than low Indian wages. Those good paying jobs are staying in China. China's strategy is to automate to offset low Indian labor costs.
     
  3. northeast

    northeast FULL MEMBER

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    It's four,not five.
     
  4. IndoCarib

    IndoCarib BANNED

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    China's GDP may be 5 times larger, but average china salaries are not 5 times higher. It is just 2-3 times



    AVERAGE ANNUAL PAY-CHINA
    Project manager: £12,173
    Software engineer: £6,998
    Accountant: £4,677
    Sales rep: £2,649
    Production worker: £1,214
    Source: Mercer Human Resource Consulting


    AVERAGE ANNUAL PAY-INDIA
    Project manager: £5,220
    Software engineer: £5,344
    Accountant: £2,956
    Sales rep: £2,464
    Production worker: £964
    Source: Mercer Human Resource Consulting


    And one more thing is salaries rose by an average of 11.5% a year in India in the past five years compared to 7.5% in China.

    BBC NEWS | Business | China tops India on average pay
     
  5. Banglar Lathial

    Banglar Lathial FULL MEMBER

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    Factor in inflation in your calculations to account for the 'real' growth in salaries.
     
  6. phylumchordata

    phylumchordata FULL MEMBER

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    CHina has other mechanism to curb production costs like a streamlined infrastructure that saves time and life of goods....govt. schemes that boost confidence and optimism....mass production that lowers the cost further...
     
  7. kawaraj

    kawaraj SENIOR MEMBER

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    good point. all nations need build up infrastructures both in physical forms as well as upscale system, thus cheapest and most efficient supply chains. China now has the best of these, even better than the US, Japan combined, that certainly is a wonder amassed over the years. I hope South Asia in the future can have that capacity.
     
  8. ChinaToday

    ChinaToday SENIOR MEMBER

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    If that is true then you are in more deeper troubles than previously thought
     
  9. E Pencho

    E Pencho BANNED

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    That's very high iq logic.
     
  10. Götterdämmerung

    Götterdämmerung SENIOR MEMBER

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    Care to explain why you think his argument is stupid?
     
  11. zip

    zip SENIOR MEMBER

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    ^you care to explain how his logic works ...
     
  12. Martian2

    Martian2 SENIOR MEMBER

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    No, it's five.

    According to the IMF, China has a $7.3 trillion GDP.

    Indian Rupee has dropped from an average of 46 Rupees per U.S. dollar to 54.51 Rupees per U.S. dollar. Indian GDP is $1.43 trillion.

    $7.3 trillion / $1.43 trillion = 5.04 times larger

    ----------

    At IndoCarib, you can't selectively compare software project managers. Selective comparisons are misleading. Also, all three examples that you provided are service jobs, not manufacturing.

    If India is interested in taking away manufacturing jobs from China, we need to do a country-to-country comparison.

    Hence, overall average incomes in China vs. India is a better comparison. Chinese are approximately five times richer/"more expensive to pay" than Indians.

    I'm saying that India has had dirt cheap wages for a very long time. It hasn't slowed down China's manufacturing one bit.

    We can only conclude there is a lot more important factors in manufacturing than cheap Indian wages. For example, the lack of available land or electricity in India would deter any potential manufacturer.

    I think you guys are also having problems collecting your potatoes and they're rotting in the field. Indian inability to deliver goods to warehouses would scare anybody off. If you can't deliver a potato chip, what are the chances that India can deliver a semiconductor chip to a port on time?
     
  13. Götterdämmerung

    Götterdämmerung SENIOR MEMBER

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    Hello, I didn't make any claims that his argument is right, it's you who said that he is wrong and therefore it's you who should explain your argument. Does that sound logical to you?
     
  14. IndoCarib

    IndoCarib BANNED

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  15. northeast

    northeast FULL MEMBER

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