DGAP-News: Shrinking Emerging Market Wage Gap Will Re-Shape Global Businesses
(firmenpresse) - PwC
26.09.2013 02:01
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LONDON, 2013-09-26 02:01 CEST (GLOBE NEWSWIRE) --
The wage gap between advanced economies and emerging economies, such as China,
India and the Philippines will shrink significantly by 2030 according to new
analysis published today by PwC (see table).
India and the Philippines remain at the lower end of wage projection in
relative terms, but average wages in India could more than quadruple over the
period in real dollar terms and more than triple in the Philippines. Real wages
in the UK and US are projected to rise by only around a third over the same
period, remaining at similar levels to each other.
More striking is how substantially the wage gap could close by 2030. India's
current average monthly wage is around 25 times smaller than that of the UK. By
2030, it's likely it be only 7.5 times smaller. Average wages in US are
currently 7.5 times greater than in Mexico, but the gap could close to a factor
of less than 4 times by 2030. Over the same time period, the average monthly
Chinese wage could rise to around half that of Spain.
John Hawksworth, chief economist at PwC, said:
'While any such projections are subject to significant uncertainties, the
direction of change is clear. The large wage advantages enjoyed today by many
emerging economies will shrink as their productivity levels catch up with those
in advanced economies and their real exchange rates rise as a consequence.
'Places like Turkey, Poland, China and Mexico will therefore become more
valuable as consumer markets, while low cost production could shift to other
locations such as the Philippines. India could also gain from this shift, but
only if it improves its infrastructure and female education levels and cuts red
tape.'
Projected average monthly wage levels relative to US index = 100
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Country 2011 2020 2030
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US 100 100 100
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UK 99 99 102
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Spain 74 83 92
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Turkey 43 63 86
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South Africa 42 57 77
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Poland 33 51 69
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China 15 29 45
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Mexico 13 19 26
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India 4 8 13
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Philippines 5 8 13
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Source: PwC projections based on ILO data for 2011; real wages index relative in
each year to US = 100
These trends have a number of potential implications for business strategy as:
1. Companies re-shore their manufacturing or service operations, as some US
companies have already started to do, or else move them to cheaper locations.
2. As current large cost advantages decline, companies move to locations that
are initially more expensive but closer to home, gaining more control over
supply chains to respond to customers' changing needs.
3. Middle income economies Turkey, Poland and China begin offshoring to
relatively cheaper economies like Vietnam, India and the Philippines.
4. Current 'Western' offshorers (to India and China, for instance) reorient
their operations to sell their goods and services to increasingly affluent
local populations.
Michael Rendell, PwC partner and Global Human Resource Services leader, said:
'Change is continuous and there will be even more movement in the coming years.
Companies planning for this today will find themselves with significant
advantages, particularly in terms of people costs. It's inevitable that the
manufacturing and services industries in countries will transform as the cost
base evolves, and also that there will be winners and losers. Governments,
regulators and business communities need to be ready for that shift.'
Notes to editors:
1. The PwC analysis is based on estimates of relative average monthly wage
levels from the International Labour Organisation (ILO), projected forward to
2030 using results from PwC's latest 'World in 2050' report, which is available
from
http://www.pwc.com/en_GX/gx/world-2050/the-brics-and-beyond-prospects-challenges
-and-opportunities.jhtml
.
2. The real wage projections are in dollar terms and so allow both for
domestic real wage growth driven by projected labour productivity trends and
estimated future real exchange rate movements. Further methodological details
are included in the accompanying slide pack, which also includes projections
based on US Bureau of Labour Statistics hourly manufacturing wage data for a
smaller set of emerging market countries. The ILO data relate to estimated
average monthly wages across the economy as a whole, not just manufacturing. It
should be borne in mind that there are significant difficulties in getting
fully comparable wage level data across economies, so these estimates are
subject to significant margins of error.
About PwC
PwC helps organisations and individuals create the value they're looking for.
We're a network of firms in 158 countries with more than 180,000 people who are
committed to delivering quality in assurance, tax and advisory services. Tell
us what matters to you and find out more by visiting us at www.pwc.com.
PwC refers to the PwC network and/or one or more of its member firms, each of
which is a separate legal entity. Please see www.pwc.com/structure for further
details.
2013 PricewaterhouseCoopers. All rights reserved.
The PwC logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=2684
CONTACT: Andrew Smith, media relations, PwC
Tel: 020 7213 1216, Mobile: 07841 491180
e-mail: andrew.x.smith(at)uk.pwc.com
News Source: NASDAQ OMX
26.09.2013 Dissemination of a Corporate News, transmitted by DGAP -
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