Workers’ pay expected to increase by 3.9%, outpacing inflation of 2.3%

THE salaries of workers here are expected to rise by 3.9%, outpacing anticipated inflation of 2.3% with ease next year, according to Mercer’s Global Compensation Planning Report.

The survey found that while pay in the EU is likely to rise by 2.1 percentage points above inflation, on average, Irish salaries are forecast to increase by 3.9% while inflation is likely to be 2.3%.

By comparison, salaries are predicted to rise by an average of 1.9 percentage points above inflation next year across the globe, according to the survey, which examines employment, economic and pay trends in some 70 countries.

The study found that in almost two-thirds (62%) of the countries surveyed, including Ireland, Britain and the US, pay is forecast to rise between 1 and 3 percentage points above inflation. However, a handful of countries can be found at the extremes. In Lithuania, India and Bulgaria, for example, salaries are expected to outpace inflation by 7.7%, 7.2% and 5.6%, respectively.

Mercer worldwide partner Brian Duncan said: “wage inflation appears to be levelling off, despite the strengthening economies and the increase in employment rates. The global uncertainty arising from Middle Eastern conflicts is obviously having a detrimental effect on consumer confidence and consequently investment.”

Mercer’s Global Compensation Planning Report examines employment, economic and pay trends in some 70 countries.

The report found average pay increases are predicted to be highest in Greece, at 5.2%. Meanwhile, inflation is likely to be 2.4%. Employees in Italy, Spain and Portugal are also expected to receive large pay rises of 4.3%, 4.3% and 4%, respectively, while inflation is forecast to be 2.2%, 2.6% and 3%. Pay is predicted to increase by 3.9% in Ireland and inflation is likely to be 2.3%. Germany is expected to have the lowest pay growth, at 2.3%, with inflation predicted to be 1.5%.

The competitive advantage of many eastern European countries are likely to be eroded as pay rises significantly next year.

“Pressure on pay is likely to be high in Asia in 2005 due to improved business sentiment following the recovery from the SARS epidemic and political and economic stability. The emergence of China as a global superpower and the IT industry in India means that companies will have to pay premiums to attract and retain experienced, qualified staff in these employment hot spots,” said Mr Duncan.

Salary increases in the US and Canada are likely to remain in line with recent years, at 3.5% and 3.3%, respectively. Inflation is likely to rise to 3.1% in both countries.

In Australia, employees can expect to see their pay rise by 4.3%, while inflation is predicted to be 2.6%. Those in New Zealand are likely to see slightly lower increases, at 3%, and inflation at 2.8%.