REVISION TIME?
Rising salaries in Asia.
By Oliver Jones

Many multinationals in Asia calculated their employee raises in what may seem to be a different world of only four months ago. True, there were whisperings of a U.S. recession as far back as September. But GDP levels were growing at an average rate of 5-6 percent across the region, with a blistering 11 percent in China, and inflation was relatively low. How will dramatic changes in these conditions affect local salaries?

Counter-intuitively, with an upward revision, says Lee Quane, general manager of ECA International’s Hong Kong office. He predicts that actual salaries in key Asian economies will rise even higher, and that multinational companies “are likely to face pressure to revise their forecast salary increases upward,” despite the prospect of a slowdown in Asian business.

This is surprising news, because salaries in Asia—once the global standard of low-cost labor for even skilled jobs—are already set to jump in 2008. A January survey released by ECA International collected data from 250 multinational companies in 47 countries. In Asia, the companies surveyed planned to raise the salaries of managers employed on local terms by 7.3 percent a year—well above the global average of 5.9 percent. Five Asian economies are expected to be in the top ten for salary increases this year (see table).

So what’s changed? Inflation forecasts were relatively low when many companies were calculating salary increases for 2008. No longer. In China, for one, the recent storms that clogged transportation and power industries pushed up food prices by as much as 30 percent in many of the nation’s cities in January.

Inflation affects real incomes, adding to the pressure for bigger raises. Tony Dickel, CEO of the MRI China Group, a recruitment firm based in Hong Kong, says that, “If you need to attract someone to join you and inflation is running at 10 percent, then people are not going to move unless they get more than a 10 percent rise in compensation.”

Because of the looming recession, Dickel says, multinationals are looking to Asia’s developing markets for profits. This, he says, should keep hiring levels in the mid- to senior-level hiring market “extremely frothy.” And companies still have leeway to give raises, if it keeps them competitive. Linda Jiang, China corporate finance director with Swiss industrial products maker Georg Fischer, says that “the market has been growing faster than the increase in labor costs.”