Wage Cuts, Payment Structure Change — Can Teaching Chinese Students Online Still Support Your Life?

“I’ve received the pay reduction recently, ” Jane Reid says. “My manager told me that this is due to the economic situation impacted by the coronavirus. The economy is slowing down, and that’s why the pay reduction was necessary.”

The spread of COVID-19 has shaken financial markets across the world, and North America sees a much more severe outbreak. As “stay-at-home order” still has been implemented in several states, it seems that part-time teachers could spend more time teaching Chinese students online.

Does the wage cut reflect the market’s downward trend or return to rationality in the context of the dynamic relationship between talent supply and demand? And what’s the future of online children’s English teaching sector in the Chinese market?

“There should be 70% to 80% of foreign teachers facing pay reduction”

Coming from Canada, Jane Reid has been teaching English online for Chinese children since last September. “I was getting paid 11 US dollars an hour, but now my pay rate per class has gone down by 2 dollars, that means per hour my pay has gone done by 4 dollars,” Jane told JMDedu. But even with a wage cut, she still has not thought about changing another job, “because it still better than anything else that I was finding.” Said her.

When asked if there would be more Canadians who are willing to teach English online, Jane regards that it depends on the pandemic circumstances. “Personally, I think that a lot of people have probably lost their job recently, so they may not be looking anything else right now, but if the situation continues, maybe yes.”

Laura has observed a high turnover among foreign teachers. She used to work for a Boston-based company and was responsible for recruiting professionals to partnered Chinese education institutions. “A lot of excellent teachers I served before skype me recently for seeking jobs, and they are very willing to accept the lower wages.”

According to her, a majority of China online English teaching EdTechs are bracing for a wave of wage cut since the COVID-19 outbreak. “There should be 70% to 80% of foreign teachers facing such a situation. Companies that I know include 31abc, DaDa, Landi, and VIPKid.” She also told JMDedu that VIPKid’s newly recruited teachers are getting a base rate of 15 US dollars per hour, lower than the old contract.

In response, He Hui, the founder of 31abc, said: “The base pay of newly recruited teachers will indeed be lower, but no big changes. When considering the salary adjustment of teachers in an old contract, it depends on the negotiation result.” Said him.

The person in charge of VIPKid’s teacher recruitment also said: “There has not been a significant change, but the reduced base pay is due to individual’s teaching qualifications and ability, but not the epidemic.”

Daniel DiDio is an American who lives in the Philippines. He has been working for VIPkid since the year of 2015 and has established a student base to well over 5,000. Since the outbreak of the coronavirus, Daniel has been teaching English online twelve hours per day. “My wage hasn’t been cut, but I cannot support my family with 40 hours a week, because I have three kids.” Said him.

But last weekend, a video uploaded on YouTube showed that VIPKid rolled out the new pay structure for all teachers. As JMDedu investigated, it will go into effect for all contracts with a term starting on or after this August. As of now, VIPKid has not responded to this.

Why it happens, why it matters

“It’s true that more native speakers who are willing to work for Chinese companies. That’s why you are seeing them drop the salaries because they have an influx of teachers,” Daniel said, “I know a lot of these companies are looking at low cost, but as I said, more teachers cannot make a livable salary to support their families.” To get rid of this predicament, a lot of teachers are now preparing for their own small companies and curriculum, looking at how they can go independent, and find Chinese students and other students around the world.

In Daniel’s point of view, the epidemic is not the root cause of the wage cut, but the advertising war and massive free courses provided during the past few years. “Why is it taking so much money to acquire students? Now, people putting millions of dollars into those companies want to see a return on their investment.” Thus, institutions can only increase their profits by pay reduction. “I think a lot of the companies just really want part-time teachers may be working 2 to 3 hours a night for a lower cost. Although training programs are provided, I’ve to say that it took me 10 to 11 months to get my teaching style down for online courses. Teachers are not cookie cutter.”

But 31abc’s founder He Hui mentioned that the applicant pool has increased since last September but not the epidemic. “Of course, the outbreak has played a certain role. Recruiting foreign teachers once encountered a bottleneck, but won’t undergo again anymore.”

As for a reason, He Hui believed that 1-on-1 courses taught by North American teachers are not the rigid demand for many Chinese families. “Just under the fierce competition in the Internet industry, companies need to attract more students who were not our target users through subsidies, but this won’t be a long-term strategy.” From his perspective, companies will gradually reduce the subsidies to students, and then users will also be stratified.

“Since the second half of last year, absolute user growth has stagnated in many online institutions. Over the past few years, there have been nearly 300,000 professional teachers supplied by the European and North American market, which, according to China’s current GDP, is totally enough.” Said He Hui.

At the same time, He Hui regarded that the pay reduction is not unrelated to the teaching model. “In terms of the teacher cost, the small-sized class, like 1-on-4, accounts for less in the overall product structure, but teacher’s payments take up a large proportion on 1-on-1 and 1-on-2.” In 2017, the online children’s English learning sector was in the stage of user expansion, and elite teachers could even be paid 30 US dollars per hour. “The average base pay may pick up after the epidemic is over, but won’t be as crazy as it was three or four years ago.”

“This sector has been extremely unhealthy from the beginning.” Laura also told JMDedu: “Teacher’s payment was even 50 US dollars an hour during the past and had been dropping year by year to the point where I think is a normal level, after all, it’s only a part-time job.”

Spurring business growth in online children English teaching after the pandemic

“I’ve seen cheerful changes in the sector of 1-on-1 online English class,” He Hui said: “After a fierce competition during the past years, it was eventually found that no one was making profits. Thus, the competition began to slow down.”

The unit price of the 1-on-1 class taught by North American teachers is between 120 to 130 yuan per lesson. “Paying the teacher with $17 per lesson, as well as channel fees and 10% of the sales cost, the current price is not commercially viable.” But He Hui insisted that in the future, online companies will not increase the prices, and there will be less possibility of a new wave of the price war. “More opportunities will lie in specialized products like reading and writing.”

Wu Hao, the founder of Whales English Elite Education, which specializes in the teaching mode of online 1-on-4 small-sized class, believes that the epidemic changes the usage habits, more parents and children are going to embrace online education, and “parents will find that peer learning leads to a greater willingness to talk and compete with each other, which will be good for making learning sticky.”

As attention to online education has increased during the epidemic, so has the debate over whether online classes are appropriate for children. VIPKid believes that the advantages of foreign teachers will be enhanced by their sense of humor and vivid body language, which can guide children to stay focused.

Based on experience, due to the traveling, competency-based learning activities, and offline classes that can take care of the children, there will be relatively fewer online learners during the summer vacation. But in the face of the upcoming “shorted break”, VIPKid told JMDedu that the company has seen a double growth of the number of new users, but the rate of growth slowed after the schools resumed offline. “Nobody knows exactly when this pandemic will be over, but if it continues to July, we are going to see another wave of user growth.”

(Jane Reid is a pseudonym, at the request of the interviewee.)

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