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Chinese wage gap narrows

In a game of word association, saying "China" would likely elicit "cheap labor" as a response, but shortages of some key management-qualified individuals have put intense upward pressure on salaries.

In some cases, according to recruiting services and manufacturers based there, China is no longer cheaper than the West.

Of the myriad challenges associated with opening five plants in China in five years, staffing might seem to be the least troublesome. That is, if you accept at face value anecdotes of a seemingly bottomless labor pool that''s continually topped off with former farm workers migrating east, and dime-a-dozen engineers and MBAs cranked out en masse by local universities.

Tom Opielowski, VP of United Plastics Group''s (UPG; Oakbrook, IL) Asian operations, was actually tasked with such a challenge and, after opening his third plant in the Suzhou Industrial Park in three years last December, Opielowski says finding employees, especially experienced ones suitable for management positions, isn''t as easy as one might be led to believe.

"You said the key word: `experience.'' [Such candidates] are not easy to find," Opielowski says. "Very highly educated people, no problems. Very sharp, very hard working, want to do well, but finding the experience level that you''re used to? In the U.S. it''s fairly easy to find somebody with 15-20 years'' experience. Out there, they exist, but they are very difficult to find."

Tour of duty

UPG now employs 350 in China in three plants, including the most recently established facility, a $10 million, 115,000-ft2 injection molding and assembly operation. The vast majority of those 350 are Chinese nationals, with the only current expatriates being Opielowski and one other individual, although there were significantly more Westerners helping bring Suzhou along until local managers could replace them.

This changing of the guard is taxing what is already a limited supply of management-level Chinese nationals with suitable plastics processing experience. The result has been a sharp increase in wages for these positions, with salaries quickly approaching, and in some cases equaling, the pay for the same job in the United States.

"There''s the phenomenon of U.S. managers who go to China for a startup, or some period of time, and then they''re interested in coming back. `I''ve done my tour, now I''m coming back. Who do I replace myself with? Do I replace myself with an American? Do I replace myself with a Chinese?''" says Dennis Gros, founder of plastics executive headhunter Gros Plastics Recruiters (Brentwood, TN), which recently partnered with Chinese recruiting service Associated Management Consultants Ltd. (AMC; Beijing) to help U.S. companies starting up in China locate local executives.

Opielowski says the pervasiveness of this migration of Western startup help back to its country of origin has had a tangible effect on pay.

"If you''re talking about the general management level and above, to get a good, well-rounded experienced individual," Opielowski says, "you''re up in the higher salary ranges. I hate to state numbers, because it depends on the qualifications, but for certain qualifications, you could be coming close to the equivalent of the U.S."

Liu Ze, senior executive with Gros Plastics Recruiters'' new partner, AMC, is a firsthand witness to the same phenomenon. AMC focuses on the industrial manufacturing sector and has five professional consultants and 10 researchers and assistants spread between two offices in Beijing and Shanghai, helping local and foreign companies hire for management-level positions and up.

Ze says the annual salary for a blue-collar laborer in China remains low, coming in at about RMB10,000-20,000 ($1250-$2500). For what Ze calls a specialist who is well-educated, experienced, fluent in English, and working as an applications engineer or in sales, total annual income is anywhere from RMB120,000-200,000 ($15,000-$25,000). For upper-level managers (directors and executives), pay can range anywhere from RMB200,000 to RMB1 million ($25,000-$125,000).

"For good managers and specialists," Ze says, "wages are growing rapidly, especially in the big cities like Beijing, Shanghai, Guangzhou, Shenzhen. I think they will reach the level of Western people soon."

A title by any other name

AMC stratifies positions into three levels. The first, top management, is made up of C-level executives. The second group, middle management, is higher-ranking managers that might be in charge of an entire department. The third level, which Le describes as specialists, was only added recently, and includes sales engineers.

Keeping track of the changing job classifications and pay, Opielowski says UPG regularly undertakes wage studies, performs its own salary surveys, and has built up a network of human resources contacts to share salary information.

In terms of finding employees, Opielowski says UPG does some advertising and uses recruiting services like AMC, but it often gets its best results with more traditional means.

"Networking is actually one of the best tools," Opielowski says. "Getting that word out as to what kind of position you''re looking to fill and the qualifications for it."

AMC uses no advertising. Instead, it mines its database of 50,000 names, which is expanded daily according to Ze. It also undertakes direct searches where it contacts people on its own.

Opielowksi says turnover rates in the Suzhou Industrial Park, which features schools, housing, shopping, and more, run as high as 19%, but are less than half that figure for UPG. "There''s competition from everywhere," Opielowski says. "You have people leaving for higher wages, better opportunities, or opportunities for advancement. Again, the titles are very important of course."

There''s always the web

In addition to recruiting services and networking, the Internet can help Western companies advertise for employees and gain insight into job titles and wages. According to Liu Ze, senior executive at Chinese management headhunter Associated Management Consultants Ltd., these are some of the most popular sites:

 
www.chinahr.com
www.51job.com
www.zhaopin.com

Tony Deligio [email protected]

Contact information

Gros Plastics Recruiters   www.plasticsjobs.com
United Plastics Group   www.upgintl.com
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