Korn Ferry 2019 Salary Forecast Shows Smaller Real-Wage Increases Across Most Parts of the World
Adjusted for Inflation, Real Wages Up Only an Average of 1 Percent Globally
A forecast issued today by Korn Ferry (NYSE: KFY) reveals that, adjusted for inflation, real-wage salaries globally are expected to grow only an average of 1.0 percent in 2019. This is down from a 1.5 percent prediction for 2018.
“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 Gal lobHead 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.”
Middle East Sees Second-Lowest Real Salary Increase
In the Middle East, wages are expected to increase by 3.6 percent, compared to 3.8 percent last year. Inflation-adjusted wage increases are predicted to be 0.4 percent, compared to 0.9 percent last year and 2.5 percent the year before.
Things are looking better in the UAE, Saudi Arabia and Kuwait this year:
• In the UAE, an inflation rate of 3.2 percent combined with pay increases of 3.9 percent means that real wages are expected to increase by 0.7 percent. Last year real wages were predicted to fall by -0.5 percent.
• Saudi Arabia is expected to see the highest real salary increase in 2019. With the inflation rate anticipated to increase by 2.3 percent and salaries expected to rise at a rate of 4.9 percent, the real salary increase is forecasted at 2.6 percent. That’s significantly greater than the 0.1 percent increase forecasted for 2018.
• Kuwait ranks second in the region in projected average real salary increase, coming in at 2.2 percent. That’s based on an inflation rate forecast at 1.6% and expected salary increase of 3.8%.
Qatar and Lebanon are both predicted to see a drop in real wages, with Qatar forecast to have a -0.5 percent loss in real wages, and Lebanon to have a -1.7 loss in real wages. This is compared to 1.8 percent growth in Lebanon last year and a 6.1 percent growth the year before.
“Whilst the Middle East continues to face a similar inflationary pressure as we are seeing across the globe, key financial centres should see improved performance in 2019. Saudi Arabia and Kuwait are expected to outpace the region in terms of real salary increases, with both showing significant year-on-year increases,” said Vijay Gandhi, Regional Director – Europe, Middle East & Africa, Korn Ferry Products.
“The UAE continues to position itself as a highly attractive workplace destination in the region. Average real salary increases are projected to move back to a positive level after being in negative figures in 2018. At the same time, inflation has halved in the last 12 months and the cost of living is declining, resulting in greater disposable income for workers at all levels,” Gandhi added.
Highest real wage growth in Asia
In Asia, salaries are forecast to increase by 5.6 percent, up from 5.4 percent last year. Inflation-adjusted real wage increases are expected to be 2.6 percent, the highest globally, but down from 2.8 percent last year.
China’s real-wage forecasted growth for 2019 weakened at 3.2 percent, down from 4.2 percent last year. Japan saw a real-wage prediction of 0.1 percent for 2019 compared to the 2018 prediction of 1.6 percent. Asian countries that saw year-over-year increases include Vietnam’s forecast of 4.8 percent, up from 4.6 percent last year, and Singapore‘s forecast of 3.0 percent, up from 2.3 percent last year.
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 6.6 percent in 2019. After taking inflation into account, real wages are forecast to rise by 2.0 percent, which is up from 1.4 percent last year. In Western Europe, workers are expected to see lower wage increases, with an average increase of 2.5 percent, and inflation-adjusted real wage increases of 0.7 percent. This is down from the predicted 0.9 percent real-wage growth of last year.
Wages are predicted to increase 2.5 percent in the United Kingdom. Combined with a 1.9 percent inflation rate, real wages are expected to increase by 0.6 percent. This is up more than a percentage point from 2018, when wages were predicted to decrease by -0.5 percent. Employees in two of Europe’s largest economies, France and Germany, are forecast to see real-wage rises of 0.5 percent and 1.0 percent respectively.
North America Lagging
In North America, the average salary growth is predicted to be 2.8 percent in 2019, and when adjusted for inflation, the real-wage growth is expected to be 0.6 percent.
In the United States, an average 3 percent pay increase is predicted, which is the same as last year and the year before. Adjusted for the expected 2.4 percent inflation rate in 2019, the real wage increase is forecast to be 0.6 percent, down from last year’s 1.0 percent. Canadian workers will see salaries increase by 2.6 percent, and with inflation at 2.0 percent, will also experience real-wage growth of 0.6 percent.
Inflation Tempers Salary Growth in Africa
Although top-line salaries will increase by 7.7 percent in Africa, high inflation means the real increase is predicted to be only 0.9 percent. In Egypt, salaries are expected to increase by 15 percent, but a 14.4 percent inflation rate means employees will only see a 0.6 percent real-wage increase.
Latin America Sees Year-Over-Year Drop in Real Wage Growth
Employees in Latin America are forecast to see a 4.6 percent gain in wages. With inflation, the real-wage increase in the region is expected to be 1.3 percent. This is down from 2.1 percent real-wage growth predictions from last year.
In Colombia, inflation is expected to be 2.9 percent for 2019. With a salary increase projected at 5.0 percent, this puts real wages for Colombia up 2.1 percent. In Brazil, the expected salary increase is 4.2 percent, and with 4.3 percent inflation, workers are expected to see a -0.1 percent decrease in real wages.
The Pacific Sees the Lowest Real Salary Increase
Wages in the Pacific are forecast to grow by 2.5 percent, and adjusted for inflation, the rise in real wages is predicted to be 0.3 percent. Australia will see a 2.5 percent top-line growth, a 2.3 percent inflation rate, and a 0.2 percent real wage increase. In New Zealand, a 2.5 percent salary increase is forecast, and with 2.2 percent inflation, is expected to see a 0.3 percent real salary increase.
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.”