Globalization marches on, supporting rising boats (unevenly, of course) around the globe. Average pay worldwide is expected to rise 2.4 percentage points above inflation in '06, compared to 1.9 percentage points for '05. Pay in the European Union is likely to rise by 2 percentage points over inflation, and in the U.S. by 1 percentage point, according to a survey of employment, economic and pay trends in some 70 countries by global HR services firm, Mercer Human Resource Consulting.
Mercer spokesman Greg Cornish said, "We've seen strong global economic growth in the past couple of years and all the signs indicate this is set to continue in 2006. With this growth and more stable inflation we anticipate next year's pay rises to be higher, in real terms, than this year's."
While the economic outlook for 2006 is positive, fluctuations in oil prices, exchange rates and consumer confidence could affect companies' pay increase budgets for next year," Cornish added as a note of caution.
"Caution" is the operative word for the U.S. "Despite the tremendous growth in the US economy, many companies remain cautious in their approach to pay increases. Organizations continue to use variable pay such as bonuses to help retain talented employees, as they struggle to afford higher base pay levels," said Robin Ferracone, President, Human Capital Business at Mercer.
The greatest increases are expected in India, Egypt and Lithuania where employees are forecast to receive pay rises of 7.3%, 7.1% and 5.5% above inflation respectively. "Organizations recruiting employees with specialist skills in India and China must offer competitive salaries, as the pool of skilled workers is relatively limited," Cornish commented.
Eastern Europe will continue to be strong. "Although many Eastern European countries have experienced high wage inflation since joining the EU, their labor costs are still extremely competitive," Cornish said. "Multinational organizations continue to look to Eastern Europe for opportunities to set up operations at a much lower cost than in Western Europe."
Projected 2006 annual base pay increases and inflation rates - ranked by projected pay above inflation (%)
Top 5 ranked countries
Country - Projected pay % above inflation