Next year, U.S. wages will increase by about 1.5% after adjusting for inflation, according to ECA International estimates. In some parts of the world, wages will grow at double this rate, and in several countries even more. Ukrainian workers are expected to earn roughly 6.1% more in 2014 than they did this year, adjusted for inflation. 24/7 Wall St. reviewed the 10 countries with a projected 3%, or more, real wage growth.
In many of the countries with the highest real wage increase, previously high inflation rates are expected to stabilize. For example, inflation in Ukraine, the country with the highest wage increase, was nearly 16% in 2009, but fell to just 0.6% in 2012. For both 2013 and 2014, prices are expected to remain fairly stable in the country.
Similarly, inflation rates exceeded 10% in Bangladesh, Kenya, Pakistan and Vietnam in 2011. All of these countries, among the top 10 for wage increases, are projected to have inflation below 8% next year.
In an interview with 24/7 Wall St., ECA International’s Cost of Living and Remuneration Services Manager Steven Kilfedder explained that “salary increases tend to be less elastic than the cost of living or price increases.” When inflation rates stabilize, wages can be slower to adjust, and this means that in countries like Vietnam, which had 18.7% inflation in 2011 and a projected inflation of 7.4% in 2014, “workers reap the benefits.”
Many countries where wages are rising are also expected to experience strong economic growth. According to the IMF forecasts, seven of the 10 countries with the greatest expected wage growth will have GDP growth faster than its 3.6% projection for global growth next year. Two European countries that are not expected to outpace global GDP growth, Bulgaria and Ukraine, have projected GDP growth greater than that of the eurozone, which is expected to grow its economy just 1%.
Another factor potentially leading to higher real wage growth in several of these countries is government-mandated increases in wages, typically the minimum wage. The governments of Vietnam, the Philippines, Bangladesh and Thailand have recently mandated pay increases for low-wage workers.
Based on wage figures provided by ECA International’s Salary Trends Survey 2013/2014, 24/7 Wall St. determined the 10 countries where wages are projected to rise the most in 2014, net of inflation. Nation-level statistics on inflation, gross domestic product and other macroeconomic figures are from the International Monetary Fund’s World Economic Outlook. GDP per capita figures are adjusted for purchasing power parity. We excluded Argentina from our rankings despite its high nominal and real wage growth because it is widely believed to be underreporting inflation figures. In February, Argentina became the first nation to be censured by the IMF for its economic data.
These are the 10 countries with the fastest-growing salaries.