U.S. pay increases will trail China, India, Eastern Europe

New research from Philadelphia-based Hay Group reveals real pay increases (adjusted for inflation) for workers in the United States will substantially lag those in China, India and Eastern Europe in 2007.  

U.S. administrative, professional and senior management employees are predicted to see real increases of just 1.4 percent vs. increases approaching 8 percent in high-growth economies.

"Much like their colleagues in Europe, U.S. employees will be seeing relatively modest increases in base salaries when compared to the emerging economies," said Iain Fitzpatrick, General Manager of Hay Group's US Reward Information Services. "Projected 2007 increases are fairly consistent with real increases seen in the US over the past several years."

Hay Group's Global Pay Day analysis, compiled using Hay Group PayNet, one of the world's most comprehensive global pay databases, predicts real base salary increases for administrative, professional and senior management in 2007 for 50 countries worldwide, based on employers' projections once inflation has been considered. The PayNet database contains 7 million individual records from 13,000 organizations in 19 job families across a number of industries.

Economic Development in China and India
"The wealth created by rapid, focused economic development is resulting in a pay boom for Chinese and Indian workers, who will enjoy some of the largest real pay increases worldwide in 2007," said Hern Yin Goh, director of Hay Group Reward Information Services in Shanghai.

China tops the tables for each of the three job categories, with a predicted 7.9 percent increase for administrative workers, 7.8 percent for professionals and 8.9 percent for senior management.

High pay increases in India last year — 7.2 percent across the board — look set to continue into 2007. The country boasts the second highest pay increase predictions for 2007, with increases of 6.2 percent forecast across the three job levels. Senior managers can anticipate a real increase of 6.9 percent, professionals and administrators 5.9 percent each.
 
Eastern Europe
"Growing pay packets in Eastern Europe reflect continued economic development in the region," said Scott Marlowe, general manager, Hay Group Czech Republic.

"While wages are growing from a much lower level for manual and administrative workers, pay levels for managers are closer to Western standards," said Marlowe. "The lower cost of living in the East means that as the management pay gap closes, senior managers in Eastern Europe enjoy a significantly greater purchasing power than those in the West — ultimately making them better off."

Senior managers in Bulgaria can expect the largest real pay increases of any in Eastern European, at 7.8 percent; however administrative workers can expect only 4.3 percent. Slovakia and Lithuania are expecting average increases in excess of 5.5 percent. Average salaries in Rumania are forecast to see a real increase of 3.1 percent.

Western Europe
"Employees in Western Europe will start from a higher base level of pay than those in the East, receiving only incremental real rises in the coming year," said Ben Frost, the Hay Group consultant responsible for the research. "The 'new' economies are experiencing much faster salary growth rates than the established job markets of 'old' Europe, reflecting their position as emerging economies."

Workers in the major continental economies — Germany, Italy, Spain and France — face predicted real increases of less than 1.5 percent across all categories, the only exception being Italian senior management, who will enjoy an increase of 2.3 percent. Administrative staff in Italy will receive a meager 0.5 percent real pay increase. British workers can expect an average 1.5 percent real increase.

South East Asia
"In contrast to Europe and North America, workers across South East Asia are experiencing healthy salary growth in both the more developed economies like Singapore and emerging economies such as Vietnam, due in part to low inflation," said Frost.

Workers in Indonesia and Vietnam will see real increases in excess of 4 percent, those in Singapore and Malaysia, will see real pay increases exceeding 2.8 percent and 2.7 percent respectively.

South America
"The combination of economic instability and a changeable political landscape makes for a mixed salary picture in South America. While emerging economies in Asia are accelerating at a rapid pace, economic growth and salary increases in South America lag behind," said Frost.

Employees in Brazil, Colombia and Peru are unlikely to see real salary increases of more than 1.5 percent. Venezuela’s picture is gloomy across the board, particularly for senior managers who will see reduced pay in real terms. Economic unpredictability in Argentina is reflected in a "yo-yo" effect on pay inflation. Having enjoyed huge real salary increases of 5.2 percent in 2006, workers in the country will receive rises of just 2.2 percent in 2007.

Middle East

"While salaries continue to rise, in general, salary increases have been lagging inflation," in the Middle East said Vijay Gandhi, Director of Hay Group Reward Information Services, Middle East and North Africa.

"This is causing difficulty for companies struggling to maintain internal equity: companies are offering more competitive salary packages for new hires, particularly in managerial and executive positions, where heightened demand for talent from traditional expatriate markets is outstripping supply."

» Click here for Hay Group 2007 Global Pay Day Analysis Tables

About Hay Group
Hay Group is a global consulting firm that works with leaders to turn strategies into reality, with 88 offices in 47 countries. It helps develop talent, organize people to be more effective, and motivate them to perform at their best. Its clients are from the public and private sector, across every major industry, and represent diverse business challenges. Its focus is on making change happen and helping organizations realize their potential. Hay Group conducts annual research on Most Admired Companies for FORTUNE magazine and on the Best Companies for Leaders for Chief Executive magazine.