APAC sees the world's highest real salary increases in 2023
According to the latest Salary Trends Report by ECA International (ECA), real wages in APAC, which are equal to nominal wage growth minus the rate of inflation, once again outperformed the rest of the world in 2023.
In Thailand, salaries increased by 3.5% in 2023 in real terms and are expected to grow further by 3.4% in real terms in 2024.
ECA International is the world’s leading provider of information, software and expertise for the management and assignment of employees around the world. The annual Salary Trends report analyses current and projected salary increases in more than 70 locations across the world.
“Thailand was one of the few locations in Southeast Asia where inflation went above median salary increases in 2022, meaning employees saw salary decreases in real terms. However, we are seeing returns to positive salary growth this year and with lower inflation projected for next year, real salary increases should continue next year,” explained Mark Harrison, General Manager, of Asia for ECA International.
The average forecast rate of increase in real terms in the region for 2024 is 2.2%, more than double the global average of 1%. Most surveyed locations in the APAC region are likely to maintain or exceed their 2023 real salary growth rates in 2024, with the exceptions being Sri Lanka and New Zealand.
Rates of salary growth across ASEAN countries vary. In Malaysia, salaries increased by 2.1% in 2023 in real terms and are expected to grow further by 2.3% in real terms in 2024. Vietnam led the way in ASEAN in 2023 with a salary growth of 3.6% in real terms, a rate which is forecast to be the same in 2024. In Singapore, real wages fell by 1.5% in 2023 and are expected to rise once again in 2024, where workers will see a 0.5% increase in real wages.
Conversely, workers in Laos experienced a significant decrease in salaries in real terms in 2023, with salaries falling by 23.1% in real terms due to a soaring rate of inflation of 28.1%. Salaries are forecast to continue to decrease in real terms in 2024. However, a real-term fall by a further 3.0% is an improvement from the previous year as the rate of inflation is expected to fall substantially to 9.0%. Lastly in Myanmar, inflation is anticipated to normalise only by next year, amidst the persistent political turmoil since 2021, which has led to a consistent decline in real wages for employees over the past five years, a trend likely to persist into 2024.
“Southeast Asia has generally come out of the pandemic in a strong position with most locations seeing positive salary increases throughout the pandemic and returns to pre-pandemic levels this year. Indeed, locations in Southeast Asia make up a large portion of our top ten for both nominal and real increases for 2023,” explained Harrison.
Workers in Hong Kong have also benefited from below-average rates of inflation compared to their APAC and global counterparts, resulting in continued salary increases in real terms next year. After taking inflation into account, the real forecast salary increase in Hong Kong will be 1.7% next year, 0.1% lower than in 2023.
"As we look ahead, it's promising to see that the nominal salary increase in Hong Kong has rebounded to pre-Covid levels in 2023, as expected,” said Harrison. “Although real salary growth in Hong Kong in 2023 is in the middle of APAC regional ranking, squarely at the median percentage, this growth remains substantially higher than the 1.5% fall in salaries in real terms observed in Singapore."
In 2023, workers in China experienced a nominal salary increase of 5.3%, and this is expected to rise to 5.8% next year. Notably, China recorded the lowest rate of inflation in the region for 2023, at just 0.7%, with a forecast increase to 1.7% in 2024. Consequently, the average salary increase in China in real terms stood at 4.6% in 2023, making it the third-highest globally and the second-highest in the region. Projections for 2024 anticipate a real salary increase of 4.1%, remaining in the top three both globally and regionally.
Harrison stated: “Due to the advantage of a lower inflation rate compared to the rest of the world, most locations in Greater China except Hong Kong rank among the top 10 globally for the highest real forecast salary increases in 2024. Notably, the inflation forecast for Taiwan in 2024 is the lowest, and China ranks as the third lowest in the Asia Pacific region.”
Japan presents a challenging scenario, with the nominal salary increase for 2023 being the lowest in the region at 2.8%. The forecast for the following year remains modest at 3.0%, continuing to position Japan at the bottom of the regional ranking. Meanwhile, Japan's history of very low rates of inflation seems to have ended, with inflation rates rising to 3.2% this year. Although the rate of inflation is expected to fall to 2.9% in 2024, workers in Japan will see little improvement in their real incomes by the end of next year: A decrease of 0.4% in real terms in 2023 will only be slightly offset by real salary growth of 0.1% next year.
Global highlights
Globally, the average salary increase in nominal terms was 5.0% this year and is forecast to be the same in 2024. Inflation rates are expected to fall from an average of 5.5% this year to 3.6% next year. After factoring in inflation, globally salaries fell by 0.9% on average in real terms in 2023, but they are expected to return to growth in 2024 where average salaries will grow by 1.0% in real terms.
Europe continues to trail other regions globally for real salary increases, where at 0.9% salaries will grow at less than half of the 2.2% increase in real terms anticipated for employees in Asia in 2024. Salaries in the UK fell by 2.7% this year in real terms.
Nevertheless, with the anticipated decrease in inflation from 7.7% in 2023 to 3.7% in 2024, real salaries in the UK are forecast to rise by 1.3% next year.
