Wage gap to narrow between UK and emerging countries

The narrowing wage gap between the UK and emerging economies, such as China, India and the Philippines, will have major implications for business, according to research by PricewaterhouseCoopers (PWC).

Its research, which is based on estimates of average monthly wage levels from the International Labour Organisation, found that India and the Philippines remain at the lower end of wage projection in relative terms, but average wages in India could more than quadruple by 2030 in real dollar terms and more than triple in the Philippines.

The current average monthly wage in India is around 25-times smaller than that in the UK. By 2030, the difference is projected to be only 7.5-times smaller, which represents a huge relative economic shift.

The research found that average wages in the US are currently 7.5-times greater than in Mexico, but the gap could close to a factor of less than four-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.”

Michael Rendell, partner and global human resource services leader at PWC, said: “Change is continuous and there will be even more movement in the coming years. Organisations 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.”