The wage gap between developed and emerging economies is set to shrink significantly, according to new research, and could lead to a major shift in where companies base their manufacturing operations.
PricewaterhouseCoopers’ (PwC) Global Wage report, published on Thursday, found that all emerging economies are expected to show significant convergence in wage levels relative to the U.S. and U.K. by 2030. The shift looks to be most marked in China, India, Mexico and the Philippines.
India’s current average monthly wage, for example, is around 25 times smaller than that of the U.S., but PwC estimates that by 2030 it is likely to be just 7.5 times smaller. Similarly, average wages in the U.S. are now 7.5 times greater than in Mexico, but by 2030 are projected to be just 3.8 times more.
Higher labor productivity growth in these emerging economies will drive this boost to wages, PwC said, along with a long-term appreciation of local currencies. This contrasts with the developed world, where real wages tend to rise more slowly than productivity.
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