An end to the seemingly inexhaustible source of cheap, unskilled labour in Asia is within sight as rural wages rise sharply across the region – according to the Overseas Development Institute, the UK’s leading think-tank on development issues.

The Rural Wages in Asia report, a comprehensive study of rural wages in the continent, shows that lower birth rates, combined with growing demand for labour in factories which is pulling workers away from rural areas, are behind this trend.

In Bangladesh, for example, the average male rural wage rose by 45% in real terms between 2005 and 2010, while in India it increased by 35% between 2005 and 2012, and more than doubled in China between 1998 and 2007.

ODI Research Fellow Steve Wiggins said: “Rural wages are key as they mark the lowest returns to labour on offer. Falling birth rates in rural areas and an expected continued growth in manufacturing means that rural wages will probably keep rising, potentially taking hundreds of millions of people across Asia out of extreme poverty.”

In China, average earnings for male rural workers surpassed the $7 mark in 2007, up from $3.02 a decade earlier. Bangladeshi male farm labourers meanwhile have seen their earnings increase from $1.52 in 2005 to $2.21 five years later, while in India these rose from $2.15 in 2005 to $2.91 in 2010.

The growth of rural wages in these three countries has accelerated since the mid-2000s, but the impact is being felt in other places with less pronounced rises:

• In Malaysia, it has become increasingly difficult to recruit workers for oil palm estates. Indonesians covered 80% of these jobs, but job applications have plummeted owing to higher wages and rapid urbanisation in Indonesia.

• Farm labour shortages are reported in Myanmar as casual labourers leave the land for construction jobs in Rangoon.

• In Thailand, some workers are returning to rural areas as wages rose by a third in the relatively poor northeast of the country.

Despite this trend, rural wages remain low across the region compared to rich countries, with only Malaysian farmers and South Korean dairy process workers earning more than $10 a day.

Female rural workers are particularly worse off. In the four countries with data on gender – China, India, Pakistan and Bangladesh – women are shown to earn between a quarter and one third less than their male counterparts even though the wage gap appears to be narrowing.

The study finds that the overall rise is rural wages is enough, however,  to continue pushing up factory wages, with the authors speculating that this will lead to an automation of Asian plants and further relocation of production to poorer areas where labour costs are lower – including Africa.

Steve Wiggins added: “Increasing rural wages in Asia is a potential game-changing opportunity for Africa as Asian manufacturers increasingly look for cheap labour elsewhere. This can already be seen outside Addis Ababa in Ethiopia with the arrival of the first pioneer wave of relocated Chinese plants. African countries need to prepare for this, by ensuring they have a trained workforce and basic infrastructure in place – otherwise they may miss this boat.”

See also: New research: A wage revolution could end extreme poverty in Asia, with massive knock-on effects in Africa - blog by Duncan Green, strategic adviser for Oxfam GB