Low wage growth expected for Gulf countries

06/12/2016 06:01 AST

Households in the Arabian Gulf are facing their weakest earnings growth prospects in a decade as low oil prices force employers to keep pay rises to a minimum.

Real wages in the region will increase by just over 1 per cent next year – a lower rise than most other regions except Latin America and Africa, according to research from recruitment consultant Korn Ferry Hay.

Although headline pay increases in Arabian Gulf countries would average 4.2 per cent, inflation will mean that real disposable incomes will rise by just 1.3 per cent

The UAE is expected to have the lowest real wage increases in the region, with average salaries rising by just 0.5 per cent as slowing growth forces companies to tighten budgets.

Employees in Saudi Arabia, the world’s largest oil producer, are expected to fare only slightly better, with real wages expected to increase by 0.8 per cent.

"Companies in the Gulf have taken a cautious view on pay increases, which are the slowest in a decade," said Vijay Gandhi, the reward expert at Korn Ferry Hay Group.

"With oil prices averaging in the range of US$40 to $60 a barrel, this new reality is shaping the way organisations focus on costs – including reward."

Korn Ferry analysed salary forecasts from HR departments for 25,000 organisations in 110 countries to find out which countries were likely to experience the biggest – and smallest – pay rises next year.

The region with the highest predicted pay rises was Asia, where salaries are forecast to increase by an average of 6.1 per cent and real wages are expected to rise by an average of 4.3 per cent.

The largest real wage increases are forecast in Vietnam (7.2 per cent), Thailand (5.6 per cent), Indonesia (4.9 per cent) and India (4.8 per cent).

Meanwhile in western Europe, average pay rises are expected to stand at about 2.1 per cent which means that, when inflation is taken into account, real pay rises of around 1.7 per cent.

Despite a fall in the value of the pound following the UK’s EU referendum in June, average wages in the UK are expected to rise 2.5 per cent next year – equating to a 1.9 per cent increase when adjusted to account for inflation. Workers in France and Germany are forecast to receive real wage rises of 1.5 per cent and 2.2 per cent respectively.

And in the United States, a 3 per cent salary increase is predicted. Adjusted for the 1.1 per cent inflation rate, the real wage increase is 1.9 per cent.

Earlier this year online recruitment firm GulfTalent predicted that salaries in the Gulf region would rise by 5.2 per cent this year. Last year, the UAE’s inflation rate was 4.09 per cent, with the cost of housing and education having the steepest increases.

The National