Mumbai: India and China are losing their labour cost advantage and employers will turn increasingly to lower-cost countries for operations, a study by consultancy firm Towers Perrin said.

Wage levels in both India and China are expected to rise at a faster pace in 2008 than in 2007, even work pours from all over the world into these two economies.

"The labour markets in those countries are incredibly tight," said Ravin Jesuthasan, managing principal and practice leader at Towers Perrin.

In China, Towers Perrin expects salaries to rise nine per cent on average next year, while the increase in India is forecast at 15 per cent. Both are one percentage point above the increases in 2007, and both are running at almost three times the pace of inflation.

Salaries in India and China have been rising at a fast clip for several years, Jesuthasan said.

In contrast, workers in Latin America are barely keeping up with inflation. In Venezuela, for example, salaries will go up 22 per cent in 2008, but inflation will be 22.5 per cent.

The Philippines and Thailand are among the potential beneficiaries. 

The Philippines has an educated work force, most people speak English, and are very comfortable with the US economy, given the presence we've had there for so long.

In Thailand, Japanese organisations have good manufacturing bases, and these are likely to expand further, Jesuthasan said.

Towers Perrin advises organistions on human resources strategy and provides actuarial and management consulting to financial services.