Labor Market and Salary Developments 2015/16 - China€¦ · Labor Market and Salary Developments...

Labor Market and Salary Developments 2015/16 - ChinaPresentation of results of GCC Wage Survey

Max J. ZengleinEconomic Analyst China

Hong Kong, October 27th, 2015

NORTH CHINASHANGHAISOUTH & SOUTHWEST CHINA

NORTH CHINASHANGHAISOUTH & SOUTHWEST CHINA

Page 2 27. October 2015

• Survey conducted from August 27th to September 18th 2015 • Total of 393 valid responses were collected from companies in Mainland China• Responses from main economic centers• Industrial distribution dominated by machinery and automotive sector

Regional distribution of responses

Xinjiang

Tibet

Qinghai

Gansu

Sichuan

Yunnan

Ningxia

Guizhou

Hainan

Guangxi

Chongqing

Hubei

Shaanxi

Shanxi

Henan

HunanJiangxi

Fujian

Heilongjiang

Anhui

Jilin

Liaoning

Shandong

Hebei

Tianjin

Beijing

Shanghai

Zhejiang

Jiangsu

Inner Mongolia

Guangdong

Yangtze River Delta

65.1%

Bohai and North East

20.7%

Pearl River Delta

14.2%

About the Survey


• Survey conducted from August 27th to September 18th 2015• Total of 393 valid responses were collected• Responses from main economic centers• Industrial distribution dominated by machinery and automotive sector

Industrial distribution

16.8%

6.6%

6.8%

7.4%

7.4%

7.6%

16.8%

30.5%

0% 5% 10% 15% 20% 25% 30% 35%

Other

Chemical

Consumer Goods

Plastics/Metal Products

Consulting

Electronics

Automotive

Machinery/Industrial Equipment

About the Survey


Beijing, October 09th, 2012

Agenda

Regional Focus2

Evaluation of Wage Increases3

National Wage Developments1

Labor Market Environment

Economic Outlook

4

5


• Average wage growth at German companies continues to fall• After years of relative stability, significant downward adjustment• Wage forecast of 8.1% for 2015 confirmed

Wage developments of GCC surveys

10.2%

8.9% 8.8%8.1%

7.1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

2012 2013 2014 2015 2016

National Wage Developments


• Average wage growth in China has fallen below 10% since 2014• In 2015 average wages were 1.7 times higher compared to 2010 levels • Government target doubling 2010 level income by 2020 well on track• Minimum wage growth target of 13% for the five year period ending 2015 achieved

National Annual Wage Developments

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*2016*

Average wage (RMB) Wage growth (nominal)


Source:NBS / GCC /* forecast

in RMB


• Upward pressure on wages from government targets easing• Growth of all main wage indicators is slowing• Wage indicators moving in similar manner within a more narrow band • Expected wages increases at German companies at lower end of forecasts

Wage developments

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

2012 2013 2014 2015 2016*

National wage growth Minimum wage

Wage guidelines German companies





Agenda

Regional Focus2




Economic Outlook

4

5


• Poorer regions only with minimal faster wage increases • Wage gap only slowly closing• 5-year average wage increases in richest provinces/municipalities: 11.3%• 5-year average wage increases poorest provinces/municipalities: 11.8%• However, some second and third tier cities with faster wage growth

5-year average wage increases

0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%

Bei

jing

Shan

ghai

Tian

jin

Jian

gsu

Zhej

ian

g

Gu

angd

on

g

Yun

nan

Jilin

Heb

ei

Gu

angx

i

Hei

lon

gjia

ng

Hen

an

Highest wages Lowest wages

Regional Wage Focus


West 51,204 RMB/year (2014)

Average wage (2014) 9.0%

Minimum wage 13.7%

Wage guidelines 10.3%

North East46,512 RMB/year (2014)


Minimum wage 0%


Central46,828 RMB/year (2014)


Minimum wage 15.8%


East58,561 RMB/year (2014)


Minimum wage 13.0%


Regional Wage Focus

Source:NBS / GCC


• Wage increases falling across all regions at German companies• Generally downward adjustments similar in main economic centers• Wage increases in second and third tier cities typically slightly higher

Regional wage increases at German companies

8.5%8.0%

7.5%8.2% 8.1% 8.2%

7.3%6.9% 6.7%

7.5%

6.6%7.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Shanghai Other East Beijing Other North SZ/GZ* Other South

East North South

2015 2016

Regional Wage Focus

*SZ/GZ=Shenzhen/Guangzhou


• Comparable wage levels in Shanghai and Beijing• Wage levels at German companies in Shenzhen and Guangzhou on average more than

10% lower compared to other first-tier cities

Wage levels first-tier cities: by seniority

Regional Wage Focus

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

junior mid-level senior

Beijing Shanghai Shenzhen/Guangzhou


• Lower wage levels in second and third tier cities• Difference in pay levels in region increases with seniority of position• Relatively similar wages levels for production workers

Wage levels first and lower tier cities: by seniority

Regional Wage Focus

0

5,000

10,000

15,000

20,000

25,000

30,000

junior mid-level senior

first-tier second-tier third-tier



Agenda

Regional Focus2




Economic Outlook

4

5


• HR problems continue to dominate business challenges despite cooling labor market• Increasing labor costs remains one of the main problems for German companies• Problem of finding qualified staff highlights lack of skilled labor

Top 3 Business Challenges

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2012 2013 2014 2015

Retaining qualified staff Increasing labour costs Finding qualified staff

Evaluation of Wage Increases


• Wage growth measured in % has been declining steadily since 2011• Measured in absolute terms wage growth has increased• Impact of wage adjustments affecting cost of labor stronger despite slowing increases

Absolute and nominal wage increases (of average national wage)


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

1,000

2,000

3,000

4,000

5,000

6,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016*

Absolute increases (in RMB) Wage growth (nominal)Source:NBS / GCC /* forecast


• Adjusted for inflation real wage increases have been stable since 2012• Low inflation environment suggest that there is no real downward adjustment of wage

growth

Real wage development

0%

2%

4%

6%

8%

10%

12%

14%

16%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016*

Real wage growth (national) Real wage growth (German companies)




• Productivity increases have been higher or similar for 2/3 of companies• Survey suggests that average productivity at German companies increased by 8.1% in

2015

Wage increases and productivity at German companies

24.7%

34.6%

40.7%

24.1%

42.4%

33.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Productivity higher thanwage increase

Similar Productivity lower thanwage increase

2014 2015



• Taking employees’ productivity and qualifications into account majority perceive wage levels as reasonable or low

• Just over 20% already perceive wage levels as being too high

Perception of wage levels

21.3%

49.9%

28.8%

0%

10%

20%

30%

40%

50%

60%

High Reasonable Low



• Foreign managers with different evaluation of wage levels and productivity• Only minority perceive wage levels as being low

Perception of wage levels by foreign managers


51.6%

40.1%

8.3%

0%

10%

20%

30%

40%

50%

60%

high reasonable low


• German companies remain mostly optimistic about future productivity gains• Evaluation stable compared to previous year• Majority of foreign managers more pessimistic

Likelihood future productivity growth will match wage increases

51.9%

31.6%

16.4%

49.2%

32.5%

18.4%

0%

10%

20%

30%

40%

50%

60%

Likely Neutral Unlikely

2015 2016




Agenda

Regional Focus2




Economic Outlook

4

5


• Labor market has remained resilient as economy slows• Strong growth in service sector jobs has been compensating slowdown in other areas• However, the job growth is increasingly starting to be affected, -2.6% in H1• Government has already launched several support projects

New urban jobs (in million)

11.712.2

12.713.1 13.2 13.0

0

2

4

6

8

10

12

14

2010 2011 2012 2013 2014 2015*




`• Labor demand continues to be larger than labor supply (>1)• Significant downward adjustment in Q2• Sectors supporting job growth also coming under pressure

Labor demand

1

1.02

1.04

1.06

1.08

1.1

1.12

1.14

1.16

National East Central West

Q1 Q2


Source:NBS


• Manufacturing industries have been laying off workers since 2014• Employment demand at service sector better, but also indicating contraction

PMI sub-index on employment

45

46

47

48

49

50

51

52

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

2014 2015

Manufacturing Non-Manufacturing


> 50 expansion

< 50 contraction

Source:NBS


• Expansion of labor force at German companies slowing since 2013• Slowdown in key German industries affecting growth prospects and reducing demand

for labor

Employment intentions German companies

0%

10%

20%

30%

40%

50%

60%

70%

2012 2013 2014 2015

increase similar decrease



• Skills mismatch on labor market persists• Despite lower labor demand, finding qualified staff remains a major problem• Insufficient professional skills and too high salary expecations major reason vacant

positions cannot be filled

Reasons vacancies cannot be filled

0% 20% 40% 60% 80% 100%

No experience with foreign company

Company not competitive enough

Unfavorable company location

Not enough applications

Insufficient working experience

Insufficient of English skills

High salary expectations

Insufficient of professional skills

Major problem Problem



• Effort of training needed in order to obtain necessary skill level of staff is high• Qualification of labor pool a major problem• Deficiencies in educational system need to be compensated

Required training to achieve necessary skills

56.3%

36.1%

7.7%

0%

10%

20%

30%

40%

50%

60%

High Neutral Low




Agenda

Regional Focus2




Economic Outlook

4

5


• China’s labor market structure is transforming• Importance of service sector expanding• Share of labor in manufacturing likely to start declining

Employment structure

27.5% 31.4% 34.6% 40.2%

22.5%23.8%

28.7%29.5%

50.0% 44.8%36.7%

30.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2005 2010 2015*

Tertiary industry Secondary industry Primary industry

Economic Outlook



• Economic slowdown has not bottomed out yet, weak Q3 data• Slight recovery possible in Q4• 2015 GDP growth likely to achieve 7%• But overall growth will shift to lower levels in 2016

Development of key macroeconomic indicators

Economic Outlook

Source:NBS

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%Ja

n/F

eb

Mar

Ap

r

May Jun

Jul

Au

g

Sep

Oct

No

v

De

c

Jan

/Feb

Mar

Ap

r

May Jun

Jul

Au

g

Sep

2014 2015

Retail Fixed-asset investment* Industrial production


• Low inflation environment to continue• CPI slightly recovering, but at low levels• Overcapacities and slower growth affecting producer prices

Development of price levels

Economic Outlook

Source:NBS

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

2014 2015

Consumer prices Producer prices


• Slower economic growth to affect labor market• Low inflation to contribute to easing wage increases

Wage growth and economic development

Economic Outlook

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016*

National wage growth Conusmer inflation

GDP German companies


Key developments

• Despite lower wage increases, rising labor cost a key business challenge

• Achieving productivity growth remains crucial

Wage increases

• Skills mismatch persists with high competition for highly skilled professionals and workers

• High level of training necessary

Labor marketenvironment

• Economy shifting to lower growth levels

• Look out: labor contract law, social insurance, retirement age, new 5-year plan

Outlook


• Full Labor Market and Salary Report 2015/16 available for GCC members • Flash survey will follow in March 2016• PPT available on request

Thank you!

Max J. ZengleinEconomic Analyst China

T: 010 6539 6665E: [email protected]

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