Slow pay

The Great Recession took a big toll on workers in the country where the collapse started: the United States. New Korn Ferry Hay Group research finds that Americans’ real (inflation-adjusted) salaries fell 3.1% on average since September 2008. This occurred even as the US Gross Domestic Product (GDP) grew 10.2%.

The firm’s research focused on the G20, nations with the world's leading economies, and compared inflation-adjusted pay and GDP in each. The US fared poorest in pay recovery among Western developed nations. Canada’s recovery was the best, with 7.2% real salary growth on average and a GDP gain of 11.2%. Other developed nations experienced flat to modest real salary growth, with Australia at 5.9%, France at 5.2%, Germany at 5%, Italy at 2.4%, and the UK down 0.1%.

“While global economists point to this recovery overall as one of the worst in history, there are political, economic, and social reasons for the disparate salary fluctuations in different countries,” Benjamin Frost, Korn Ferry Hay Group Global Product Manager−Pay, said in discussing the firm’s new research. It examined how salaries have fluctuated globally since Lehman Brothers fell eight years ago, marking for many experts the start of the worst economic crisis and recession in generations.

In the US, the Commerce Department recently released figures showing that the pace of the subsequent and current expansion has been by far the weakest since 1949. The slow-growing economy and especially the failure of broad swaths of American workers to see income gains in the face of widening economic inequalities, have remained major issues of the 2016 presidential campaign. Media reporting on economic fundamentals, such as monthly jobs reports, fixes now, not so much anymore on unemployment levels, as pay gains.

The Korn Ferry Hay Group pay data was drawn from the firm’s PayNet database, which contains salary and job data for more than 20 million workers in more than 25,000 organizations across 110 countries. Economic data (CPI and GDP) came from the Economist Intelligence Unit. The firm’s data for this study shows real change (i.e. absolute change minus CPI inflation) in base salary median pay levels from 2008 to 2015, averaged across three benchmark job levels (clerical/entry level, professional, and senior management) for each country. The firm also shows the change in GDP over the same period.

Emerging markets

Besides the Western industrialized nations, Korn Ferry scrutinized emerging markets, which saw the best and worst salary growth. China (10.6%), Indonesia (9.3%), and Mexico (8.9%) had the largest salary growth. The worst were Turkey (-34.4%), Argentina (-18.6%), Russia (-17.1%), and Brazil (-15.3%). Growth in all developed nations landed in the middle.

“In the countries that are seeing tremendous salary growth, the issue is supply and demand,” Frost said. “With countries like China seeing a whopping 75.9% 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.”

US low-end workers see big dip

Workers in low-end jobs bore the brunt of the recession’s pay crash in the United States, Korn Ferry data show. Employees with lower-paying/entry-level titles, such as clerical, network analyst, payroll coordinator and production line supervisor, experienced a 14.8% inflation-adjusted drop in wages on average since the recession’s start.

Those in professional mid-level roles, such as a brand/product manager and network administrator, fared much better, with a 2% inflation-adjusted salary growth. Senior managers, such as an IT manager or chief accountant, saw a 3.5% 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.”

That top-and-bottom difference in pay gains proved less dramatic in other developed nations, where some lower-level workers saw higher pay gains in the recovery. In France, such workers experienced a 5.1% salary increase since the recession’s start, compared with a 4.7% gain for senior managers. The same held true for Italy, with its 1.6% salary growth for lower-level staff versus a 1% decline for senior managers, and the UK, where the figures were 2.9% decline at the low end versus 1.7% growth at the high end.

“Several factors help to achieve pay parity across levels in European nations,” Frost said. “Many governments regularly increase minimum wage to keep pace with inflation, and labor laws usually favor employee rights. Also, strong unions bargain on pay and conditions, and in recent years, public pressure has kept senior manager salaries in check amid a call for everyone to ‘share the pain’ on the road to economic recovery.”

Global Inflation Adjusted Salary Increases/Decreases 2008-2016