Salary Expectation of Expatriates in Shanghai

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This entry is part 2 of 5 in the series Living/Working in China

In a previous post about foreigners and expatriates in Shanghai, I gave a breakdown on the different types of expats living and working in Shanghai. I also mentioned that I’d write about expectations that expats have regarding their job, work, salary, and compensation.

Different Types of Expatriates

Here’s a quick list of the different types of expats. For details about each type, read the other post.

  • Expatriates with full expat package.
  • Expatriate with same U.S. salary
  • International school teachers
  • Locally hired expatriates
  • Expatriates with freelance job(s)
  • Expatriates with local salary
  • Trailing spouse
  • Expatriates without a job

The highly desired full-expat package is not for everyone. Unless you have like 30 years of work experience and lots of gray hair, chances of getting this package is slim. The second most desirable expat package (U.S. salary) is also not for everyone. Not everyone gets a chance to work in China and if you’re already in China, companies wouldn’t want to pay U.S. salaries considering there’s already a huge pool of local expats willing to work for much less! So pretty much, the majority of expats fall in the other categories. The least desirable is having no work at all or earning very low local salary. And by low, I mean like the average 3000 RMB ($400 USD) a month for college graduates in Shanghai low. You can make so much more from tutoring or teaching English!

U.S. Salary vs Local Salary

While 3000 RMB is not bad at all for a local PRC citizen, why do I think 3000 RMB a month is low for an expatriate? Let’s put things in perspective. If you’re a U.S. citizen, then you are used to seeing/earning a salary in the average range of $3000-$5000 USD a month fresh out of college. You need to make at least that much to make ends meet (depending on where you live).  Between Uncle Sam (taxes), 401K, and medical insurance, that’s already half your paycheck. Your rent takes half the remaining. Your food, car, gas, insurance, and utility bills take pretty much the rest. Even with a $3000 USD a month job, you’ll find that you have very little left each month.

So going from $3000 USD  in the U.S. (which is barely enough) to 3000 RMB in China is utterly unacceptable. You won’t find many (if any) expats willing to work for that "low" of a salary. Most expats will make at least double that amount. But even with living expenses significantly lower in China, expats will complain as long as they are making anything less than their U.S. salary.

There are a few good reasons (and a few bad reasons) why expats complain so much about salary. While I’m not justifying an expat’s right to earn a higher salary or complain when they are not, I think some of the reasons are legitimate issues that Chinese locals may not realize. It’s easy to think that expats are highly demanding, loud, vocal, and greedy people who always want more. I thought I’d share a few reasons to put things in a bigger perspective.

Reasons Why Expats Demand a Higher Salary

  1. Salary expectation. Expats are used to getting paid a certain amount in their home country, so it’s hard to ask for anything less. Settling is one thing but they won’t start low when asked about salary expectation.
  2. College education was expensive. Many expats paid a lot of money for their education. Some still have student loans to pay back. On average, people in the U.S. graduate with student loans in the mid $XX,XXX USD! People with professional degrees like MBA and MD have loans in the 6 digits!! They’d be in debt for the rest of their life if they earned a Chinese salary!
  3. Maintaining a certain lifestyle. Once you are used to a certain lifestyle, it’s hard to change. Expats require/demand a certain level of comfort when it comes to everything from housing to transportation to dining out to healthcare. While habits can change, it’s not as likely that an expat would want to live in a dinky hole-in-the-wall shack, wait 30 minutes for a bus when taxi costs just a dollar more, or get their teeth pulled by a street dentist. Then of course, there are expats who "need" to enjoy their daily cup of Starbucks coffee.
  4. Bills to pay back home. Some expats have mortgages and bills to pay back in their home country. If they have family back in their home country like kids in college or caring for the aging parents, that’s a lot of expenses that a local salary cannot afford!
  5. Visit home. Expats need to go home occasionally to visit family/friends. International flights cost an arm and a leg. If they make local salaries, one flight costs pretty much one or two months of salary!
  6. High tax bracket. Tax bracket for expats are quite high. There’s not a good system in place for tax refunds, benefits, or returns like in the U.S. For some expats, they have to pay both Chinese tax as well as U.S. tax! Not all companies offer tax benefits to expats, so that’s money down the drain AND they can’t enjoy government benefits because they are not PRC citizens.
  7. No government benefits. Despite being a taxpayer in China, expats don’t get to benefit from government benefits like retirement, pension, healthcare, education for their kids, etc… which lead to a bunch of extra expenses that expats have to pay out of pocket. 
  8. School tuition. Tuition at international schools is around $20-25K USD a year! That’s probably annual salary for some locally hired expats!! The alternative is to send kids to local Chinese schools, but even local schools charge expats a lot for tuition.
  9. Higher rent. There’s housing discrimination against the expats in China. Rent for expats is at least double the rent for local Chinese. It’s very difficult for expats to find cheap housing because landlords and real-estate agencies jack up the rent just because you are a foreigner and they think you can afford it.
  10. Health care. Health care for expats is also very expensive. Expats aren’t covered in the Chinese healthcare system (if such even exists). In addition, language is such a barrier when it comes to medical and critical needs that the possibility of misdiagnosis strikes great fear in foreigners. Expats prefer going to better clinics where doctors speak English. And these clinics are very expensive.
  11. Retirement. As non-PRC citizens, expats can’t retire in China. That’s just the law. Expats need legitimate reasons to stay/live/work in China. Without a job, they have to leave this country. Expats need to consider saving for their retirement in their home country, which generally has a much higher living expense than their Chinese salary can afford.
  12. Expertise and experience. Not that expats are any better than locals when it comes to knowledge, experience, expertise, and creativity. However, expats do bring a fresh new set of perspective to the workplace that is sometimes critical to a company’s success. And expats know that, so they know their worth and the value they bring to a company.
  13. Language skills. Expats have the foreign language skills (whether English, French, or Korean) that are also critical to a company’s success. Expats with bilingual skills know that too, so they have some negotiating power when it comes to salary. Unfortunately, with more returnees (Chinese people who go abroad to study but return to China) in the job pool, the demand for expats with bilingual skills are becoming less and less.
  14. Expensive friends. Expats like to hang out with other expats. And expats like to party, club, dine, and go to expensive places. At the end of the night, everybody splits the bill. The expat with the full expat package pays the same amount as the expat with the local salary. Life just isn’t fair. No wonder expats complain so much.
  15. Keeping up with the Jones. This isn’t just an expat or American phenomenon. People like to compare, so who you hang around with affects your judgment. Because expats hang around with other expats, there’s always a level of comparison and envy regarding what the other expat is making or what his/her company is offering in terms of vacation, health insurance, and benefits.

Good or bad reasons, who’s to judge? Different background, different environment, different culture, and different sets of expectations. Expats are just ingrained and grown differently. Not that they think they are any better or superior to locals. If you put all these reasons together, you might better understand why expats think the way they do and why they want a higher salary.

So this begs the question why companies would want to hire expatriates if they are so expensive. What kind of companies hire expatriates? And if companies pay expatriates a much lower salary than what they would otherwise receive in the U.S. (or think they "deserve"), why do expatriates stay in China? Why don’t they just go home and stop complaining?

Stay tuned!


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