Boardroom hypes (1) – Wage escalation

Ever since offshoring and near-shoring took ground, a typical boardroom comment has been that wage escalations will eradicate the option to leverage on wage cost arbitrage.

Well, it’s been 20 years since I first heard this comment about Prague. Today the Czech capital still offers wages significantly below Western European levels. The same can be said for other Central European locations, and even more so for far-shore destinations like Egypt and India.

Certainly, wages in so-called “low cost countries” have increased, and will continue to do so. Even more so for all-wanted skills – read IT.

It’s also true that some traditional low cost destinations have sky-rocketed , evolving to price-points above some Western-European destinations.

But so far such cases are exceptions to the rule.

Wage arbitrage opportunities continue to exist, but companies increasingly look for more than merely cost reduction.