Asia salaries up, but not back at pre-crisis levels

LABOR market research by consultancy Mercer shows that Asia-Pacific salaries have increased but remain below the levels before the recent global economic downturn, the firm said in a statement on Wednesday.

“Asia Pacific’s emerging markets continue to lead the world in terms of real wage growth, with salary increases just 10% lower than pre-financial crisis levels, compared with the US and Europe, which remain 20-30% adrift,” the statement read.

Mercer said the figures were based on its Total Remuneration survey, Salary Movement Snapshot surveys, and its biannual Market Pulse Surveys.

The consultancy noted salary increases in the emerging markets of Vietnam, India, and Indonesia remain at double digits or high single digits, yet real wage growth (measured as salary increases minus inflation rate) remains low, due to high inflation rates in these countries.

“For example, the salary increase forecast for Indonesia for 2015 is 9.4%; however, the real wage growth is only 2.2%, as the forecasted Inflation rate (CPI rate) is 7.2% for 2015,” the statement read.

Mercer also noted minimum wage in countries like China, Indonesia, Thailand and Vietnam has continued to rise at a compounded rate of 12%-13% every year over the last three to four years.

The firm expects salary increases for 2015 to be higher than inflation across Asia-Pacific, resulting in positive real wage growth in the region. The Philippines, for its part, has a salary increase forecast of 6.5%, with real wage growth pegged at 4%.

“It is important to keep growth rates in perspective,” Puneet Swani, Mercer partner as well as Information Solutions and Rewards Practice leader for Asia, Middle East and Africa, was quoted saying.

“While real wage growth is good news for emerging markets, on a percentage basis, absolute salary levels are still low in these countries, compared to more developed markets.”

Perhaps of more concern, the research also showed doubt-digit turnover rates in almost all Asia-Pacific countries, with the exception of Japan and South Korea.

Mercer said, despite recent stabilization in voluntary turnover rates, the rising numbers represent a major challenge in terms of replacement costs. These costs are in the form of higher salaries for new joiners, recruitment costs, and lost production — all of which, the firm noted, negatively impact overall cost of operations and margins that are already under close scrutiny.

“After a gap of three years, we are seeing changes in hiring intentions in Asia Pacific,” Mr. Swani said.

“The consistent hiring that had continued unabated over the past three years has begun to slow down. Although four or five companies out of ten are still looking to increase head count, especially in emerging economies, this number has decreased from six to seven in the past few years. Sales and marketing, technical/engineering, and finance and accounting functions continue to lead the pack in terms of where maximum hiring is happening,” he added.