The APAC region continues to outperform the rest of the world in 2022 in terms of real salary increases. Most locations are expected to see the same or higher rates of salary growth in real terms in 2023.
-With inputs from Priya Sunil
Workers in Hong Kong received a real wage growth, i.e. nominal wage growth minus the rate of inflation, of 1.6% in 2022, and can expect the same in 2023, according to the latest Salary Trends Report by ECA International (ECA).
In nominal terms, salaries for workers in Hong Kong rose 3.5% in 2022, significantly higher than the 2.5% pay rise workers received in 2021, and are forecast to increase by a further 4.0% in 2023, returning to pre-pandemic levels.
Workers in Hong Kong have also benefited from low inflation compared to their APAC and global counterparts and will therefore experience real salary increases this year and next.
Even though inflation is expected to rise next year from 1.9% to 2.4% and cancel out the benefits of the larger nominal pay rises, buying power will rise faster than many locations globally.
“Hong Kong workers will benefit from the low rates of inflation relative to elsewhere in the world. Real wage growth of 1.6% in 2022 is the fifth highest in the region and significantly higher than Singapore where real salaries fell by 1.7% in 2022,” said Lee Quane, Regional Director, Asia for ECA.
Workers in Singapore received a salary increase of 3.8% in 2022 in nominal terms and this rate of growth is forecast to rise further to 4.0% next year. Inflation in Singapore this year is 5.5%, similar to the average rate of inflation in the region, and is expected to fall to 3.0% in 2023.
Therefore, in real terms, salaries fell by 1.7% in 2022 but will grow by 1.0% next year, although this will be lower than the average of rate of growth of 1.3% in APAC in 2023.
“Although salary growth in 2022 was higher in Singapore than in recent years, a surge in inflation means many will be worse off. Salaries will fall by almost 2% this year in real terms,” said Quane.
“The good news is that we expect to see a return to real salary growth in 2023 although it will continue to be modest compared to elsewhere in the region.”
The APAC region continues to outperform the rest of the world in 2022 in terms of real salary increase. Eight out of the top ten countries with the highest real salary increases globally are from the APAC region.
The average real salary increase in the region is predicted to be 1.3% in 2023, which is 1% more than this year, and will again lead the way as globally salaries are forecast to fall by 0.5% in real terms next year.
Most locations surveyed in the APAC region are expected to see the same or higher rates of salary growth in real terms in 2023 when compared with 2022, with only Indonesia, Bangladesh, and Pakistan being the exceptions.
2023 top 10 forecast real salary increases – Asia Pacific
|Country||2023 forecast real salary increase (%)||2022 real salary increase (%)|
Workers in Greater China have benefitted from low rates of inflation and are amongst a small group globally who will see real salary growth in both 2022 and 2023.
Workers in China continue to be amongst those who receive the highest rates of real salary growth in both years. In nominal terms, salaries increased by 5.9% in 2022 and will grow by a further 6.0% 2023.
Although nominal salary increase rates in China are not amongst the highest in the region, low rates of inflation mean that workers in China received the highest rate of salary growth in real terms globally in 2022 and will be in the top three in 2023.
Meanwhile, in Taiwan, salaries are predicted to increase by 4.0% in 2023 in nominal terms – a slight rise compared to 3.7% this year. After factoring in inflation, the real rate of salary growth is forecast to triple from 0.6% this year to 1.8% in 2023.
In Southeast Asia, Vietnam, Malaysia, and Thailand are all expected to see higher rates of real salary growth in 2023 in comparison with 2022 as the post-pandemic economic recovery is expected to continue and inflation rates are expected to fall.
Workers based in Vietnam benefitted from having the second highest rate of salary in growth in real terms in 2022 in the region and are expected to do so again in 2023. Workers in other ASEAN locations, such as Malaysia and Indonesia, will also benefit from solid growth in salaries in real terms in both years.
Contrary to predictions in 2021, workers in Thailand did not see a real salary increase this year. Rather, real salaries fell by 1.8% owing to higher than anticipated rates of inflation.
However, in 2023 workers will benefit both from larger salary increases and lower rates of inflation, which will result in the fourth highest rate of salary growth in 2023 in the region in real terms.
However, Laos and Myanmar, which have been impacted by economic and political problems, will experience a significant decline in their salaries in real terms in both years as inflation impacts their economies more than elsewhere in the region.
In Sri Lanka, the ongoing economic crisis continues to impact its workers. Although Sri Lankans received a nominal salary increase of 7.5%, which was the fourth highest in the region, their salaries are 40.7% lower than in 2021 once high rates of inflation are taken into consideration. Although lower rates of inflation are expected next year and salaries will grow at a faster rate in nominal terms, employees will still see their salaries fall by a further 20.5% in real terms.
From a global perspective, the average salary increase was 4.0% this year and is forecast to rise to 5% in 2023. With inflation increasing significantly in 2022, 78% of countries surveyed recorded a real salary decrease, and no European country saw a real-terms salary increase.
Even though the global situation is expected to improve next year with higher nominal salary increases and lower inflation on average, a 0.5% decrease in real terms is still expected.
“Our survey indicates another tough year for workers globally in 2023,” commented Quane. “Only around a third (37%) of the countries surveyed are forecast to see real-terms salary increase, though this is better than the 22% that experienced increases this year. India will see the biggest increase of 4.6%, followed by Vietnam (4.0%) and China (3.8%).”
ECA's Salary Trends Survey 2022/2023 collected data of over 360 multinational companies across 68 countries and cities from August to September 2022, covering all seniorities across the following industry groups which included energy, mining & petrochemicals; chemical & pharmaceutical; transport & logistics; manufacturing & consumer goods; legal & professional services; engineering & technology; retail, leisure & other services; financial services; non-profit.
In an exclusive catchup with HRO, ECA's Lee Quane spoke about some of the key trends he observes in the salaries space.
The good news, he points out, is that in most locations, in 2022, most workers will have seen an increase in their salaries at a more rapid rate of increase in comparison to during a pandemic.
"However, the bad news is that while salaries are increasing at pre pandemic levels, because inflation rates are significantly higher than they were a couple of years ago, that means those salary increases have been wiped out by inflation. In many cases, inflation is overriding the impact of the nominal increase, which means people are worse off now than they were last year or the year before, because the rate of salary increases is not keeping pace with inflation."
He points out that next year, the rate of inflation should slow whereas the rate of salary increase in nominal terms is expected to either be similar to what it was this year or higher still. "So we may see a return in many locations to salary growth in real terms."
Sharing his perspective on trends in employee mobility, he is seeing a rebound to regional mobility, in spite of certain locations, particularly Hong Kong, China, or other markets seeming to be adopting a ‘living with COVID’ approach.
He explains: "Many organisations were previously holding steady in terms of either having repatriated main staff back home at the outset of the pandemic, or holding back expansion plans during the pandemic. But now what we've seen as organisations start to reinvigorate some of those plans, we're expecting significant interest in either sending more people to locations in which they operate or expanding into new markets."
On the flipside, cost pressures also seem to be evident for many organisations.
Quane elaborates: "Firstly, employees seem to be less willing to go [overseas] than they were in 2019 or prior. There are several reasons behind this, but a couple of these reasons relate to health. For example, the pandemic exposed challenges associated with being on an assignment several thousand miles away from your loved ones, and not being able to return. So, many people are thinking twice about whether or not they do want to do that."
He adds: "Likewise, the difficulties associated with travel still exist. For example, if I'm on a business trip to a particular location, and then during that time, we have crises, be it riots, civil disorder, or even a war. That means many organisations need to think about crisis strategies in terms of how they will look after their staff when they're on assignment, and what they need to do in order to take care of them and look at ways in which they can repatriate staff."
Image / Salary Trends Report by ECA International (ECA)