Korn Ferry 2018 Salary Forecast: Smaller real wage increases across most parts of the world

Salaries to rise by only 1.5% globally when adjusted for inflation

Employees around the world are expected to see lower real wage increases averaging just 1.5 %, down from last year’s prediction of 2.3 % and the 2016 prediction of 2.5 %

Worldwide salaries 2018 – West is stagnating, Asia loses in comparison to last year and Africa has the highest nominal salary increases

Real salaries are increasing in Western Europe by 0.9 %, the same is valid for North America and the Near East. Only Australia shows an increase of only 0.7 %, thus these have less money in their pockets. In Asia real income increased by 2.8 %, in Latin America 2.1 %. The worldwide average shows that real salaries will increase by 1.5 %. These are the result of a worldwide salary forecast ”Global Salary Forecast 2018” of Korn Ferry Hay Group, based upon the global most voluminous data bank for salary data.

  • Worldwide average increases of salaries are 1.5 %
  • The dynamic in the East surpasses the stagnating- sinking salary development of the West
  • Asia is still strong, but with markedly lesser increases than last year.

„The rate of inflation is noticeably back“ says Thomas Gruhle, compensation expert of Korn Ferry Hay Group. “The enterprises increased salaries not less as in the past. But the rate of inflation has already eaten 2017 and again 2018 a majority of the gains.” Thus the nominal salary increases in Western Europe are at 2.3 %, in Australia 2.5 %, and in North Amercia even at 2.8 %. In the near East an average rate of inflation is forecasted at 2.9 %, thus of the nominal increase of salaries by 3.8 % are remaining only 0.9 %. Thomas Gruhle explains: “The exorbitant price increases of real estate, shares and raw materials are only marginally included in the calculation of inflation.  For young people in the west it will ever more difficult to create long term assets.”

Salaries to rise by only 1.5% globally when adjusted for inflation

Employees around the world are expected to see lower real wage increases averaging just 1.5 %, down from last year’s prediction of 2.3 % and the 2016 prediction of 2.5 %.

Worldwide salaries 2018 – West is stagnating, Asia loses in comparison to last year and Africa has the highest nominal salary increases

Real salaries are increasing in Western Europe by 0.9 %, the same is valid for North America and the Near East. Only Australia shows an increase of only 0.7 %, thus these have less money in their pockets. In Asia real income increased by 2.8 %, in Latin America 2.1 %. The worldwide average shows that real salaries will increase by 1.5 %. These are the result of a worldwide salary forecast ”Global Salary Forecast 2018” of Korn Ferry Hay Group, based upon the global most voluminous data bank for salary data.

  • Worldwide average increases of salaries are 1.5 %
  • The dynamic in the East surpasses the stagnating- sinking salary development of the West
  • Asia is still strong, but with markedly lesser increases than last year.

„The rate of inflation is noticeably back“ says Thomas Gruhle, compensation expert of Korn Ferry Hay Group. “The enterprises increased salaries not less as in the past. But the rate of inflation has already eaten 2017 and again 2018 a majority of the gains.” Thus the nominal salary increases in Western Europe are at 2.3 %, in Australia 2.5 %, and in North Amercia even at 2.8 %. In the near East an average rate of inflation is forecasted at 2.9 %, thus of the nominal increase of salaries by 3.8 % are remaining only 0.9 %. Thomas Gruhle explains: “The exorbitant price increases of real estate, shares and raw materials are only marginally included in the calculation of inflation.  For young people in the west it will ever more difficult to create long term assets.”

Real salaries are decreasing in the UK and Finland

British people will have 2018 0.5 % less in their pockets, and Finns 0.2 % less. Thomas Gruhle states: „In both countries enterprises will increase nominal salaries only slightly, in the U.K. by 2.0 %, and in Finland by 1.0 %. Inflation is adding, thus salary increases are transformed into a real salary decrease.” The slightest real increases note Denmark (0.1 %), Sweden (0.1 %), as well as France, Norway and Portugal (each 0.7 %). The strongest increases in Western Europe are expected for Cyprus (2.4 %) Ireland (2.0 %) and Italy (1.8 %).

In Eastern Europe, including countries like Russia and the Ukraine look a bit better. Various countries have to fight a higher rate of Inflation than Western countries, thus enterprises plan to increase the nominal salaries by an average of 6.0 %. Thus persons in Eastern Europe will have – after deducting the inflation – a real increase of 1.4 %. The winners are Azerbaijan (4.8 %), Ukraine (4.4 %) and Russia (3.0 %). “But also EU member countries in the East have better forecasts than in the West, “ explains Thomas Gruhle. The real purchase power increases in Romania by 2.5 %, Lithuania 2.2 %, in the Czech Republic by 1.9 % and in Bulgaria 1.8 %.

Asia loses in comparison to the previous year – Latin America wins

Asia is earmarked for real salary increases of 2.8 %. The enterprises are planning an average increase by 5.4 % of nominal salaries. “Salary increases in Asia are above the ones in the West”, states Thomas Gruhle. ““Qualified skills are in developing and industrial countries difficult to find and, thus considerably more expensive”. In turn Indian companies increasing the nominal salaries by 9 % (real salary increases 4.7 %. In Vietnam a nominal increase of 8.6 % (real 4.6 %) is expected, in China 6.0 % (real 4.2 %), and in Thailand 5.5 % (real 4.5 %). Thomas Gruhle says: “The rate of inflation in some parts of Asia is lower than in the West – and where this scenario is not the case, enterprises are balancing the gap with a markedly nominal salary increase.”

The economically fragile Argentina will probably show the highest increase in real salaries with 7.3 % (nominal 21.9 %), followed by Ecuador with 4.4 % (nominal 5.0 %), and Brazil with 3.3 % (nominal 7.3 %). If one abstains the very difficultly estimable Venezuela, then salary increases in Latin America will settle at 6.2 % nominal, and 2.1 % in real terms.

Thomas Gruhle explains: “Comparing Asia and Latin America with the figures of the prior year, one finds a very interesting picture: Asia is losing markedly, whereas the South of the Americas is increasing markedly. The forecast for Asia in 2017 in real terms was earmarked at 4.3 %, Latin America only at 1.1 %.

Africa makes a significant leap – highest nominal salary increase worldwide

A positive development for Africa is foreseen. The forecast nominal increase of wages is 8.5 %, real remain 1.7 %. “Inflation will increase in 2018 significantly,” says Thomas Gruhle “but the firms in Africa are planning to increase the nominal salaries worldwide at the highest level. They demonstrate impressively their will to economic growth and prosperity.”

The top of the line regarding income leads Ghana (real 5.9 %, nominal 15.6 %), followed by Zambia (real 5.4 %, nominal 12.3 %) and Mozambique (real 3.5 %, nominal 10.0 %). In Nigeria the increase of nominal 10.3 % means that there will be 3.2 % less money available for consumption. “The Nigerians are the losers in the row of salary increases 2018 in the Sub-Sahara Africa, states Thomas Gruhle. Above the Sub Sahara level is Egypt with a minus of 3.8 % (nominal increase 15.0 %).

Australasia sees the lowest real salary increase globally, with wages forecast to grow by 2.5 %, which is an increase of 0.7 % in real wages when adjusted for inflation.

North America lags, with the United States seeing a predicted 3 % pay increase, which represents only a real wage increase of 1% after adjusting for inflation. Canadian workers are expected to see salaries increase by 2.6 %, translating to a real wage growth of 0.9%.

Employees in Western Europe are predicted to see lower wage increases, with an average increase of 2.3%, and inflation-adjusted real wage increases of 0.9 %. Eastern Europe fares somewhat better than Western Europe with an average salary increase of 6 % expected in 2018. However, after adjusting for inflation, real wages will only rise by 1.4 % – down from last year.

Smaller increases are expected in the Middle East, where real wages are predicted to rise by 0.9 % in 2018, compared to 2.5 % the previous year. In Africa, inflation tempers salary growth with top-line salaries increasing by 8.5 %, but real salary increases reaching only 1.7 %.

Latin America sees the second-highest real wage growth with a 6.2 % increase, and an inflation-adjusted increase of 2.1 % – up from last year.

In Asia, increases have slowed from the previous year. Inflation-adjusted real wage increases are expected to be 2.8 % – the highest globally, but down from 4.3 % last year.

*Global Averages without Venezuela, Argentina, and Ukraine due to particularly high inflation.

**Regional Average without Venezuela due to particularly high inflation.

About the study

The data was drawn from Korn Ferry’s pay database which contains data for more than 20 million job holders in 25000 organisations across more than 110 countries.

It shows predicted salary increases for 2018 as forecasted by global HR departments, and compares them to predictions made at this time last year regarding 2017. It also takes into account 2018 inflation data from the Economist Intelligence Unit.

http://engage.kornferry.com/pay