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Gaping pay differentials show pressure for talent in APAC

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Abhigna
New Update

NEW DELHI, INDIA: Gaping pay differentials across the spectrum of job levels reflect workforce imbalances and pressure for talent in the Asia Pacific region.

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However, depending on location, skilled labour at low cost is available to potential employers, according to new research by professional services company Towers Watson.

The Asia Pacific section of Towers Watson's 2013/2014 Global 50 Remuneration Planning Report shows a widening disparity in pay levels particularly between the middle management and CEO in 13 of the Asia Pacific's key developed and developing economies.

The findings illustrate where in the region senior executive talent shortage is most acute and also the competitiveness of pay amongst rival economies - from production worker to top management.

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At the lower end of the job level Asia Pacific's developed economies predictably have the highest pay levels, Australia entry pay level is eight to 11 times more than China, the Philippines and Indonesia, and 15 times that of Vietnam. Australia also pays discernibly higher than Japan, Singapore and Hong Kong through to middle management, after which the gap narrows.

Opportunities in India

More eye-catching, however, is the comparison between China and India. Striking differences exist between the region's two biggest labour forces. Based on the survey findings, labour costs for senior executives and top management is lower in India. At senior level, executive pay in China is more than twice that in India (US$94k).

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For international companies, the sharp fall in the value of the Indian rupee against the US dollar in 2013 contributed to reducing labour costs in India. It contrasts with China where the renminbi appreciated against the dollar.

"The large influx of Indian returnees following the global financial crisis helped India to get more CEO talent," said Clare Muhiudeen, managing director, Talent & Rewards, Asia Pacific at Towers Watson.

"But with higher rates of inflation in India than in China, that gap will narrow. We expect average salary increases in India to be higher than China's 8.5 per cent. That said, India clearly has more affordable labour than China and that's the way it'll be for the foreseeable future."

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Other fundamentals have a bearing too. China's labour force is expected to fall for the second year running to 795 million in 2014 from 798 million in 2013, while unemployment is forecast to be 6.1 per cent (6.4 per cent in 2013).

In India, however, while unemployment is expected to fall to 8.4 per cent from 8.8 per cent in 2013, it remains well above that of China. Meanwhile its work force is set to reach 492 million this year, up from 487 million in 2013.

"The net addition to the working population is reflected in India's abundant entry level talent. In people-intensive sectors like technology and retail, the entry level wages are stagnant. Adjusted for inflation, they may actually be reducing every year" said Subeer Bakshi, director, Talent & Rewards, India at Towers Watson.

Flat wages at the entry level and rising wages at senior levels are leading to considerable inequity and employers are under significant pressure to provide fast and vertical career growth in a moribund market.

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