China used to be touted as a place for “cheap talent,” As it turns out, while China remains much cheaper than Silicon Valley at the junior levels, it is no longer (and hasn’t been for quite a few years), the low price leader for technical talent overall.
For data, I looked to Norman Chang and his excellent team at headhunting firm PCI Executive Search China, Chang restricted his search to technology companies with more than 1000 employees, which are mostly based in first-tier cities such as Beijing, Shanghai and Shenzhen, and only takes into account before-tax cash compensation.
The data surprised me – while for junior engineers China looks to be about on average a little more than half as expensive on a cash basis as Silicon Valley, that difference vanishes at the director level (typically a dozen years of experience or more) and above. Not cheap by any means.
Chang also shared with me the types of backgrounds tend to get the most love from employers currently. One of the quickest ways, he says, is to start off at a reputable MNC as these are known for their high bars for hiring and rigorous training programs. Local companies, which tend to be less structured, love to pick off MNC employees. “Because they are more results driven, local firms like ‘ready-to-go’ talent and these days often offer a 30-100% increase in pay to lure folks from MNCs,” according to Chang.
As a tech investor, I am a bit concerned by the rapid rise in development cost, which means that each dollar I put into a startup now buys fewer and fewer headcount, a trend not likely to reverse any time soon.