Global salaries set to rise above inflation

Despite a strong correlation between 2008 forecasted inflation and forecasted pay increases, there is expected to be wide global variation in both projections. The 2008 Worldwide Pay Survey conducted by Mercer has revealed that India will have one of the highest pay increases in the world, with a projected increase of 14.1 per cent, almost 10 per cent above local inflation.

Inflated salary projections in emerging economies could mean that multinationals will start to reconsider their long-term commitment to a presence in these economies. Although multinationals can currently save up to 75 per cent on labour costs by sourcing labour from emerging markets, these savings could be offset by the long-term volatility in labour costs. Employers may find that domestic employees in areas with less competition for labour, yet with strong language skills and good work ethics are preferable.

In Western Europe, Ireland is predicted to experience the highest salary increase of 2.6 per cent above inflation, with the UK predicting an increase of 1.1 per cent above inflation.

Although salaries in Eastern Europe are among the highest in the world at 6.9 per cent, inflation rates are also expected to remain high, resulting in an average increase of 2.3 per cent above inflation. This area is becoming an attractive option for global companies where they can take advantage of employees with multilingual skills and good proximity to European markets.