Top Offshore Locations by Per Capita Income

Submitted by admin on Sat, 2009-06-20 12:00

Per capita income of different offshore locations can provide some insight into the long-term cost competitiveness of a country. Typically, skilled IT, BPO and KPO employees command wages significantly above country averages, but low average incomes can help countries maintain cost advantages.

For example, India has had rampant wage inflation for high skill workers. Until the resent global down-turn, salaries in India for top tier talent were increasing at as much as 30% a year. However, India has maintained much of its cost advantage because lower skilled, entry level roles have remained competitive. While demand has increased, there is a massive population of low cost resources willing to fill the junior levels.

Four countries, Ghana, Vietnam, Pakistan, and India, have per capita income below $1,000 U.S. dollars per year, or less than $100 per month. Another three very large countries have per capita incomes below $200 a month. Egypt, the Philippines, Indonesia and China also have large populations that provide inertia to future wage increases.

Top Outsourcing Locations by Per Capita Income - Figure 1

[caption id="attachment_204" align="alignleft" width="588" caption="Source: World Bank (2007)"]Source: World Bank (2007)[/caption]

In the middle, there is a mix of Asian, European and Latin American countries that have per capita incomes of $2,000 to $15,000. On balance, most Asian countries are on the low end with Malaysia at the top of the group at about $5,000. Ukraine has the lowest pre capita income of the European locations at $2,500 while the Czech Republic is on the high end with incomes of almost $15,000. Latin America has less disparity with Argentina, Brazil, Chile and Mexico between $5,000 and $10,000.

On the high end are Israel and Canada at $22,000 and $40,000 respectively. Neither of these countries can differentiate of price, but must excel based on service delivery.

As a side note, we want to provide a balance perspective on per capita incomes. While low wages in offshore locations helps firms deliver low cost goods and services to US and European consumers, offshoring also helps workers in the lower cost countries. For example, an entry level software engineer in India can comand a salary of over 5 times that of the national average and quickly escalate that to 10 times after a few years on the job.