ECA’s Salary Trends Survey 2007/2008 contains information collected from multinational companies about actual salary increases for 2007 and predicted salary increases for 2008.

In Hong Kong, despite a strong economy and tight labor force, salary increases are expected to remain at 4%—the same as in the previous two years. This is the second lowest rate in the region and 3.3 percentage points below the regional average.

“It is not unusual for developed economies such as Hong Kong to have lower salary increases than in developing locations, where rates of economic growth are higher," said Lee Quane, general manager of ECA International in Hong Kong.

China’s salary increases are anticipated to remain static at 8%. Singapore’s workers can expect salary increases of 5%. While this increase is below the regional average, this is up on last year’s 4.5% increase—reflecting a longstanding trend of rising salary increases in the country.

“While workers in China and Singapore receive lower salaries than their Hong Kong counterparts, the fact that they will be enjoying significantly higher salary increases means that the salary gap between these locations will continue to narrow," Quane said.

Regionally, India and Vietnam are expected to see the biggest increases when compared to last year’s salary rises. In India the 14% salary rise is significantly up on last year’s highs of 12.6%, while Vietnam’s 10% prediction shows a notable increase on the 8.5% salary increments given in 2007.

The Philippines is forecast to join India, Indonesia, Vietnam and China in 2008 as the fifth Asian country in the top ten seeing the largest salary increases in the survey. Salary increases in the region are predicted to be 25% higher than they were in 2005 and for the first time the region’s salary increases are expected to overtake those of Eastern Europe where wage rises are showing signs of starting to stabilize.

Japan is expected to experience the region’s lowest salary increases again this year. They are forecast to remain at 3% —the same as in 2007.

Rising Inflation

Within the region, real wage increases—the difference between actual salary increases and inflation—have shown a rising trend in recent years. However, unexpectedly fast inflation growth over the past three months prompted by significant rises in oil, food and accommodation costs, will counter-balance many of these high salary increases considerably. Most locations in Asia will therefore see lower rates of real wage increases than in 2007.

“This latest upswing in inflation, which has caught many people by surprise, will have an impact on real salary increases in 2008. When many companies calculated salary increases for 2008, inflation forecasts were relatively low," Quane explained.

"Inflation in Singapore, for example, is now around two and a half times higher than anticipated in October forecasts, so employees here are likely to experience relatively subdued real income rises in comparison to previous years. The same goes for major economies such as China, Korea and Taiwan," he said.

The combination of lower real wage increases, together with a relatively tight labor market in many Asian economies, will become a headache for companies seeking to attract and retain talented staff in 2008.

"Companies will need to consider revising their forecast salary increases during 2008 or provide higher salary increases next year to make up for this year’s relatively low increase in real incomes," Quane said.

Overview

Globally, Indian workers will again receive the largest salary increases in 2008, which are anticipated to be 14%. India is followed by Argentina (12.7%), Indonesia (11.3%) and Russia (11%). These high increments are mainly the result of fast economic growth and widespread skills shortages which are prompting companies to pay more for talent while keeping pace with the inevitable inflation that comes with economic development.

At the other end of the scale, companies are forecasting that workers in Switzerland, Japan, France Austria and Germany will be receiving the lowest salary increases next year.

Elsewhere, the UAE is expected to see the biggest improvement on last year, according to the survey, with salary increases forecast to be 8.7%—1.7 percentage points above last year’s rate. As this part of the world continues to experience robust growth, other countries in the region are also likely to record relatively high salary increases.

The biggest fall in salary increases since last year is forecast for Slovakia. Companies there are predicting wage increases of 5.5%, down 1.3% percentage points on last year. Although salary increases in Eastern Europe are showing signs of stabilizing, wage growth remains relatively high there, with a regional average of 7%. Western Europe continues to be the region with the lowest expected salary increases, averaging 3.9%—almost 50% lower than increases forecast for Asia.

In Latin America, companies in Argentina are forecasting salary increases to rise from 11.3% in 2007 to 12.7% in 2008. This is almost double the regional average of 6.4%.