Global Expansion: 12 Countries with The Most Affordable Labor
When expanding your business to another country, there are a plethora of different factors you have to consider, starting with why you are moving there in the first place. Do you want to capture the local market, harness local talent or some natural resource, take advantage of the local infrastructure or geographic location, or you might simply be looking for affordable labor? These questions and the underlying factors can have significant sway over your expansion decision.
Cheap labor is one of the most important reasons businesses move manufacturing to a different country. For the last one or two decades, it has been one of the engines of China’s economic growth, mostly because it combines cheap labor with state-of-the-art technologies and manufacturing capabilities.
But there are other countries as well.
12 Countries with The Lowest Labor Costs (In Their Respective Regions)
For this list, we’ve chosen three countries each from four regions: The Americas, Europe, Asia, and Africa. Note that the minimum wages discussed below are nominal, i.e., different from the purchasing power.
The minimum wage in Colombia is about $1.61 an hour, and based on a workweek of 48 hours, the yearly wage becomes a bit above $4,000. It’s less than the average wage in the UK for one and a half months. Colombia’s workforce comes in the top 30 of the world, and the unemployment rate was 36th highest in the world in March 2021. It has a growing economy, but the crime rate is, unfortunately, also on the higher end.
The sixth most populated country is home to the fifth largest labor force in the world, and the minimum wage is about $1.58 per hour, making it a little lower than Colombia. The workweek is also a bit shorter (44 hours), which also impacts the yearly wage. The unemployment rate is a bit lower in Brazil, and the country is better poised for manufacturing. However, you might have trouble finding adequate skilled labor.
Mexico has the lowest minimum hourly wage on this list for the Americas, i.e., $1.07. The working hours are the same as in Colombia. The pay is a little higher in the free-zone, near the US borders. The crime rate in Mexico is significantly lower than in Brazil, and it had one of the lowest unemployment rates last year. It’s the 10th largest country by population and has the 12th largest labor force.
In Europe, you may find the labor relatively cheap in the following countries.
In Hungary, the minimum wage ($3.20) is quite low compared to the UK or the US. The difference between the wages of skilled and unskilled labor is quite significant (about $171 a month). It’s in the bottom half when it comes to unemployment rates in the world. The country is ideal for automotive manufacturing and heavy industry.
Romania has one of the largest labor forces in Europe. The minimum wage is $2.80 per hour, and the workweek is 40 hours. The two main industries in Romania are Industry and services. The service sector makes up over 55% of the GDP, so you might not have trouble finding professionals in this field. But for niche industries and skilled labor, you might have trouble finding the right workforce solutions in Romania.
Bulgaria has one of the lowest minimum wages in Europe (around $2.11 per hour), and the yearly wage is a bit less than $4,400. The labor force is small, and the unemployment rate is low. Energy, tourism, and service industries produce most of the GDP and higher most of the labor force, so you’ll have your pick of the bunch if you are expanding in these areas.
When it comes to minimum wage and the size of the labor force, African countries might be second only to their Asian counterparts.
Sudan has one of the highest unemployment rates in Africa right now, and South Sudan (a different but adjacent country) is considered one of the most dangerous countries in Africa right now. But the labor is inexpensive, and you can hire people for about $55 a month, and that’s on the slightly high end of wage on an African scale.
8. The Democratic Republic of Congo
DR of Congo has a labor force that ranks in the top 20 (by size) in the world. The unemployment rate is one of the highest in the world right now, and the minimum wage is about $1.83 a day or $0.11 per hour.
Ethiopia’s labor force ranks quite near the top ten, yet its wages are significantly lower compared to even the other two countries on this list. Most public sector employees (the largest employed group in the country) get about $21 a month.
There is a wide range in figures when it comes to wages in Asia. But it’s also home to two of the largest labor forces in the world, which results in that widespread.
China has a great range when it comes to minimum wages and based on the region; the hourly wage can be as low as $2.30 and as high as $3.70. China is home to some of the best manufacturing facilities, powerful infrastructure, and best-skilled labor in the world.
With the second-largest labor force in the world, the Indian national average comes to about $2.80 per hour, but that doesn’t give the exact picture. The pay can be drastically lower in some states and the overall cost of manufacturing, moving goods, and access to skilled labor will also vary by the specific region where you expand.
It’s one of India’s neighbors, and it has recently started focusing on industrial growth. The country is attracting foreign investors by lowering taxes and energy costs, and it also offers educated and skilled labor at a rate of about $95.50 a month or $0.46 an hour.
It’s imperative to note that wage alone is not the most important variable to consider, even when you are expanding to a country solely from a price perspective. Simple factors like transportation costs and taxes on imported goods can offset whatever benefit you get from cheap labor by a significant margin.