Pay gap widens as China’s appetite for top skilled talents rises

Firms “more able” to find skilled talents in China amid rising global uncertainties, new research finds.

Businesses are paying a premium for highly-skilled professionals across a number of industries, as wages in highly-skilled industries are outpacing those in lower skilled industries. The widening pay gap suggests China’s rising appetite for top talents to propel its economic transition from export-oriented to tech-driven.

The Hays Global Skills Index (the ‘Index’), an annual report by recruitment expert Hays, produced in collaboration with Oxford Economics, also suggests China, for the second consecutive year, has the least pressured labour market among 34 of the world’s economies.

It suggests employers have an easier time finding the right-skilled talents in China than in other 33 major economies, meaning China’s labour market is still more robust than others when the global economy is faced with rising uncertainties and growth is sluggish.

“In recent years, China’s local labour market has increasingly been able to meet the hiring demands of employers, represented over the past five years by a steadily decreasing overall Index score.” Simon Lance, Managing Director, Hays Greater China, says.

“Workers in high-skilled industries, scientific activities in particular, experienced strong wage growth last year, widening the pay gap to those in low-skilled sectors,” Simon says. Wages in the information, computer service and software industry grew by 9 percent, the highest of China’s industries, he adds.

Simon notes key skills in demand in China include data scientists, clinical physicians, eCommerce managers, senior engineers in R&D, and digital finance experts, and says sectors like life sciences and engineering are the most hungered for high-skilled professionals.

Record lows

The report, published annually since 2012, measures how easy or difficult for firms to attract and retain the most talented workers in the world’s major labour markets.

The overall index score is an average of the seven indicator scores, a score closer to 0 indicates the labour market is less pressured whereas a score to 10 indicates it is more pressured. With this year’s overall Index, China scored 3.7, the lowest in 34 of the world’s major labour markets and in its own record low since 2012. The average score of all 34 markets this year remains unchanged from last year’s 5.4.

Despite the indications of the overall Index score, pressures definitely present which should not be neglected at the same time, as there are indicators such as Labour Market Flexibility which are more pressured.

The Index also shows China’s overall wage pressure dropped clearly to a historical low of 1.9 too, yet its wage pressure in high-skilled industries rose to 4.4 from 4.0 in 2018.

China’s economy has maintained overall stability. The country’s GDP expanded 6.2 percent year on year in the first three quarters of 2019, data from the National Bureau of Statistics of China showed.

Investment in high-tech manufacturing and high-tech services rose 14.5 percent and 13.7 percent year on year.

Talent mismatch: a hidden risk

At the same time, the research finds talent mismatch, a key indicator to measure the gap between the skills businesses are looking for and the skills available in the labour market, bothers China less than most of other major labour markets.

China’s score in talent mismatch, a key indicator of the overall research, dropped to 4.1 from 4.2 in 2018, but is higher than the historical low of 3.8 it achieved in 2017. Worldwide, the indicator this year has risen to 6.7, the highest since 2015. China’s lower talent mismatch score is driven by the falling unfilled job vacancies rate in the index, Simon explains.

“Employers are becoming more selective in their hiring decisions, and focusing greater attention on soft skills, culture fit and aptitude for ongoing learning. Various new technologies and heightened consumer expectations continue to bring about unparalleled changes across retail banking, which indicates transformation within the sector is far from complete,” Simon says.

“However, there are exceptions to this trend, where skills shortages have the potential to hamper business operations: these are typically within high-tech sectors and STEM (science, technology, engineering and math) job functions,” Simon adds.

The 2019 Hay Asia Salary Guide indicated that 47 percent of companies said they were not confident they will find talents with the necessary skills in the year ahead.

To make matters more serious, the skills gap has widened in the past year－up from 36 percent in 2018. This means most enterprises will struggle to recruit the talents they need in the year ahead, while they enjoy fast growth.

Notes on methodology

The Hays Global Skills Index provides a score for each labour market of between 0 to 10 which measures the pressures present. The score is calculated through an analysis of seven equally weighted indicators, each covering different dynamics of the labour market, such as education levels, labour market flexibility and wage pressures.

An overall score above 5.0 indicates that the labour market is “tighter” than normal. A score below 5.0 indicates the market is “looser” than normal. Within these Overall Index Scores, however, the scores attributed to each of the seven indicators can vary significantly, highlighting the different dynamics and pressures faced by each country.