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Minimum Wage Comparisons Between China and India

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

Op-ed Commentary: Chris Devonshire-Ellis

Jun. 7 – 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:

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.

Chris Devonshire-Ellis is the founding partner of Dezan Shira & Associates. Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details concerning these markets, including China-India cost comparisons, please email asia@dezshira.com, visit www.dezshira.com, or download the firm’s brochure.

You can also stay up to date with the latest business and investment trends across emerging Asia by subscribing to the Asia Briefing weekly newsletter.

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8 Responses to Minimum Wage Comparisons Between China and India

  1. Carlos de Souza says:

    OK, so India is cheaper than China. What about productivity of labour ??
    Actual cost = Wages/Productivity. I think Chinese labour is far more productive. Partly because they are more hardworking and partly because of the whip :-)

  2. Girish says:

    @Carlos de Souza,

    Why someone is more productive? is hardworking a born attribute of Chinese? Are non Chinese with similar skills and work experience less hardworking?
    It will be interesting to see if there is any analysis before making conclusions.

    I believe, if we consider the parity of skills, experience, living standard between an Indian worker and Chinese, then I do not see why Chinese can be rated better if not less. We must also understand the limitations of weather conditions on human labour. India is a warmer country where as China is cooler. Productive increases in cold conditions.

    Yes, Chinese are more disciplined people (which do give them +1 in better productivity) and communism and social control has a major role in building such behavior in Chinese. Where as Indian as be asd to be more undisciplined (-1 in productivity) as they are more free by law and free to oppose things (even if its wrong to oppose).

    But the society which learns to be disciplined while being free is more stable in long term and value the discipline as a value not as a law.

  3. It’s a matter of training, leadership and coordination. 20 years ago the average Chinese worker was not all that great either. Foreign investors need to both train and supervise workers properly as well as motivate them. India is a little behind in this but as the expat manager I talked with in Mumbai recently said (he’d previously managed thousands of workers in China) “Management techniques are why I have an MBA for and using it is why I’m in India” – Chris

  4. Beijinglaw says:

    I’m surprised to see the min wages in second tier cities like Chengdu and Dalian are close to Beijing wages.

    Many workers in Beijing are paid around the min wage (e.g. KFC employees) so it’s not just a low number with no relation to real wages.

  5. @Beijinglaw – I don’t think that KFC are typical minimum wage earners in Beijing. However, the 2TC are catching up fast – its where the growth is. Our own Payroll Unit http://www.dezshira.com/payroll-services.html is based in Dalian and handles national accounts, so they have a pretty good idea of the wages across China. It remains an evolving and increasing expense throughout the country. – Chris

  6. Harry says:

    After read these conversation, i think india is getting much smaller share of foreign investment as compare to china and these investment enhance the technical side of the production processes on the ground level of manifacturing industry. And right now, these things giving advantage to china in the form of more productive nation as compare to India.

  7. @Harry – it’s a debatable issue, but FDI is increasing in India. Its not however a competition between China and India – a common mistake analysts make – but rather a complimentary FDI choice targetting two emerging markets of over 1 billion each. A bit of a no-brainer really. – Chris

  8. Harsh says:

    The door of FDI is wide open in China (100%)while in India is limited. Land, electricity,water and tax are very very low while in india , because of democracy, they are at market values.
    ALSO THE CURRENCY OF CHINA CONTROLS BY FIXED RATE WHILE IN INDIA AT OPEN MARKET
    DECIDES. THE LABOR FORCE IN BOTH COUNTRIES ARE ON SAME LEVEL.

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Dezan Shira & Associates provide a range of services for companies looking to undertake foreign direct investment into Asia, These include corporate establishment, accounting, tax, payroll, audit and due diligence. To learn more about the firm, please contact one of our specialists at china@dezshira.com, download our corporate brochure or visit at us www.dezshira.com


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