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Hey, Graduates! Negotiate Hard, You Hear, Now?

An alert reader sends along this story from The Economist, on the price of talent in China versus the West. Talking about the steep rise in the stock of WuXi PharmaTech on the Chinese stock market, which is insane even by the impressive standards of the Chinese stock market, they point out that:
”. . .as in so many other industries in China, labour is cheap. Starting salaries for a PhD are $23,000 a year, compared with $200,000 a year in America, according to UBS, an investment bank.”
Well, that explains it! If that’s a real salary figure, I’m at a loss to explain where it came from, let me tell you. I’ve been doing this for 18 years now, and all I can say is that I’m driving down the average for what is supposed to be a starting salary? Something is seriously awry.
Real numbers are to be found, among other places, at the American Chemical Society. These are self-reported, of course, and surely have biases in them – but not all those biases point in the same direction, and if anything, they might lean a bit toward the high side. (People feel better answering surveys about their salary when it’s a number that they’re happy with). According to the most recent ACS numbers, entry-level PhD chemist salaries in industry were between $70,000 and $75,000 in 2003 and 2004. Unless something bizarre has happened since then, I think we can take that as a reasonable starting point.
So basically, the UBS figures are deranged, and if anyone there would like to tell me where they got them, I’d be obliged. But those ACS numbers still show a large cost difference between hiring a PhD in China and hiring one here, of course. And those numbers leave out a number of costs on the employer’s side, which just might make up a lot of the difference toward the UBS figure. I’m talking about benefits, retirement plan contributions, mandatory FICA and insurance payments, etc. I don’t know what the figures are for these costs in China, but I feel safe in assuming them to be much, much lower on both a currency-adjusted and percentage basis. (I realize that the UBS figure is billed as a salary, which isn’t supposed to include these costs – if this really is the explanation, then someone at the Economist was asleep at the keyboard).
The thing is, the costs in China are increasing. The increase no doubt looks gaudiest on a percentage basis, since it’s starting from a lower number, but the price of a PhD employee there is has been heading nowhere but up the last few years, if what I’ve been hearing is any guide. Supply and demand cannot be escaped merely by traveling to Shanghai. If the global research environment stays healthy, the trend will continue, which will lead to shifts into the less-globalized inland parts of China. (I already know of some good stuff from Chengdu, for example). And after that, it’ll lead to other countries entirely. Which is the whole idea.

22 comments on “Hey, Graduates! Negotiate Hard, You Hear, Now?”

  1. SRC says:

    Presumably they meant the fully-burdened US cost, in which case they’re low. Is it possible that $23K is the fully-burdened cost in China, or (equally improbable) that they’re comparing two different types of figures?

  2. AC says:

    Perhaps they’re talking about all non-academic Ph.D.’s, not just those in the basic sciences. $200k sounds reasonable for MD/Ph.D.’s as well as business/economics Ph.D.’s who go into finance.

  3. TNC says:

    I agree with SRC.

  4. MikeS says:

    A Chinese synthetic chemistry CRO that a former employer works with charges its clients 30-40K/yr for a FTE PhD plus all associated expenses, including the costs of all chemicals. So $23K sounds realistic for fully-burdened costs in China after US-side support costs and profit is subtracted.
    Of course, given the communication issues and lag times associated with working with people in China, and the fact that no company is going to have contractors, PhD-level or not, driving discovery projects, these Chinese PhDs are really fulfilling the role of an experienced associate-level chemist. Making intermediates, cranking out analogs, taking the first crack at scale-up. Still a bargain in some ways, but not directly comparable to an in-house US PhD.
    On the other hand, the work of the process group at this particular CRO is very impressive for the price.

  5. LNT says:

    As SRC mentioned, I’ve often heard $250,000 / year as the “real” cost of a full-time chemist in the US. This includes overhead costs such as chemical and energy consumption, administrative support, and benifits. Of course only half or less of that figure actually goes to salary.
    When taken in this “broader” view, it becomes apparent that the arguement of hiring a PhD vrs. a BS/MS chemist becomes more muddled than we traditionally think. The cost to the company really isn’t all that different between PhD and BS/MS since salary only accounts for 30-50% of the “real” cost of employment.

  6. Anonymous BMS Researcher says:

    Hmm, the $200K figure is roughly comparable — though maybe a bit on the low side — to what we at BMS figure as the average cost per FTE hour (we tend to figure things as hours instead of years) including stuff like benefits and overhead, so as others have pointed out this may be what UBS meant. I cannot say whether the Chinese figure quoted there is also a fully-loaded-with-overhead figure though I presume it is. I’ve no knowledge of what outsourcing to India costs BMS per FTE hour, but from the pace with which we’re doing it our management must think it worth doing.

  7. Analytical Chemist says:

    Is UBS trying to sell business consulting services and encourage companies to outsoruce to China?
    This does seem like a selective use of statistics. I have a friend working a mid-tier scientific job in Shanghai whose salary would blow that $23k number to bits. I wonder if any of the PhDs they surveyed are diving Taxis?

  8. PharmaChemist says:

    $23K is only for the salary component of a PhD chemist in Shanghai. Fully loaded cost is on the order of $60K-95K per FTE. Either the UBS data for US cost is grossly inaccurate (as Derek suggests) or it is not an apples to apples comparison with the data for China.

  9. Nina says:

    As many have commented here before, hiring in china seems to be a box that management checks off to demonstrate their frugality.
    Lets look at the figures for 2006. There was a record amount of Venture capital heading into California biotech in 2006. But jobs for PhD chemists were scarce. Many companies I had contacts with were hiring ten even twenty PhD chemists in China. The feedback I recieved on their performance was less than stellar, but management refused to hear about it. Its all due to the fact that chemists are seen as a disposable asset, easily circumvented in the business model.
    So for you BS folks thinking of getting a PhD I say…don’t don’t don’t! You’ll find its a dead end.

  10. MolecularGeek says:

    Nina,
    As opposed to the dead-end of trying to find a BS-level position that actually uses the education you have?
    MG

  11. JBJB says:

    Nina nails it with:
    “Its all due to the fact that chemists are seen as a disposable asset, easily circumvented in the business model.”
    This is so true, and something I have tried to explain to my R&D collegues for years. This is not to say that getting a PHD in Chem is a hapless endeavor, but if you choose basic R&D as a career path, you must always keep this reality in mind.

  12. SynChem says:

    I chatted with a complete stranger last night who just finished a Master’s in Computer Engineering. He said their starting salary is ~$150K. We’re ALL int he wrong profession!

  13. Jimbo! says:

    I was wondering if those figures from ACS skew a bit due to Post-Doc salaries. We had similar average numbers coming out of MIT last year (I just graduated with a PhD there), and I thought that this might be due to P-D salaries driving the number down. Because no one I knew got a 70K salary offer anywhere. I’d put the average closer to 90 from my experience.

  14. Moe says:

    Jimbo, it’s debatable whether that actually matters. Post-docs are often (usually?) a necessity when industry jobs aren’t available. It’s one mechanism for the PhD labor market to equilibrate, so I think post-docs should indeed count toward that figure–especially since salaries don’t rapidly adjust to market forces.

  15. Kay says:

    I have been told that the Chinese university system graduates way more chemists than the country can use, hence keeping salaries low. Perhaps the low prices will be around for longer than Derek estimates?

  16. Mark M says:

    “Lets look at the figures for 2006. There was a record amount of Venture capital heading into California biotech in 2006. But jobs for PhD chemists were scarce. Many companies I had contacts with were hiring ten even twenty PhD chemists in China. The feedback I recieved on their performance was less than stellar, but management refused to hear about it. Its all due to the fact that chemists are seen as a disposable asset, easily circumvented in the business model.
    So for you BS folks thinking of getting a PhD I say…don’t don’t don’t! You’ll find its a dead end.”
    I disagree with the sentiment of obtaining an advanced degree. you will earn considerably more than an BS–but the caveat is to know you are disposable and keep your skills sharp and current.

  17. LNT says:

    Mark — I have to disagree. Unless the job market changes, I don’t think a PhD ofers any major advantage over BS/MS chemists. (in reguards to money and job stability)
    In a career change, a PhD will typically “overqualify” you for many positions — so you are much more pigeonholed into a very narrow and uncertain job field. Yes, you are paid more as a PhD. However, you have to go through years of grad school and postdoc to get there. Say I make $85k after graduating with a PhD and a year or two of postdocing. My buddy graduated 4 years previous with an MS and got a job in the industry for $60k. For those 4 years, I’m stuck in grad school/postdoc making $20-$30k. He outearned me by $140k over that 4 year period. How many years will it take for me to make up that $140k gap? Probably close to a decade when you take into account inflation and consider that his salary has now grown considerably because he has 4 years experience while I have none.
    If you move out of the pharma/chemicals field, what advantage does a PhD have? What can you do as a PhD that you could not do as a MS chemist? I honestly can’t think of anything.
    I’m glad I earned my PhD because I enjoy what I do. But if I had to do the same thing in the current job market, there’s no way in hell I would get a PhD.

  18. Polymer Bound says:

    “I’m glad I earned my PhD because I enjoy what I do.”
    That’s the advantage that a PhD offers… life often boils down to money, but sometimes there’s more. I enjoy running a research group, and managing people, and steering the direction of my research. If you’re going to school to be a chemist, and not a scientist, a B.S. or an M.S. will suit you just fine. If you want more than that, you’re going to have to struggle.

  19. Rohan Deo says:

    There are simply too many PhD’s coming out of China at the moment for salaries to be comparable to US levels. I still do think they are better off there for now. I can only see the PhD unemployment crisis in North America worsening in the next couple of years.

  20. Loon E Toon says:

    $23K/year? Sounds about right.
    Oh, you mean for people working in China and not us postdocs? Sorry, my bad.

  21. Jimbo says:

    So long as the currency differential exists, China will always be the more desirable locale. Coupled with no wage laws, no envio laws and a police state govt, I can’t see why (a master of the universe MBA) would waste money in the USA. Plus five times as many potential workers!

  22. Presumably they meant the fully-burdened US cost, in which case they’re low. Is it possible that $23K is the fully-burdened cost in China, or (equally improbable) that they’re comparing two different types of figures?
    I agree with pharma chemist
    A Chinese synthetic chemistry CRO that a former employer works with charges its clients 30-40K/yr for a FTE PhD plus all associated expenses, including the costs of all chemicals. So $23K sounds realistic for fully-burdened costs in China after US-side support costs and profit is subtracted.
    Of course, given the communication issues and lag times associated with working with people in China, and the fact that no company is going to have contractors, PhD-level or not, driving discovery projects, these Chinese PhDs are really fulfilling the role of an experienced associate-level chemist. Making intermediates, cranking out analogs, taking the first crack at scale-up. Still a bargain in some ways, but not directly comparable to an in-house US PhD.
    On the other hand, the work of the process group at this particular CRO is very impressive for the price.

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