Part III: The emerging global labor market: How supply and demand for offshore talent meet

By Diana Farrell, Martha Laboissiére, Robert Pascal, Charles de Segundo, Jaeson Rosenfeld, Sascha Stürze, Fusayo Umezawa
Part III: The emerging global labor market: How supply and demand for offshore talent meet

At an aggregate level, the supply of suitable talent from low-wage countries exceeds likely demand. Importantly, of all the occupations, engineering has the least supply relative to demand. Offshoring will raise wages in some occupations in the lowest-cost supply countries, but will not significantly impact wages or employment in developed countries.

Global resourcing may raise wages in some occupations in the lowest cost supply countries, but the practice will not significantly impact wages or employment in developed countries. Of all the occupations, engineering has the lowest supply of suitable talent relative to demand.

At an aggregate level, the potential supply of suitable talent from the low-wage countries we studied exceeds the likely demand for it by two-fold.

In practice, companies hiring offshore tend to follow each other to locations that have a track record in providing offshore talent. The resulting agglomeration of companies in popular locations has some positive effects, such as accelerating improvements in infrastructure, communications and the business environment. But the pattern also leads to local wage inflation and high levels of attrition. MGI found that wages for engineers and generalists could double in the lowest wage countries, but will remain below 30 percent of the level of wages for engineers in the United States, or the current level of wages for these two occupations in Mexico and Brazil. In contrast, the effects of offshoring on employment and wages in developed countries will be negligible.

Companies can find more suitable locations offshore if they rationally analyze the factors that are most important to them, including their home market, their first language, what activity they want to outsource, the scale on which they want to offshore, and whether they want to outsource or set up a captive operation. That means different companies will assign different costs and benefits to the same location.

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