by Mike Caggeso
If you ventured a guess at which countries paid their senior management the most, what would be some of your choices? The United Kingdom? Japan? Surely the United States would be high on the list, right?
A recent Hay Group Research report showed that management in Russia, Mexico, Ukraine, Thailand, Poland, Malaysia, Lithuania, Romania and Austria all have higher disposable incomes than the United States, which ranks 24th on a list of the 47 countries in the survey.
Topping the list are the oil-rich – and tax-free – states of Saudi Arabia ($229,325) and the United Arab Emirates ($223,939). The United States weighs in at average of $104,905 in disposable income for its senior managers (which the Hay Group defines as either a department head, or the head of a corporate function).
“Companies are operating in an increasingly open and competitive global economy, and emerging markets are offering managers higher disposable incomes than established countries — which is making these locations an attractive prospect for management talent,” said Iain Fitzpatrick, Director Reward Information Services for Hay Group North America.
“This makes sobering reading for companies in Western Europe and the U.S., who face not only local competition for managerial talent, but an increasing threat from buoyant new economies.”
The Hay Group, a global management consultancy group, compiled the report by comparing detailed cross-country pay information of 47 countries in North America, South America, the Middle East, Africa, Europe and Asia Pacific. It then factored pay, cost of living and taxes to reveal disposable income — the true indicator of purchasing power.
That makes it less of a surprise that the United Kingdom ranks 40th. Its high cost of living whittles the average manager’s disposable income to $86,367.
The reasons the United States and United Kingdom are both so low on the list are fairly simple, though multi-layered. First, managers in wealthy countries not only compete with themselves, but also with other countries whose growing economies are demanding more and more upper-level managers to move that growth along. And in many of those countries, the living costs are essentially peanuts compared with the higher-cost U.S., U.K. and Japanese markets.
It’s not that executives in these three countries are paid less. Rather, their money doesn’t go as far in their homeland than underdeveloped countries. And in Canada, 42nd on the list, not a penny of its “low” $81,613 has to be spent on health care.
Given all these considerations, it’s no surprise that seven of the Top 10 countries are in Asia. But China isn’t one of those seven, however. It only ranked 12th, with managers there making an average of $126,218.
“Chinese companies have realized the need to attract management talent as economic acceleration continues apace, having a significant upward impact on managers' pay,” said Hern Yin Goh, Reward Information Services Manager for Hay Group China.
It’s not as surprising to find India well down the list. With buying power of just $92,750, India ranks only 36th – underscoring why that country’s highly educated work force is a coveted outsourcing target for multinational corporations looking to escape such high-cost markets as the United States and Japan. In India, major corporations are setting up everything from customer-service call centers to design-and-development units for computer software and high-speed microprocessor chips.
As that continues, however, India may find it tough to maintain its competitive edge as a low-cost sanctuary with high-value labor.
“India benefits from a large tier of well educated, English-speaking local talent, making management pay more immune to the international market,” the Hay Group China’s Yin Goh noted. “That said, managers’ pay is increasing at double-digit rates in India — between 15% and 20% — so it is unlikely to stay at the bottom of the pay table for long.”
To see the full report, go to: http://www.haygroup.com/Downloads/sg/misc/World_Pay_Report_2007.pdf