Cost-of-Living Arbitrage, II
By Arnold Kling
I received a lot of pushback on my earlier post. Comments and email have pointed out that (a) the cost of living really is five times lower in India and (b) Indian expatriates are indeed moving back home to take advantage. Some links:
a salary of about $20,000 in India — the going rate for a project manager — is roughly equivalent to a $100,000 salary in California in terms of standard of living; therefore Bangalore is looking increasingly attractive to the Indian diaspora, especially those of us who live uncomfortably ‘under two flags’.
The Times of India has an article on NRIs (non-resident Indians) returning home.
Rohit Kumar, Vice President and COO, Global Energies and Utilites Practice at Wipro, is one such person. A business graduate from Wharton, Rohit worked in Oracle, US for five years in a senior position, before he decided to return to India.
“The most important decision that persons like me have to make when we decide to come back is being willing to settle for a third of the salary we used to make. But the advantages of coming home outweigh the disadvantages by far. You are close to your family and you can lead a much better lifestyle than you would abroad.
This reprinted New York Times article says,
Of the 1,400 engineers who work in Intel Technology India, nearly 10 percent are repatriated Indians who have spent significant time working abroad. Mr. Sampat of Intel is a naturalized American citizen who returned to India less than a year ago, after 17 years with Intel in Portland, Ore., and 3 after that in Singapore.
Some repatriates who hold top jobs, like Mr. Sampat, work at salary levels comparable with executives in the United States.
But others, who move of their own volition, may take significant cuts in pay, bringing their compensation closer to Indian salaries. Evidently, the opportunity to return home, and the lower cost of living, make the tradeoff acceptable.
According to India’s software trade body, the National Association of Software and Services Companies, about 5,000 technology professionals of Indian origin with more than five years of work experience have moved back to India from the United States in the last two years
Incentives to stay at home in the first place also may be stronger: statistics from the India Institute of Technology in Mumbai suggest that whereas more than half used to leave India after graduation, now the proportion is closer to two-fifths.
This article in the Financial Express describes headhunters starting to recruit workers from overseas to come to India. Thus, we could see Indian workers complaining about this foreign competition!
Sums up Mr Shenoy, “At this moment the numbers are too small, However, if the trend becomes a deluge and the foreigners start competing with Indians for the same jobs, the insecurity of the Indian job seekers might become a reality.”
Thanks to various readers for all of the pointers.
For Discussion. What do these stories suggest about the process by which labor markets converge to equilibrium?