In theory, wage growth ought to maintain the same, if not higher, growth rate as inflation. The value of money erodes with time and as such, wages need to rise in order to keep pace otherwise people won’t be able to afford any goods and services that are priced to match the modern economy.
While inflation rates have been relatively moderate around the world in recent months, it’s quite surprising to see which countries are showing a surge of anticipated wage growth in 2018 and which ones are declining.
After analyzing OECD data, the London-based Trades Union Congress (TUC) has prepared forecasts for wage growth in developed economies over the coming year. The chart below shows this data mapped out from Statista. These countries will need to ensure that they don’t run into issues with inflationary pressures and interest rates that would disrupt this balance.
This information is quite good news for a number of Eastern European countries, with Hungary, Latvia and Poland expected to see the largest increases at 4.9, 4.1 and 3.8 percent, respectively.
However, tougher times await those in the soon-to-be-divorced-from-the-EU United Kingdom though, where real wages are projected to shrink by a potentially punishing 0.7 percent.
Interestingly enough, the U.S. is on the positive side of the chart, with a 1.2 percent jump upwards predicted to be on its way. This data was collected before Congress passed its tax-overhaul at the end of the year, so this growth could very well be higher than expected.