Oceania set for lowest real wage growth globally in 2019

25 February 2019 Consultancy.com.au

A forecast by human capital consultancy firm Korn Ferry predicts stormy seas for professionals in Oceania, with the region expected to experience a paltry 0.3% increase in real wages in 2019. The number is the lowest globally, and lower than the region’s 1.2% increase in 2018.

The decrease is a result of higher inflation than previous years, according to the report, and is a sign that economic growth is being passed down less strongly than before in salaries. Despite high inflation, Asia and Eastern Europe will experience the highest real wage increases – 2.6% in Asia and in 2.0% for Eastern Europe.

"But the year-on-year increase is also decreasing in Asia: in 2016 and 2017 the growth in real wages was more than 4% per year”, Rob Westrek, a senior partner at Korn Ferry, said. 

Wage growth in Oceania – nominal and real terms

In regions where economic growth is levelling off, real wage rises are considerably lower. For the Americas and Canada, Korn Ferry predicts an increase of 0.6%. For Latin America, the number is marginally higher, at 0.7%. The Middle East comes in just above Oceania, with a projected 0.4% real wage increase. In Africa, where inflation is highest, at 6.8%, a real wage increase of 0.9% is expected. 

Nominal wages for each region are considerably higher, but nominal wages are tied to the amount of money a person earns per hour. A real wage is a nominal wage adjusted for inflation.

It’s not all bad news for the Oceania, however. According to Credit Suisse’s “Global Wealth Report 2018," Australia last year surpassed Switzerland as the country with the highest-paid median wealth per adult. The number of "super rich," also known as ultra-high-net-worth individuals, grew to 42, up from 34 the previous year. 

From a national perspective, employees in Ukraine, Turkey and India set to receive the largest real rise in pay. In Argentina, Uzbekistan, Argentina, and Lebanon, however, real wage growth is forecast to be below 2%. Papua New Guinea, in the southwestern Pacific and part of Oceania, is expected to see a rather high 5% increase in nominal wage growth, yet with inflation close to 6%, real wage growth will drop to -1%.

Changes in wages - top and bottom countries

Money isn't happiness

Alongside a need for employers to pass on revenue increases to their employees, shifting to a more productive and innovative economy would drive real wage growth. Sectors demonstrating above-average growth include the creative sector and digital platforms, set to reshape the country’s residential tradie economy, which last year accounted for nearly 6% of the national GDP. The creative sector's development spurred PwC’s chief creative officer, Russel Howcroft, to call for “creativity” to become central to the nation’s agenda.

“Employment in the creative sector is growing almost twice the rate of employment across all sectors. Other sectors are increasingly relying on workers with creative skills for their own growth and innovation. Creative jobs are jobs of the future,” Howcroft said.

Financial factors are however just part of quality of life, pointed out a recent report from global HR consulting firm Mercer. While cities such as Sydney, Melbourne, and Perth are all on the list of the world's most expensive cities to in which to live, Australia nevertheless ranks relatively high in terms of overall quality of life. Adelaide is Oceania's top city in this regard, ranking seventh globally, trailing Auckland and Wellington, in New Zealand, which respectively take the fifth and sixth spots.

Related: Malcolm Turnbull is best paid global leader according to IG consultancy.


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