The wage difference between the countries such as the U.S.A., U.K. and France vis-à-vis the offshore outsourcing destinations will remain wide enough to make outsourcing economically viable, claims a recent study by Everest Research. This is against the school of thought that states that wage inflation is escalating at a high pace. Offshoring destinations are expected to continue having wage-differential advantages, at least for the next 20 years. The study examined the sustainability of the labor arbitrage among five key locations offshoring work and six key locations receiving the work.

The study states that increase in the wage of an employee must be looked at with respect to his advancement in the organizational hierarchy rather than his individual profile. Another main factor for the perceived high rise of the wages is the practice of quoting the highest increase in the compensation as against average increase. Apart from labor arbitrage, offshoring is expected to involve variables such as quality and productivity improvements in its ambit, which will ensure the continuation of the offshoring processes even when the wage gap declines.

Though wage inflation continues, its magnitude is much lesser that what is reported. For example, wages are increasing at about 9%-10% year-on-year in India, as against the 15% figure, which is quoted more frequently. Wages are also recording an increase in the sourcing countries. That increase couples itself with depreciation in the Indian currency vis-à-vis currencies of the developed countries to offset salary increases by a large margin.