SINGAPORE: Wage growth in Asia is expected to accelerate this year, multiple studies show, alongside a rising tide of inflation and an intensifying fight for talent.
From China and India to Indonesia, Singapore and Thailand, anticipated pay bumps are set to exceed last year’s, as economies begin to shake off the Covid-19 downturn.
This comes as the war in Ukraine adds to upward pressure on living costs, due to disruptions in global energy and food supplies, after the pandemic already snarled supply chains.
“There are several factors being considered for employers to be more generous in pay increments this year,” said Edward Hsu at Willis Towers Watson, a British-American advisory firm.
One “is partially attributed to fewer companies freezing salary increases compared to 2020. In addition, employers are also acknowledging and rewarding their employees who have demonstrated resilience throughout the pandemic.”
A WTW survey of about 5,700 companies across 27 Asia-Pacific markets found that India is likely to see pay increases average of 9.2% this year, one of the highest rates in the region and exceeding the 8.7% rise last year.
China is expected to see 6% wage growth, up from 5.6% in 2021.
Conducted in the final quarter of last year and released in January, the survey found two in five companies were planning higher salary expenditures this year, with employers taking into account rising living costs.
In Southeast Asia, WTW’s projected salary increases this year stood at 6.6% for Indonesia, up from 5.8%; 3.8% in Singapore, versus 3.4%; and 4.8% for Thailand, exceeding the 4.2% in 2021.
“After a muted year in 2020, where companies were challenged with business continuity, we saw a big rebound in 2021,” Puneet Swani at global consultancy Mercer told Nikkei Asia.
“Strong business performance combined with new ways of working have allowed companies to help employees cover high living costs created by rising inflation. This has prompted employers to be more generous in pay increments.”
Mercer’s own survey, released in December, found companies in the Asia-Pacific were forecasting a median 5.4% increase in overall salaries this year, compared with 5.1% in 2021 and 4.8% in 2020.
How higher pay will play out in an inflationary environment remains to be seen as economists present a mixed outlook.
For now, they see inflationary pressure in Asia as relatively modest compared with Western markets.
As for the impact of Russia’s invasion of Ukraine, “Asia’s weak economic and financial links with Russia and Ukraine mean that it is not as exposed as Europe and the US,” Oxford Economics’ Priyanka Kishore wrote after the invasion began Feb 24.
Still, the economist added, Asia “will feel the consequences of rising energy prices and lower foreign demand”.
Likewise, DBS economists Taimur Baig and Chua Han Teng wrote this month that “Russia and Ukraine’s outsized role in energy and food-grain supply has spooked markets”, warning that “the ongoing rise in fuel and food prices clearly poses further upside risk this year”.
At the same time, they noted that inflation momentum in Southeast Asian countries like Indonesia, Malaysia, the Philippines, Thailand and Vietnam is “substantially lower” than in the US or European Union.
“Asia, largely an importer of energy, will find ongoing developments uncomfortable, but the region has sufficient depth to take on elevated oil and gas prices,” the economists said.
What is clearer is that employers feel pressure to pay more, partly as they scramble to hire the workers they need.
Comparing the labour market in the wake of downturns caused by the global financial crisis more than a decade ago and the current coronavirus health crisis, financial services firm Morgan Stanley Asia noted in January that wages are picking up quicker this time.
One factor is the shortage of labour caused by the pandemic.
Morgan Stanley said in sectors like manufacturing, which has rebounded strongly, employment is still running below pre-Covid levels, with companies needing workers but unable to find them given tighter manpower availability.
Still, Morgan Stanley economists Deyi Tan, Louise Loo and Jin Choi wrote that “wage growth in Korea, Taiwan and Singapore, where the recovery is more advanced, stands at between 2% and 4%, a range which looks reasonable”.
They predicted that “inflation will rise but not get out of hand”.
London-based recruitment consultancy Robert Walters, in its 2022 Salary Survey which involved some 600 respondents from six Southeast Asian countries – Singapore, Malaysia, Thailand, Indonesia, Vietnam, and the Philippines – noted increasing attrition rates across industries, which has exacerbated a scarcity of professionals with skillsets in technology, automation and analytics.
The study, done over the course of 2021 and released in December, assessed that in 2022 there will be an increasing shortage of workers who are able to support companies looking to grow in tech-related fields.
“The tech industry tends to offer average higher increments for talent moving jobs,” said Gerrit Bouckaert, managing director for Southeast Asia at Robert Walters.
“We expect to see upward pressure on salaries for mid to senior level professionals especially across the board for all Southeast Asian countries.”
Source: https://www.freemalaysiatoday.com/category/business/2022/03/13/from-india-to-indonesia-wages-to-rise-faster-alongside-inflation/