By Global Chief Economist, Renaissance Capital, Charlie Robertson
This is a lot of minimum wage data that you should treat sceptically, but at least in the EU, minimum wages are roughly 40-60% of the average monthly wage, so this may be a good guide to actual relative labour costs.
Russia’s minimum wage after Putin’s hike this month is still far lower than China’s in Shenzhen.
Russia’s minimum wage is 2/3 that of SA – SA looks expensive.
There is pressure in Bangladesh to hike the textile worker minimum wage by at least 50%, pressure in Nigeria to treble the minimum wage in 4Q18 and in Egypt talk of the minimum wage being hiked by around 40%.
Looking at the current respective dollar figures of $64, $50 and $68 respectively – it is not a big surprise and not a big threat to competitiveness.
Turkey’s minimum wage is 8 times higher than Egypt’s. Egypt is half the price of Tunisia, a quarter of the price of Morocco.
CIS wages are really low. What is not clear is the ratio of minimum wages to the average wage. In the EU, the minimum wage tends to be 40-60% of the average monthly wage. Maybe it is different in the CIS. But this suggests the CIS should have a manufacturing renaissance.
Ghana looks twice as competitive as Kenya. Note we might have miscalculated the Ghana wage (we took the daily rate and multiplied by 22 working days to get the monthly wage, perhaps we should have multiplied it by 30 to give $64). But it is at least half that of Kenya, and maybe even smaller.
Ghana in 2015 had double the electricity supply per capita of Kenya, so it looks more able to industrialise (one district, one factory) than Kenya.
Little illiquid Ghana has been the best performing African stock market this year.
Vietnam’s minimum wage is half that of South Africa or Morocco. Vietnam looks good.
Romania’s wage increases have risen too far now. They should not be within 80-90% of Hungarian levels.
CONCLUSION: Egypt’s wages do look very competitive right now. In order of beneficiaries of tight labour markets in central Europe, the MENA beneficiaries should be 1) Egypt, 2) Tunisia, 3) Morocco and 4) Turkey (rising population, and the advantages of existing clusters).
SA should be scared of ZAR strength. We think is hard to justify SA minimum wages being 50% higher than Russia.
Ghana and south Asia are more competitive than Kenya, so should do better in terms of industrialisation (and Ghana beats south Asia when literacy is taken into account).
CIS countries look very competitive. Romania and Turkey have pushed wages too high in recent years.
*Article by the Global Chief Economist, Renaissance Capital, Charlie Robertson