labor market and salary developments 2015/16 - china€¦ · •survey suggests that average...
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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
Page 3 27. October 2015
• 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
Page 4 27. October 2015
Beijing, October 09th, 2012
Agenda
Regional Focus2
Evaluation of Wage Increases3
National Wage Developments1
Labor Market Environment
Economic Outlook
4
5
Page 5 27. October 2015
• 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
Page 6 27. October 2015
• 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)
National Wage Developments
Source:NBS / GCC /* forecast
in RMB
Page 7 27. October 2015
• 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
National Wage Developments
Source:NBS / GCC /* forecast
Page 8 27. October 2015
Beijing, October 09th, 2012
Agenda
Regional Focus2
Evaluation of Wage Increases3
National Wage Developments1
Labor Market Environment
Economic Outlook
4
5
Page 9 27. October 2015
• 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
Page 10 27. October 2015
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)
Average wage (2014) 7.1%
Minimum wage 0%
Wage guidelines 8.0%
Central46,828 RMB/year (2014)
Average wage (2014) 9.4%
Minimum wage 15.8%
Wage guidelines 10.5%
East58,561 RMB/year (2014)
Average wage (2014) 9.7%
Minimum wage 13.0%
Wage guidelines 10.5%
Regional Wage Focus
Source:NBS / GCC
Page 11 27. October 2015
• 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
Page 12 27. October 2015
• 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
Page 13 27. October 2015
• 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
Page 14 27. October 2015
Beijing, October 09th, 2012
Agenda
Regional Focus2
Evaluation of Wage Increases3
National Wage Developments1
Labor Market Environment
Economic Outlook
4
5
Page 15 27. October 2015
• 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
Page 16 27. October 2015
• 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)
Evaluation of Wage Increases
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
Page 17 27. October 2015
• 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)
Evaluation of Wage Increases
Source:NBS / GCC /* forecast
Page 18 27. October 2015
• 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
Evaluation of Wage Increases
Page 19 27. October 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
Evaluation of Wage Increases
Page 20 27. October 2015
• 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
Evaluation of Wage Increases
51.6%
40.1%
8.3%
0%
10%
20%
30%
40%
50%
60%
high reasonable low
Page 21 27. October 2015
• 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
Evaluation of Wage Increases
Page 22 27. October 2015
Beijing, October 09th, 2012
Agenda
Regional Focus2
Evaluation of Wage Increases3
National Wage Developments1
Labor Market Environment
Economic Outlook
4
5
Page 23 27. October 2015
• 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 Market Environment
Source:NBS / GCC /* forecast
Page 24 27. October 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
Labor Market Environment
Source:NBS
Page 25 27. October 2015
• 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
Labor Market Environment
> 50 expansion
< 50 contraction
Source:NBS
Page 26 27. October 2015
• 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
Labor Market Environment
Page 27 27. October 2015
• 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
Labor Market Environment
Page 28 27. October 2015
• 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
Labor Market Environment
Page 29 27. October 2015
Beijing, October 09th, 2012
Agenda
Regional Focus2
Evaluation of Wage Increases3
National Wage Developments1
Labor Market Environment
Economic Outlook
4
5
Page 30 27. October 2015
• 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
Source:NBS / GCC /* forecast
Page 31 27. October 2015
• 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
Page 32 27. October 2015
• 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
Page 33 27. October 2015
• 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
Page 34 27. October 2015
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
Page 35 27. October 2015
• 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]