Salaries to record double-digit growth this year – Should you expect more money in your pocket?

Last Updated at: Oct 22, 2019
Salaries to record double-digit growth this year

If the recent economic reports are to be believed, employees in India are likely to see double-digit salary growth in 2019. This is due to a consistently high economic growth in India. However, it is also said that salaries usually increase to compensate for an increase in expenses. In this article, we examine the current salary trends, reasons for why there may be a hike in salaries and also highlight how inflation can affect the amount of disposable income.

The Korn Ferry 2019 Global Salary Forecast

The firm Korn Ferry draws the data from a pay database which contains data for more than 20 million job holders in 25,000 organizations across more than 110 countries. It shows predicted salary increases, as forecasted by global HR departments, for 2019 and compares them to predictions made regarding 2018. It also compares them to 2019 inflation forecasts from the Economist Intelligence Unit. The survey also highlights the need for regular compensation program review, to adapt to the changing business environments

Talk to Legal Experts

What the 2019 trends say?

According to the firm’s data analysis, globally wages are expected to grow at just 1 percent in 2019. However, Asia is expected to see the highest real wage growth, which is highlighted in the subsequent part of this article. So, while employees in other continents may be left with just one percent extra income this year, Asian employees can expect to receive almost 2.6 percent rise. The data for North America shows an abysmally low increase of 0.6 percent.

In stark contrast to this, salaries in India are expected to increase by 10 percent, one of the highest. This is also a one percent increase from the 9 percent prediction of 2018. This growth is largely attributed to the steady upward trend in economic growth in India last year and the predicted high-growth this year.

Income, expenses and inflation – A necessary trinity?

While in Asia, salaries are forecast to increase by 5.6 percent, up from 5.4 percent last year, the inflation-adjusted real-wage increases are expected to be half of it, at 2.6 percent. We will now examine what inflation-adjusted real wages are. Although the phenomena of price rise and income adjusted are complex and dependent on several variables, we will present a simpler angle to this multi-faceted phenomenon.

In any growing economy, due to limited resources (let’s say land and oil), there is a rivalry on resource-acquisition and therefore, prices eventually start increasing. Economic growth also means that people demand more salaries, and their ability to spend also increases. However, assuming how they spend has not changed; the final savings will still be the same or with the marginal increase due to commodities becoming pricier. This price rise is called inflation, the hike in salaries when compared against inflation is called inflation-adjusted, and what is finally earned is termed as ‘real wages’. Typically in an inflated economy, expenses increase, as a result of which incomes may also increase, not necessarily by the same margin.

How reliable are these predictions?

If we look at the survey, it tracks data from various companies. However, in an economy like India, where a large chunk of employees can be seen in the unorganized sector who may not be accounted for, or be engaged in agriculture or allied activities, the double-digit growth statistic may not be significant. Moreover, there is a great disparity between technically skilled and unskilled employees, the difference between their salaries being as high as 80 percent. Therefore, not all segments of workers may witness a high increase in their real wages.

Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.