While pay is projected to rise globally at a higher rate than last year, the increase is overshadowed by inflation in emerging markets that is cutting into real wages.
That’s according to management consultancy firm Hay Group’s annual salary forecast for 2015, which shows projected global wage growth of 5.4%, compared with 5.2% for 2014. In Europe, which had been in decline for years, salaries are expected to rise 3.1%, with an inflation-adjusted real wage growth of 1.6%. The improvement is notably higher in countries such as Greece and Ireland.
In the US, salaries are projected to rise 3%, according to Hay Group’s research, but with inflation of 2%, the real wage growth is 1%.
In the UK, real wage growth is expected to be 0.8% after inflation, which Hay Group reports is just the second increase in real income for UK workers since 2009. An EY report on UK salary data projects wages there to grow 1.9% this year.
That’s far better than in some emerging markets, where high wage increases are cancelled out entirely by higher inflation. For example, pay for workers in Brazil is projected to increase 6.1%, but inflation is 6.5%. In Russia and Ukraine, inflation is 7.5% and 10.7%, respectively, more than projected salary increase of 6.8% for each nation.
“Each market has its own complexities, and organisations must understand the detail if they want to attract and retain the best workers,” Ben Frost, a consultant at Hay Group, said in a news release. “The big turnaround is between Europe and the emerging markets.”
Some emerging countries will have higher pay
Not all emerging economies are seeing pay decline. Workers in Vietnam are forecast to have real wage increases of 6.6%, and Indonesia’s workforce is projected to have a 4.4% real pay rise.
Even China, with a slower pace of economic growth, remains on the positive side in terms of pay increases. Chinese workers’ pay is projected to go up 8%, and, with moderate inflation, the real wage growth is slated to be 5.7%.
Hay Group attributes the trend in Asia to an ongoing battle for talent “both for experienced managers and new graduates,” the report said. Pressure from the Chinese government to create a larger middle class means that the minimum wage is rising in many cities, Hay Group wrote.
Venezuela, a country heavily dependent on oil, is projected to suffer the most this year in terms of wage growth. While pay is projected to rise 40.3%, figuring in hefty inflation (64.4%) means workers’ real wages will shrink 24.1%.
The Hay Group report used data from 16 million workers in 24,000 organisations around the world and used inflation rates from the Economist Intelligence Unit.
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—Neil Amato (email@example.com) is a CGMA Magazine senior editor.