LOS ANGELES — A forecast issued by Korn Ferry, the preeminent global people and organizational advisory firm, reveals that workers around the world are expected see real wage increases of 2.5 percent — the highest in three years — as pay increases combine with historically low inflation to leave employees better off.
In the Middle East, the forecast is more somber as businesses focus on driving profitability by minimizing their fixed costs, including salaries.
In the Gulf Cooperation Council (GCC) countries, workers can expect a real wage increase of 2.3 percent, the lowest of these being the UAE where salaries are expected to increase by 0.9 percent, once inflation is taken into account.
Vijay Gandhi, regional director for productized services at Hay Group said: “As 2015 draws to a close we can look back on a year of continued growth in GCC. However, we have seen a gradual slow down, due primarily to lower oil prices which have impacted the economies in our region.”
The forecast appears positive for workers in the Middle East, however, plunging oil prices and economic and political uncertainty throughout the region is continuing to make an impact. Gandhi explained: “There is a definite feeling of slow down in the market with around 15 to 20 percent of companies now suggesting that they will introduce a pay freeze for 2016. We are already seeing some corrections in some key sectors including Real Estate, Luxury Retail, Financial Services and Oil and Gas Services.”
“There is no doubt that there is a cloud of cautiousness in the UAE as businesses focus on restricting increases in fixed costs (including through the payroll), improving their profitability and top line revenue and restructuring to gain higher efficiency from their current staff. In addition to lower pay increases, we’re expecting this to result in lower bonus pay outs than recent years,” continued Gandhi.
Organizations in the Middle East and Africa have forecast salaries to rise by 5.3 percent and 6.5 percent respectively. Relatively low inflation means that workers are set to see real wage increases of 3.8 per cent and 1.6 per cent.
In the Middle East, Jordan (5.3 percent) is amongst the highest of real wage increases, with the UAE set to see the slowest real wage growth (0.9 percent) — down from 2.8 percent last year. High inflation in Egypt means it is the only country in the region set to see a cut in real wages (-0.4 percent).
Executive talent is still in high demand across the GCC region with a shortage of key talent at the C-Suite level. Gandhi says that businesses looking to retain their top employees are emphasizing long term incentive plans and creating enterprise value schemes that reward leaders over the longer term.
Gandhi said: “Long term incentives drive alignment with corporate goals and reward high performance. Our data shows that the fixed pay of executives is broadly competitive with the UK, Europe and Australia; however the total variable pay received significantly lags behind these markets. Going forward, we will see a bigger proportion of total executive remuneration at risk than we see today.”
According to the Korn Ferry Hay Group forecast, the outlook remains positive in Europe where workers are set to see an average salary increase of 2.8 percent in 2016, and with inflation at 0.5 percent, they will see real wages rise by 2.3 percent. Fueled by a low inflation environment, those in Western Europe will see a 2 percent increase in real wages compared to a 2.9 percent increase in Eastern Europe.
Two outlier countries are excluded from the European averages, due to specific political issues causing high inflation which impacts real wage increases. Workers in Ukraine are forecast to see the biggest wage rises in Europe (11.5 percent), but due to high inflation (48.3 percent) real wages are set to drastically reduce by 36.8 percent.
The outlook is similar in Russia as the impact of economic sanctions and falling oil prices hit the economy. Despite an average salary increase of 7 percent, with inflation at 14.5 percent, real wages are set to fall by 7.5 percent. This is significantly more than the 0.7 percent decrease in real wages seen last year.
In Asia, salaries are forecast to increase by 6.4 percent – down 0.4 percent from last year. However, real wages are expected to rise by 4.2 percent — the highest globally, despite China’s economic slowdown. In fact, the increasing need for skilled workers and the sustained rise of the burgeoning middle class has resulted in a positive outlook for the Asian region.
Seeing the benefit of being a part of the fastest growing major economy, Indian workers are also forecast to see the highest real wage increase they have seen in the last three years, at 4.7 percent compared to 2.1 percent last year and 0.2 percent in 2014.
This upward trend can also be seen in North America, where the labor market is buoyant. In the USA, with low inflation (0.3 percent), employees will experience real income growth of 2.7 percent. Canadian workers will meanwhile see salaries increase by 2.6 percent and experience real wage growth of 1.3 per cent.
Economic turmoil is impacting workers in Latin America with high inflation (12.8 percent) leading to real wage cuts of 1.4 percent. However, Venezuela is set to suffer the most significant cut in real income across the globe. Salary increases are high at 70 percent, but when predicted inflation is factored in (122.6 percent), employees can expect real wage cuts of 52.6 percent.
