Los Angeles/Mumbai: The fall of Lehman Brothers triggered by the subprime mortgage crisis in the USA in 2008 was an important milestone in the world economy. Since then the world economy has progressed a lot. Adjusted for inflation, salaries of Indian employees grew 0.2% only since 2008 while the Indian economy expanded 63.8% in real terms. A new analysis by the Hay Group division of Korn Ferry showed mixed salary recovery figures across the world, eight years after the fall of Lehman Brothers signaled the beginning of one of the worst global recessions in history.
The study also further revealed that the salary growth story in India is unbalanced where lower end employees suffered the most. Among Indian employees, entry level/clerical workers saw the worst salary growth with fall of 30.1% in salary. The professional category, mostly middle level employees, saw a drop of 2.5% in salary since 2008. The employees in senior levels, especially high-end skilled workers, posted the best salary growth of 33.1% during the same period.
According to the study, emerging markets saw the best and the worst salary growth. China, Indonesia and Mexico had the largest salary growth at 10.6 percent, 9.3 percent and 8.9 percent respectively; and 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 while the United States suffered one of the worst salary recoveries among developed nations in what is known as the “G20,” which denotes the world’s top economies.
Adjusted for inflation, salaries in the United States decreased 3.1 percent on average since September 2008 – despite a Gross Domestic Product (GDP) growth of 10.2 percent. Canada’s salary recovery is the best among developed nations, with a 7.2 percent salary growth on average, with a GDP gain of 11.2 percent. Other developed nations experienced flat to modest salary growth, with Australia at 5.9 percent, France at 5.2 percent, Germany at 5 percent, Italy at 2.4 percent and the U.K. down .1 percent.
“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, Korn Ferry Hay Group Global Product Manager – Pay. “In the countries that are seeing tremendous salary growth, the issue is supply and demand. 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.”
In the USA, in terms of salary growth, employees with lower-paying/entry-level titles, such as clerical, network analyst, payroll coordinator or production line supervisor experienced 14.8 percent inflation-adjusted drop in wages on average since the start of the recession.
Those in professional mid-level roles, such as a brand/product manager or network administrator, fared much better with a 2 percent inflation-adjusted salary growth.
Senior managers, such as an IT manager or chief accountant saw a 3.5 percent salary growth on average.
“Imbalances in supply and demand are behind the differences in pay growth at different job levels in the United States,” said Frost. “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, causing much stronger increases in pay.”