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The low cost of doing business in China
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A couple of days ago I made a small blunder on my way toward making a larger point. In summarizing a Wall Street Journal piece comparing the low cost of drug research in China to the United States, I said that China's research scientists earned about $30,000 a year, about 10 percent of what research scientists earned in the U.S. As a number of readers pointed out, the Journal piece was talking about the total cost of a research scientist, which registers at about $30,000 a year in China and $250,000 to $300,000 a year in the U.S.--according to analysis done by Credit Suisse in Hong Kong. It was not only about pay. OK. Point taken.
But the larger point stands. Drug companies don't need a Nobel Prize-winning math expert to tell them that an R&D hub in Shanghai will cost them a fraction of what it would in Boston, or Paris. Scientists would have to cut their salaries to something more in line with a grocery clerk to compete with that. And there's a major shift underway in research activities that makes that point loud and clear. I'd like to know more about what researchers think about that trend--and what it portends for drug development work. Biotechnology thrives in places where scientific talent is plentiful. Many top scientists go on to become entrepreneurs. Any lessening of talent in one region can have some serious long-term repercussions. And if Chinese companies buy into research outfits in the Europe and the U.S., isn't it likely that they will shift much of the work to China? - John Carroll
Comments
By Andy Spencer | Posted 5:33pm | January 11, 2008
I'm not going to buy into the hype to the extent that many others do. When I was a kid, the big fear was that robots would take all the jobs, especially in my native Michigan. Now the fear is that people in China and India will take all the jobs. The fact is, shifting R&D operations to China is not as simple as just subtracting 90% of your personnel costs and going along your merry way. Salaries in China are not likely to stay level at $30,000 for a research scientist. Especially when highly sought after Chinese scientists can command much more by relocating. In addition, your piece did a one dimensional cost analysis: The cost of personnel in Shanghai versus Boston. There are other costs, both quantifiable and otherwise. There are big risks in shifting an entire R&D operation from San Diego to Shanghai, not the least of which is that much of the top talent may decide not to follow. Where is the venture captial money? In the U.S.
Will China and India get more high paying R&D jobs in my lifetime? Of course. Will new biotech jobs be created in the U.S., the birthplace of the industry? Yes. So globalization is moving forward but it's all a hell of a lot more complicated than $30K v. $300K so everything is headed East.
By Matthew Jerums | Posted 7:59pm | January 11, 2008
Many of the best and brightest have flocked to drug discovery because of the rich opportunities and rewards. When these incentives no longer exist they will move to other emerging fields such as nanotechnology to the detriment of drug development which still relies heavily on talent, knowledge and creativity for success. Future drug development may be limited to nth generations of existing products.
By Anonymous | Posted 12:43pm | January 17, 2008
One wonders what incentive a young US citizen has to pursue a science or engineering PhD anymore. I am by no means a socialist, but globalization and the incentive to maximize profits is coming at a cost, which will long term have repercussions on our country and its standard of living.
One of the things which historically made our country great was its self-reliance. We are increasingly becoming less so (oil, agriculture, manufacturing, etc), and the export of high paying high tech jobs overseas will only exacerbate the upheaval.
Working in the pharmaceutical/biotech industry these days is a highly risky proposition. 40 years ago, it was one of the most respected industries in which to work and there was excellent job security, so it was an attractive career choice.
While Wall Street may look favorably on companies shedding employees to increase the bottom line, recruiting good people into it, particularly on the R&D side, becomes much less attractive.
Ultimately, I think the pendulum has swung much too far to the investor side at the expense of social and national responsibility.
