Payday Blues: U.S. Salary Increases In 2007 Will Be Less Than Asia, Eastern Europe

Continued economic development in China, India and Eastern Euorpe is boosting pay increases to 8 percent, compared to 1.4 percent for U.S., according to Hay Group's Global Pay Day analysis.

Salary increases (adjusted for inflation) for workers in the U.S. in 2007 will be substantially less than those in China, India and Eastern Europe, according to Hay Group's Global Pay Day analysis released Monday. 

U.S. administrative, professional and senior management employees are expected to see real increases of just 1.4 percent compared to increases of about 8 percent in high-growth economies, the report revealed.

"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 U.S. Reward Information Services.

According to Hern Yin Goh, Director of Hay Group Reward Information Services in Shanghai, Chinese and Indian workers will see some of the largest real pay increases globally in 2007, due to the wealth created by rapid economic development in these countries.

Continuted economic develpment in Eastern Europe is also responsible for growing wage increases in that region, said Scott Marlowe, General Manager, Hay Group Czech Republic.  Although wages are increasing at a slower rate for for manual and administrative workers,  in Eastern Europe, pay levels for managers are closer to Western standards.
"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," Marlowe said.
In Western Europe, because employees start from a higher base level of pay than those in the East, they will receive only incremental real pay increases in 2007, said Ben Frost, the Hay Group consultant responsible for the research.

Due in part to low inflation, workers in South East Asia will experience healthy salary growth in both the more developed economies like Singapore and emerging economies such as Vietnam, Frost noted.

For the South American workers, a combination of economic instability and a changeable political scene make for a mixed salary outlook. For example, Argentina's economic unpredictability has had a "yo-yo" effect on pay inflation, where workers saw real salary increases of 5.2 percent in 2006, they will probably see increases of just 2.2 percent in 2007, according to Frost. 
In the Middle East, while salaries continue to rise, in general, salary increases have been lagging inflation," 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, Gandhi noted.

To view the full report, click here.

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