Where in the World Is Wage Inflation?
Newsweek has just published a series on global inflation through their print and online editions, with viewpoints from economists such as Dominique Strauss-Kahn, Pascal Lamy, Stephen Roach, Mohamed El-Erian and RGE’s own Nouriel Roubini and Mikka Pineda (see Roubini/Pineda’s “A Wobbly Coalition of the Unwilling“). RGE also contributed data and analyses for the main story written by Rana Foroohar, in which she states
“…wages are skyrocketing across the board in much of the developing world: most Persian Gulf nations, along with other nations such as India, Egypt, South Africa, Argentina, Venezuela, Russia, Turkey, Indonesia, Pakistan, Hungary, Latvia and many more, have seen double-digit wage increases this year”
Here’s an extended list of countries known to have had double-digit nominal (unless otherwise noted) wage or salary increases so far in 2008. In general, high wage or salary increases are found in areas with high inflation rates:
For RGE’s ongoing coverage of wage inflation, see “Wage Inflation Watch: Who’s Seeing Double-Digit Raises?“
As for Ms. Foroohar’s claim that “half the world lives with double-digit inflation”, here are some details:
Out of 156 countries and territories for whom official data on 2008 inflation is available from IMF, ILO, UN, and central banks, RGE found 87 that hit double-digit annual consumer inflation rates this year – 56% of entities surveyed (note: there were 2 countries whose inflation rates were rounded up to 10% y/y: Chile (9.5% y/y June), Ecuador (9.69% y/y June):
10 Responses to “Where in the World Is Wage Inflation?”
Great. In the meantime, wages are falling nicely for US citizens.I am in healthcare and health insurance companies have been cutting my profits by 4% per year for the last 10 years. I haven’t seen a workers comp increase since 1995.If healthcare providers can’t make it in the US, who can?
GM: Everyone’s standard of living is going down in the US. Soon enough we’ll stop all this talk of recession or not and wake up to the reality of living life during a depression. Happens every 80 years or so. It’s not just an ecomomic thing but a sociological phenomenon. ‘Check outa book called the Fourth Turning for a more detailed explanation.
Hi GM. Yes, real wages are falling in the U.S. But those are just averages. CEO and executive pay are still rising faster than inflation, so those are the people who can make it in the U.S.
fyi, UK, Taiwan, Germany are also seeing negative real wage growth. Japan’s real income growth is flat, trending to negative
I think many of these countries are experincing an increase in wages because they are places where job creation (demand) is higher than the supply of workers. This is the fundamental shift that’s been going on for the last 8 years from the first world to the second and third worlds. And it’s part of the reason the first worlds are experiencing deflation in wages and the price of domestically produced and consumed products.
just logical result of globalization shift and spreading production into other countries. In fact, the developed countries are currently facing problems to find personnel for technical and technological advance. We are facing redistribution of global wealth, resulting in advance of underdeveloped countries, similarly in negative income evolution for herd of white collars administrators and consultants in developed countries. We should start thinking about using our hands and heads, both in cooperation. Hands are not evolved solely for tapping the keyboards.
The first table is very problematic. In virtually all cases the figures are for sub-groups of workers, such as those in the public sector, so this is not the overall rate of wage increases. More fundamentally, merely picking up the headline number about wage increases does not tell us the annual rate of increase. In many countries wage increases are not negotiated annually. Last but not least, if productivity growth is very fast (e.g. China), then even double-digit nominal wage increases need not be inflationary. More generally: there is a lot of scaremongering going on about inflation at the moment.
Andrew, I never meant the first table to capture the overall rate of wage increases. Wage data is very spotty for most countries of the world. I just flagged the biggest numbers I could find in response to a request on short notice from Newsweek for my thoughts on where the highest wage inflation is likely to be found. In many of the countries on Table 1, the public sector employs a large chunk of the population – 70% of employed nationals in GCC countries – so I thought public sector wages give a good sense of overall wages there. Also, Newsweek did not ask me for productivity growth figures, but I’m well aware that wage increases may reflect productivity growth. Newsweek just wanted to know who was seeing big raises this year – regardless of how seldom or irregularly wages are negotiated. More generally: The more vague the question asked of me, the more vague my answer.
I know table 1 above is an incomplete picture of global wage inflation. I don’t pretend otherwise. I didn’t mean to scaremonger about inflation, but I do want to share what info I have so far. However, I can’t control how other people read or interpret the info I share – for example, if they wrongly assume I was claiming to give them the WHOLE picture of wage inflation. I annotated the table to show how little info I had, but Andrew mistook it for synecdoche. If I really wanted to scare people about wage inflation, I’d lie and say China and the G3 are seeing multi-digit annual wage growth with low or negative productivity growth.BTW, Newsweek/Ms. Foroohar didn’t make the distinction between public and private sector wages nor average annual rates and what not in their feature story – though I had annotated the table I gave them (see Table 1) to show where I only had public sector info and where I didn’t have annual rates (let alone multi-year trend data) for all countries. Newsweek merely showed that some people somewhere in the world are seeing big raises this year – regardless of which sector, how often they get raises, what base they’re starting from, and whether the raise reflects productivity growth. Newsweek might have welcomed more detailed information, but they had to make do with what they could get under their and our time constraints. They satisficed. If anyone has ????-2008 data on private sector wage or salary increases around the world, please point me to it!
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