The FINANCIAL — Rising real wages in emerging markets will make them increasingly attractive for UK exporters in the decades after Brexit. India is projected to see the fastest real wage growth of the major economies, up by more than 200% in US dollar terms by 2040
Although emerging markets are likely to experience faster wage growth, UK real wages are projected to grow by almost 30% by 2040, assuming a reasonably smooth Brexit
While wages in emerging markets will continue to converge with those in the UK over the next two decades, a significant gap will remain for most emerging economies, according to new analysis by PwC. In 2040, UK real wages could still be more than twice as high as in Malaysia and four times as high as in India.
In the UK, average monthly wages are projected to rise by 29% to around $3,900 (in constant 2017 US dollars) by 2040, up from around $3,000 in 2017, assuming a reasonably smooth Brexit. This is within the same broad range as projected cumulative real wage increases in other advanced economies such as France (21%), the US (22%) and Germany (41%).
A more pronounced catch-up in wages in economies such as China and Poland relative to the UK could result in UK companies choosing to reshore some activities to the UK, or to adopt other strategies such as increased automation where appropriate.
Average annual growth in real wages for emerging economies such as India, Malaysia and Indonesia could exceed 4% in the years to 2040, implying cumulative growth of over 200% in the case of India as the table below shows. In advanced economies, real wages are projected to grow more slowly given they are starting from a higher level of economic development. The UK’s projected performance implies cumulative real wage growth of just under 30% between 2017 and 2040, somewhat lower than Germany, where productivity growth is projected to be higher, but somewhat higher than in the US or France.