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Pay to „race ahead” in Asia and Eastern Europe

The pay gap between professional staff and managers employed in emerging Asian and Eastern European economies and those working in more mature markets is narrowing rapidly after taking inflation into account, according to research published on Monday.

Forecasts of wage increase in more than 50 countries, published by global consultants Hay Group, reveals that real pay, after allowing for local cost of living, is predicted to race ahead in Asia and eastern Europe this year compared with the „developed old economies” of western Europe and the US. Faster wage growth reflects „the wealth creation being generated by rapid economic acceleration in China, India, the former Eastern Bloc and the Baltic states,” says Hay. A study by Manpower, one of the world’s largest recruitment companies, warned last year that multinational companies struggling to retain professional and support staff in China, were having to pay higher salaries and excessive recruitment costs to beat skill shortages.

According to Hay’s research, the real pay of senior mangers in China is forecast to rise by „an impressive” 8.9% this year. Earnings of professional staff after adjusting for inflation are predicted by 7.9% administrative workers and by 7.8% for professional staff. Extremely high pay rises in India last year also look set to continue in 2007 with real earnings of senior managers forecast to rise by 6.9%, it says. Real pay in Eastern Europe is also rising „at a rate far above that in the west,” The biggest rises this year are expected in Bulgaria where average real increase of 6% are predicted for managers, professional staff and administrative workers. Scott Marlowe, general manager for Hay in the Czech republic says: „While wages are growing from a much lower level for manual and administrative workers, pay levels for managers are closer to western standards. „ The lower cost of living in the east means that as the management pay gap closes, senior managers in Eastern Europe enjoy a significantly greater purchasing power than those in the west – ultimately making them better off.”

Salary increases in Western Europe by comparison are forecast to be much „ much more moderate” this year. Real pay rises for managers, professional and administrative staff are expected to average less than 1.5% in Germany, Italy, Spain and France and just 1.5% in Britain. US workers are also expected to fare worse „with predicted increases of just 1.4% across all three categories. „As another established market the US is experiencing much slower growth rates than some of the exciting new economies, which in turn is reflected in slower salary growth rates,” says Hay in the US. „Much like their colleagues in Europe, American employees cannot look forward to stellar pay rises in 2007.” (FT.com)