Table of contents
International Wage and GDP/Capita Comparison
United States
Canada
India
Mexico
Philippines
Romania
South Africa
Conclusion
Contributors
David Landau
Contributor
International Wage and GDP / Capita Comparison
Offshore hiring has been increasing in popularity for quite some time now, and many businesses, both large and small, have moved some, if not all of their labor force overseas. It’s no wonder why. Highly skilled labor can be found for significantly less outside of the United States. Coupled with the rise of online work tools and technologies, a global workforce can be brought together more easily than ever before, and all for less.
One question that often arises for many business owners and executives considering offshore labor is, “How long can this last?”
It’s a good question. An increase in demand usually means an increase in price, and as more and more businesses make the switch to offshore labor, logic dictates that the price of hiring an offshore worker is going to increase.
This article seeks to answer the question “How long can this last?” by comparing data on average salary and GDP per capita in some of the most popular destinations for offshore labor.
United States
Net Change: +14.9%
The US economy has seen moderate growth in average salary since 2010, increasing by roughly 15%. Any declines observed are likely attributable to the COVID-19 pandemic, which contributed to an overall slowdown in economic growth in the United States and around the world.
Data suggest that the average salary will only increase in the U.S. in the coming years, leading to an overall rise in labor costs. Businesses should be aware of these changes so they can adjust accordingly.
A viable means to counteract increasing labor costs in the U.S. is for businesses to begin using offshore labor.
Canada
Net Change: -15.3%
Canada’s average salary has increased in terms of the Canadian Dollar since 2010, but favorable exchange rates have painted a different picture for US firms. Canada’s salary has decreased in terms of real USD by roughly 15% since 2010.
While much of the decline in Canada’s average salary is due to favorable exchange rates with the US, current data suggests that this trend won’t change in the near future, and Canada will likely remain a viable source of nearshore labor for US firms for the foreseeable future.
India
Net Change: +80.9%
Between a still-growing population, an expanding tech sector, significant external investments, and economic reforms, India has seen significant economic growth since 2010. GDP per capita has risen by over 80% since 2010, with India rapidly recovering from the effects of the COVID-19 pandemic.
While India’s GDP per capita has increased at a significantly greater rate than that of the US, and current data suggests that this trend will not change anytime soon, it still remains well below the average salary in the US.
In spite of India’s expanding economy and growing GDP per capita, data suggests that it still remains a viable option for businesses looking to offshore labor, and will likely remain so for the foreseeable future.
Mexico
Net Change: -23.1%
Mexico has seen a significant net decline in average salary since 2010 in terms of real USD. While the average salary has increased in terms of the Mexican Peso, the United States has experienced a favorable exchange rate with the country in recent years, driving wages down for those looking to Mexico for nearshore labor.
At a net loss of more than 23%, this change could reverse itself in time if Mexico’s salary continues to increase in terms of the Peso or if exchange rates become less favorable. Current data, however, suggests that salary will continue to decline for the foreseeable future.
Even if the trend of favorable exchange rates doesn’t continue with Mexico, Mexico’s average salary remains well below the average salary in the US, and will likely remain so for quite some time.
Based on existing data, Mexico will likely continue to be a viable source of nearshore labor for US businesses for the foreseeable future.
Philippines
Net Change: +51.8%
The Philippines has seen a significant increase in its GDP per capita since 2010. Spurred by global economic trends, a growing service sector, foreign investment, and economic reform, GDP per capita rose by over 50%.
Though heavily affected by the COVID pandemic, the Philippines has since managed to come back from any declines, returning to near prepandemic levels by the end of 2022.
Current data suggests that the upward trend experienced by the Philippines won’t slow down in the near future, and although its rate of increase is well above that of the average salary in the US, the Philippines’ GDP per capita remains well below that of the US average salary.
Given current data and trends, the Philippines will likely remain a viable source of offshore labor for US firms for quite some time.
Romania
Net Change: +61.8%
Romania has experienced significant economic growth in recent years, having risen by over 60% since 2010. An EU member since 2007, when combined with a growing tech sector, effective internal reforms, and growing foreign investment, Romania’s economy has grown immensely in recent years, and the trend doesn’t appear to be slowing down anytime soon. Romania even managed to quickly shake off the effects of the COVID pandemic, returning to prepandemic levels by 2022.
While Romania’s GDP per capita has grown significantly in recent years, it still remains well below the average salary in the US, and will likely remain so for the foreseeable future.
Based on current data, Romania will likely remain a viable source of offshore labor for US businesses for many years to come.
South Africa
Net Change: -0.2%
South Africa’s GDP per capita has varied significantly in recent years. Experiencing a noticeable decline due to the COVID pandemic in 2020, GDP per capita has yet to reach its pre-pandemic levels and began to decline once again in 2023.
The prevalence of political instability and high rates of unemployment and inequality have resulted in a fluctuating economy.
Although South Africa’s GDP per capita has declined for now, it is by no means certain that it will not increase in the near future. Given that it still remains well below the average wage in the US, South Africa will likely remain a reliable source of offshore labor for US firms for many years to come.
Conclusion
Since 2010, countries like India, Romania, and the Philippines have seen significant growth in their GDP per capita, even in the face of the COVID-19 pandemic. Their quick rebound and projected growth trajectories mean this upward trend is unlikely to change any time soon. In contrast, South Africa has faced a decline in GDP per capita over the same period, likely due to ongoing economic struggles despite global recovery efforts.
Canada and Mexico, however, have experienced declines in average salaries when adjusted for real USD due to favorable exchange rates with the US, and based on current trends, this doesn’t appear to be changing in the near future.
A critical takeaway from this analysis is that, despite the growth in GDP per capita in certain countries, both GDP per capita and average salaries in some of the most popular destinations for offshore labor remain well below the average salary in the United States.
The world may be changing – and changing fast – but offshore labor will remain a viable cost-cutting alternative for many years to come.