India and China are losing their competitive advantage on wages, and employers will increasingly look to even lower-cost countries for their operations, according to a study by the Towers Perrin consultancy.

In India and China, wages are expected to rise at a faster clip in 2008 than in 2007, even as inflation is expected to go up at a slower pace.

"The labor markets in those countries are incredibly tight," said Ravin Jesuthasan, managing principal and practice leader at Towers Perrin in Chicago. "It's reflective of the amount of work being poured into those markets, either from booming domestic economies or work being moved from developed economies to India and China."

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