WASHINGTON, Oct 3, 2006 (AFP) – The low-cost allure of emerging economies for Western companies is overdone once the meagre productivity of their workers is factored in, a US business group said Tuesday. The Conference Board said that fast-growing economies in China, India and eastern Europe do enjoy a comparative advantage over the United States.
But it said that advantage is narrowed once a full account is taken of unit labour costs, which measure the standard unit of output per worker across economies.
Bart van Ark, director of the Conference Board’s international economic research programme, said the report was a “critical lesson” to Western companies seeking to take advantage of lower costs in emerging economies.
He said “productivity gains from new technology and innovation have to keep pace with often fast-rising wages of skilled and semi-skilled workers, or the ‘cost advantage’ begins to erode”.
“The key for emerging economies is to promote productivity through technological change and innovation to match wage increases which will undoubtedly happen in a rapidly growing economy.”
Billing the study as the first by a private-sector group to analyse standardised labour costs glob