Australia’s wage growth forecast for 2018 lowest globally
Korn Ferry Hay Group’s global annual salary forecast reveals that real wages (wage growth adjusted for inflation) will increase only an average of 1.5 percent worldwide. In Australia, wages are forecast to grow 2.5 percent with real wage growth expected to be 0.7 percent, the lowest among the 97 countries surveyed.
The head of Korn Ferry Hay Group’s remuneration and benefits practice in Australia, Trevor Warden says: “There is ongoing speculation with differing predictions regarding both wage movements and the action that the RBA will next take on rates. Much of this uncertainty stems from volatility and variation in both sector and geography. However, I believe overall salary movements will remain relatively stable at between 2% and 3%, but with potentially significant variance in sector and geography due to economic conditions being more volatile in some situations than others.”
The resources sector has been experiencing lower movements and this trend could continue, but the years of high wages movements means that the largest payments are still in that sector, and specifically in Regional WA. “Care needs to be taken with wage forecast for resources however, as the sector includes both mining and oil and gas, which may differ depending on commodity prices. The same will also apply for different types of mining commodities,” said Mr Warden.
Korn Ferry 2018 Salary Forecast: Smaller Real Wage Increases Across Most Parts of the World
LOS ANGELES, Dec., 2017 – A forecast issued by the Hay Group division of Korn Ferry (NYSE: KFY) reveals that, adjusted for inflation, employees around the world are expected to see real wage increases of only an average of 1.5 percent, down from 2017’s prediction of 2.3 percent and 2016’s prediction of 2.5 percent.
“With inflation rising in most parts of the world, we’re seeing a cut in real wage increases across the globe,” said Bob Wesselkamper, Korn Ferry Global Head of Rewards and Benefits Solutions. “The percentage of salary increase or decrease will vary by role, industry, country and region, but one thing is clear, on average, employees are not seeing the same real pay growth they did even one year ago.”
Australasia Sees the Lowest Real Salary Increase
Wages in Australasia are forecast to grow by 2.5 percent, which is an increase of 0.7 percent in real wages when adjusted for inflation. Australia will see a 2.5 percent top-line growth, a 2.1 percent inflation rate, and a 0.4 percent real wage increase. In New Zealand, a 2.5 percent salary increase is forecast, with 1.5 percent inflation, for a 1 percent real salary increase.
North America Lagging
In the United States, an average 3 percent pay increase is predicted, which is the same as last year. Adjusted for the expected 2 percent inflation rate in 2018, the real wage increase is 1 percent – down from last year’s 1.9 percent. Canadian workers will see salaries increase by 2.6 percent, and with inflation at 1.7 percent, will experience real wage growth of 0.9 percent.
Eastern Europe Faring Better than Western Europe
According to the Korn Ferry forecast, employees in Eastern Europe are set to see an average salary increase of 6 percent in 2018. However, after taking inflation into account, real wages will only rise by 1.4 percent, which is down from 2.1 percent last year. In Western Europe, workers are expected to see lower wage increases, with an average increase of 2.3 percent, and inflation-adjusted real wage increases of 0.9 percent.
With the continued uncertainty following the Brexit decision, wages in the United Kingdom are up just 2 percent. Combined with a 2.5 percent inflation rate, real wages are expected to decrease by -0.5 percent. This is in contrast to 2017, when inflation-adjusted wages in the U.K. were up 1.9 percent.Employees in two of Europe’s largest economies, France and Germany, are forecasted to see real wage rises of 0.7 percent and 0.8 percent respectively.
Smaller Increases in the Middle East
In the Middle East, wages are expected to increase by 3.8 percent, compared to 4.5 percent last year. Inflation-adjusted wage increases are predicted to be 0.9 percent, compared to 2.5 percent last year. In the UAE, inflation of 4.6 percent combined with pay increases of only 4.1 percent, means that real wages will fall by -0.5 percent.
Jordan and Lebanon saw the biggest drops in the region, with Jordan predicted to have a 1.6 percent real wage growth, down from 6.3 percent last year, and Lebanon predicted at 1.8 percent compared to 6.1 percent last year.
Inflation Tempers Salary Growth in Africa
Although top-line salaries will increase by 8.5 percent in Africa, high inflation means the real increase is only 1.7 percent, which is up from 0.7 percent last year. In Egypt, top-line salaries will increase by 15 percent, but an 18.8 percent inflation rate means employees will see a cut in real wages of -3.8 percent.
Latin America Sees Second-Highest Real Wage Growth
Employees in Latin America are forecasted to see a 6.2 percent increase in wages, and with inflation slowing down in the region, real wage increases will reach 2.1 percent, up from last year’s 1.1 percent. In Colombia, inflation is expected to be 2.7 percent for 2018. With a salary increase projected at 5.3 percent, this puts real wages for Colombia up 2.6 percent. In Brazil, the expected salary increase is 7.3 percent, and with 4 percent inflation, the real increase is expected to reach 3.3 percent.
Highest real wage growth in Asia – Though Increases Slowed from Previous Year
In Asia, salaries are forecast to increase by 5.4 percent – down from 6.1 percent last year. Inflation-adjusted real wage increases are expected to be 2.8 percent – the highest globally, but down from 4.3 percent last year. China remained consistent with real wage increases predicted at 4.2 percent for 2018, compared to 4 percent last year. Most countries in this region saw a drop in year-over-year real wage prediction increases – including Vietnam’s forecast of 4.6 percent, down from 7.2 percent, Singapore at 2.3 percent, down from 4.7 percent, and Japan at 1.6 percent, down from 2.1 percent.
“Slower economic growth in mature economies keeps a check on pay raises,” said Wesselkamper.“In emerging economies, upskilling workers is crucial for companies to maintain a competitive advantage – and those skilled employees can expect to see wages rise as talent shortages in certain regions drive salaries upward.”
Korn Ferry pay experts recommend taking a holistic approach when determining pay.
“While inflation indices are a solid benchmark for reviewing market trends in pay, we recommend that companies take a broader perspective by defining and agreeing upon their own measures of cost drivers, business strategy and local trading conditions,” said Benjamin Frost, Korn Ferry’s Global General Manager – Pay. “Compensation programs need to be regularly reviewed to make sure they align with changing business and market conditions.”