Despite China Slowdown, Asia Will See the Highest Real Wage Growth Globally by 4.3% in 2017

December 12, 201610:19 am769 views

In Asia, salaries are forecasted to increase by 6.1 percent – down 0.3 percent from last year and 0.7 percent from the year before. Real wages are expected to rise by 4.3 percent, ranking the highest globally according to forecasts by the Hay Group division of Korn Ferry.

On adjusting the figures for inflation, workers around the world are expected to see real wage increases of 2.3 percent, down slightly from last year’s prediction of 2.7 percent.

The largest real wage increases are forecast in Vietnam (7.2 percent), Thailand (5.6 percent), Indonesia (4.9 percent) and India (4.8 percent). The biggest change in Asia is in China, where real wages increases are down nearly 2.5 percent, from 6.3 percent in 2016 to 4 percent in 2017 – reflecting lower growth predictions for the year ahead.

The median base salary movement in Singapore is forecasted to be at 4 percent in 2017. Inflation for this year will be at -0.7percent, therefore driving the real salary growth (forecast) to be at 4.7 percent as compared to 3.7 percent in 2016.

Singapore’s economy in 2017 is projected to be sluggish with most companies expecting only modest growth. Despite the negative outlook for next year, our recent market reward survey of over 400 companies reveal that more than three-quarters of employers in Singapore are still likely to implement salary increment to their employees.

“With the tightening of foreign labour policies and lack of expertise at junior to middle levels to fill mission critical and crucial roles, the focus for most employers in 2017 is likely to be talent retention as Singapore continues to face talent crunch,” said Stephen Choo, ‎Senior Client Partner and Country Head of Global Productized Services at Korn Ferry Hay Group Singapore.

“In this climate of slow economic growth, apart from wage increase, companies should also explore other creative ways to retain their talent. These could include providing corporate concierge services, giving access to life coaches or even allowing employees to bring their pets to work. By providing an engaging and supportive work environment it can help take the pressure off pay and sustain organisational commitment.”

Eastern Europe vs. Western Europe

According to the Korn Ferry Hay Group forecast, workers in Eastern Europe are set to see an average salary increase of 5.1 percent in 2017, and with inflation at 3 percent, will see real wages rise by 2.1 percent. With inflation much lower in Western Europe, workers will see lower wage increases, with an average increase of 2.1 percent – with an average inflation rate of .4 percent, the real increase is 1.7 percent.

Despite the turmoil following the Brexit decision, the United Kingdom is doing well, with predicted raises staying at 2.5 percent (the same as the last three years). Adjusted for inflation, real wages are predicted to increase by 1.9 percent in 2017, which is slightly higher than the Western European average. Workers in France and Germany expect to see real wage rises of 1.5 percent and 2.2 percent respectively.

“Although not as high as last year when we saw a three-year high, there are still positive real wage gains across the globe,” said Benjamin Frost, Korn Ferry Hay Group Global Manager – Pay. “In addition to predicted salary increases, inflation is relatively low in most countries, which has a positive impact on real wages.”

North America Lagging

North America is predicted to see slower salary increases than other regions, with only 2.8 percent projected increase – the same as last year. Adjusted for inflation, the real wage increase is 1.4 percent.

In the United States, a 3 percent salary increase is predicted. Adjusted for the 1.1 percent inflation rate, the real wage increase is 1.9 percent. Canadian workers will meanwhile see salaries increase by 2.5 percent and with inflation at 1.6 percent, will experience real wage growth of 0.9 percent.

Economic turmoil impacting workers in Latin America

Workers in Latin America can expect to see the largest headline salary rises in 2017 at 7 percent. However, due to high inflation in the region (5.9 percent), they are expected to see real wage increases of only 1.1 percent.

In Colombia, workers can expect to see a 6.8 percent raise, but with an inflation rate of 7.6 percent, real wages will be down 0.8 percent. In Brazil, the expected salary increase is 8.8 percent, and with 8.4 percent inflation, the real increase is 0.4 percent.

Inflation in Middle East Tempers Real Wage Increases

2017 looks positive for workers in the Middle East. Despite plunging oil prices, economic and political turmoil throughout the region, salaries are forecasted to rise by 4.5 percent. With inflation at 2 percent, real wages will rise 2.5 percent.

Jordan (6.3 percent) and Lebanon (6.1 percent) are forecast to see the highest real wage increases in the region, with UAE set to see the slowest real wage growth (0.5 percent) – down from 0.9 percent last year.

 Africa Sees Slowest Real Wage Growth of All Regions

Although top-line salaries will increase 6.4 percent in Africa, high inflation means the real increase is only 0.7 percent. High inflation in Egypt means it is one of two countries in the region set to see a cut in real wages at -3.0 percent, which is worse than the year prior, at -0.4 percent. Algeria is the other nation in Africa to see negative real wage increases, at -1.1 percent.

Pacific Increases Middle of the Pack

Wages in the Pacific region are forecasted to come in at 2.8 percent growth, with 1.8 adjusted for inflation growth. Australia will see 3 percent top-line growth, a 1.4 percent inflation rate, and a 1.6 percent real wage increase. In New Zealand, a 2.5 percent salary increase is forecasted, with 0.6 percent inflation, for a 1.9 percent real salary increase.

“Asia continues to drive growth in wages globally as companies look set to increase pay across the board,” said Frost. “However, the global labour market is in flux as slower economic growth in mature economies keeps a check on pay rises. In emerging economies, up skilling workers is crucial for companies to maintain a competitive advantage – and those skilled employees, can expect to see wage rise as talent shortage in certain regions, drives salaries up.”

 

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