Weakest Link: U.S. Sees Worst Pay-Growth Recovery Among Developed Nations

Low-paying jobs were hit hard, while senior positions saw modest pay gains

By Stephen Miller, CEBS Sep 9, 2016
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Eight years after the beginning of the Great Recession, the United States has suffered the weakest salary recovery among developed nations.

Adjusted for inflation, salaries in the U.S. have actually decreased 3.1 percent on average since September 2008—despite gross domestic product (GDP) growth of 10.2 percent. In contrast, Canada's salary recovery has been the best among developed nations, with a 7.2 percent salary growth on average, with a GDP gain of 11.2 percent.

These newly released findings are from the Hay Group division of consultancy Korn Ferry, and are based on salary and job data for 20 million workers in more than 25,000 organizations across 110 countries. The data show the real or absolute changes in pay, factoring in consumer inflation—revealing that some employee groups have seen a real drop in purchasing power while their nominal income may have increased modestly.

Other developed nations experienced flat to modest inflation-adjusted salary growth since 2008, while emerging markets saw both the best (China, Indonesia and Mexico) and the worst (Turkey, Argentina, Russia and Brazil) salary growth worldwide.

"While overall, global economists point to this recovery as one of the worst in history, there are political, economic and social reasons for the disparate salary fluctuations in different countries," said Benjamin Frost, London-based global product manager for pay at Korn Ferry Hay Group.

Unbalanced Salary Growth in U.S.

In the United States, the pace of the current expansion has been the weakest of any since 1949. In terms of salary growth, the findings revealed that:

  • Employees with lower-paying/entry-level positions—such as clerical assistant, network analyst, payroll coordinator or production-line supervisor—have experienced a 14.8 percent inflation-adjusted drop in wages on average since the start of the recession in 2008.

  • Those in professional mid-level roles, such as a brand/product manager or network administrator, fared much better with 2 percent salary growth with inflation factored in.

  • Senior managers, such as an IT manager or chief accountant, saw 3.5 percent real salary growth on average.

"Imbalances in supply and demand are behind the differences in pay growth at different job levels in the United States," Frost said. "For lower-level jobs, technology and offshoring are among the factors causing an oversupply of people—and driving weak pay growth. At the top end, key leadership and technical skills are in short supply, leading to stronger pay increases."

Tempered Salary Gaps in Europe

The upward swing in salary increases for more senior-level roles is not nearly as dramatic in other developed nations compared to the U.S. For example:

  • In the U.K., lower-level employees experienced a 2.9 percent decline in inflation-adjusted salary, and senior-level managers experienced a 1.7 percent growth.

  • In France, lower-level employees experienced a 5.1 percent salary increase since the beginning of the recession, while senior managers experienced a 4.7 percent growth.

  • In Italy, lower-level employees experienced a 1.6 percent growth rate, and senior managers experienced a 1 percent decline.

"Several factors help to achieve pay parity across levels in European nations," Frost said. "Many governments regularly increase minimum wage to keep pace with inflation, and labor laws usually favor employee rights" throughout Europe. Also, "strong unions bargain on pay and conditions, and in recent years, public pressure has kept senior manager salaries in check amid a call for everyone to 'share the pain' on the road to economic recovery."

Emerging Economies Run the Gamut

China, Indonesia and Mexico had the largest inflation-adjusted salary growth at 10.6 percent, 9.3 percent and 8.9 percent, respectively. Turkey, Argentina, Russia and Brazil had the worst at -34.4 percent, -18.6 percent, -17.1 percent and -15.3 percent, respectively. Growth in all developed nations landed in the middle.

"In the countries that are seeing tremendous salary growth, the issue is supply and demand," Frost said. "With countries like China seeing a whopping 75.9 percent GDP growth since the beginning of the recession, universities and corporations simply can't train people fast enough. This leaves an acute talent shortage and points to the reason skilled employees are seeing steep pay increases."

Related SHRM Articles:

Salary Budgets Expected to Rise 3% in 2017, SHRM Online Compensation, July 2016

Bonus Binge: Variable Pay Outpaces Salary, SHRM Online Compensation, August 2016

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