Some Wages in US and India Moving Toward Parity

The democratization of technology has allowed emerging nations access to the kinds of capabilities and knowhow that industrialized nations have long had, and, as a result, salaries in developing nations are rising alongside productivity, especially relative to the developed world.

This week, there’s an example of this global trend in call center operations. What’s historically been the one of the most obvious cost-advantaged jobs to export to India is now, since the broader economic downturn, a business opportunity showing new signs of competitive life when based in the US.

According to the Financial Times:

“High unemployment levels have driven down wages for some low-skilled outsourcing services in some parts of the US, particularly among the Hispanic population. At the same time, wages in India’s outsourcing sector have risen by 10 per cent this year and senior outsourcing managers based in the country command salaries above global averages.

“Pramod Bhasin, the chief executive of Genpact, said his company expected to treble its workforce in the US over the next two years, from about 1,500 employees now. ‘We need to be very aware [of what’s available] as people [in the US] are open to working at home and working at lower salaries than they were used to,’ said Mr Bhasin. ‘We can hire some seasoned executives with experience in the US for less money.’

“The narrowing of the traditional cost advantage is also spurring other Indian outsourcers to hire more staff outside India. Wipro, the Bangalore-based IT outsourcing company, started to recruit workers in Europe, the Middle East and Africa during the global economic downturn. Suresh Vaswani, joint chief executive of Wipro Technologies, forecasts that half of his company’s overseas workforce will be non-Indians in two years, from the current 39 per cent.”

The Western world has had a sizeable development advantage over emerging nations, but in an increasingly connected world that initial head start is becoming less relevant. We’re likely to see many more examples of global wages coming into alignment over the coming decades.

You can read more details in the Financial Times’ coverage of how the US is now matching Indian call center costs.


Rocky Vega,
The Daily Reckoning

The Daily Reckoning