ASIA-PACIFIC countries are leading the way in real wage increases, taking 14 spots in the top 20 highest rises across the globe. All but one of the top 10 are Asian countries.
A Salary Trends survey from ECA International predicts the real average salary increase in Asia-Pacific will by 2.7 percent in 2019 – that’s more than double the global average of 1.2 percent.
India tops the world rankings with employees forecast to receive a 5.1 percent increase in real salary over the next 12 months.
Vietnam is a close second with an expected rise of 4.9 percent, followed by Indonesia with 4.2 percent.
China (4.1 percent), Thailand (4.1 percent), Bangladesh (3.9 percent), Cambodia (3.4 percent), Sri Lanka (3.2 percent), South Korea (2.7 percent), and Malaysia (2.7 percent) round out the top 10.
Not far behind is Southeast Asian neighbour Singapore with a rise of 2.6 percent. ECA said Singaporeans will see their nominal salaries increase by four percent in 2019 but, after factoring in inflation which the International Monetary Fund predicts to be 1.4 percent next year, employees will see a real salary increase of 2.6 percent.
Asia Pacific leads the way in salary increase for a number of reasons, the first being the number of developing economies in the region. These will generally have high rates of inflation, having a knock-on effect on salaries, explains ECA International Regional Director for Asia, Lee Quane.
“When companies are employing people they need to make sure at the very least they keep pace with inflation, but you also want to ensure in real terms employees are seeing an increase in their salaries,” Quane told Asian Correspondent.
In countries with high economic growth – most of those with the highest growth globally are located in Asia Pacific – the measures needed to retain talent also grows.
“Given the fact there is a lot of competition for people in these locations, companies have to offer relatively high salaries to both attract workers and retain their existing staff,” Quane said.
But while growth is happening across the region, there are some countries whose increase is slowing. Singapore is one of them who is down 0.3 percent from their 2.9 percent increase this year.
Malaysia also bucks the trend and, while salaries are still expected to grow, the rate at which they do is slowing.
ECA predicts Malaysians won’t see as a high rate of increase in their real incomes in 2019 as they did this year. The dramatic May election outcome, which saw a complete overhaul of the government, caused companies to adopt a more cautious stance on business expansion and salary hikes.
While greater clarity as to the new government’s policies and direction is slowly being achieved, this uncertainty with respect to Malaysia’s economic performance is likely to continue into 2019, Quane said.
“That [the election] had an impact on the economy, this government appears to be more fiscally prudent than the previous regime, and that fed through to many employers being a little bit more bearish with regard to economic prospects, and as such, they’re not expecting revenue growth and for profits to be as good in 2019 as it was the previous year,” Quane explains.
Another contributing factor to an uncertain economic performance was the drop in oil prices, which will have a knock-on effect on salary hikes in the industry, as well as inflation expected to be lower due to the scrapping of the Goods and Services Tax (GST).
But it’s far from doom and gloom, salaries are going in the right direction across the region which bodes well for the future prospects for Asia Pacific.
The benefits of high salary increases are not just enjoyed on an individual basis but trickle down into wider society, further projecting countries into the middle- and high-income bracket of development.
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Countries with good real income increases can expect to see a rise in consumption levels, Quane said. This enables a country to move away from its reliance on imports and exports, and government support.
“As income starts to increase and salaries increase, this gives people more purchasing power. The economy then transitions into a more service lead and consumption lead economy. This balances things out and the economy becomes less dependant on any particular sector.”
This can be hugely beneficial as it enables a country to weather the storm if there is any major economic or political upset, having the ability to make up loses in one sector by bulking up another to plug the hole. As Quane puts it, it creates “another engine” to a country’s economy.
With lower-income countries, such as Vietnam and Cambodia, expected to see high economic growth, and more established economies like Singapore and Hong Kong battle to retain talent, Asia Pacific is lining up to be a good region to be an employee.