Salaries for highly skilled workers could boom as talent shortages take hold across Asia Pacific, according to a new study by Korn Ferry.
Left unchecked, the salary surge could add more than $1 trillion to annual payrolls in the region by 2030, jeopardising companies' profitability and threatening business models. In Thailand, worker shortage will cost an additional $22 billion by 2020, $27 billion by 2025, and $34 billion by 2030.
“The new era of work is one of scarcity in abundance: there are plenty of people, but not enough with the skills their organisations will need to survive,” said Dhritiman Chakrabarti, Korn Ferry Head of Rewards and Benefits for the APAC region. “"While overall wage increases are just keeping pace with inflation, salaries for in-demand workers will skyrocket if companies choose to compete for the best and brightest on salary alone.”
Korn Ferry's Salary Surge study estimates the impact of the global talent shortage, identified in Korn Ferry's recent Global Talent Crunch study, on payrolls in 20 major global economies at three milestones: 2020, 2025 and 2030, and across three sectors: financial and business services; technology, media and telecommunications (TMT); and manufacturing. It measures how much more organisations could be forced to pay workers, above normal inflation increases.
Based on the study, the projected labour demand figures for graduate level workers and above in Thailand in the year 2020, 2025 and 2030 are 5,737,900, 5,857,280 and 6,016,130 respectively. Meanwhile, the projected labour supply figures for graduate level workers in the year are 2020 at 5,164,160, 2025 at 5,137,790 and 2030 at 5,054,850. This will cause a 10 per cent, 12 per cent and 16 per cent labour shortage in 2020, 2025 and 2030 respectively.
The study reveals the huge impact the salary surge could have on countries across the region included Japanese companies can expect to pay the most: Japan is predicted to pay approximately an additional $468 billion by 2030.
Thailand companies can be expected to pay more than $34 billion by 2030.
However, smaller markets with limited workforces are likely to feel the most pressure. By 2030, Singapore and Hong Kong could expect salary premiums equivalent to more than 10 per cent of their 2017 GDP.
By 2030, China could see an additional wage bill of more than $342 billion.
India is the only economy that can expect to avoid upward spiralling wages, as unlike any other country in the study it will have a highly skilled talent surplus at each milestone.
By 2030, the average pay premium (what employers could have to pay over and above the amount that salaries would rise over time due to normal inflation) across the region per worker is $14,710 per year. However, Hong Kong could face a staggering $40,539 per year per highly skilled worker; Singapore could expect to pay an extra $29,065; and Australia $28,625 more by 2030.
At a sector level, manufacturing, a critical driver of growth for emerging economies, may be stalled by the huge impact of the salary surge. In China the highly skilled worker shortage is expected to exceed one million workers by 2030, meaning that the wage premium could reach nearly $51 billion by the same date - higher than any other country analysed.
Dr Mana Lohatepanont, Managing Director, Korn Ferry Thailand and Vietnam, said that in Thailand, the increase in average pay premiums may have a high impact at both the macro and micro level, especially in 2030 where average pay premiums will be as high as $34 million, equivalent to 7 per cent of Thailand's GDP in 2017. By 2030, organisations will see a 15 per cent surge in annual payroll compared to salary increases, and this will directly affect businesses' bottom-line. Organisations that identify and develop employees' skills and competencies to match their future needs will be well-positioned to enjoy financial success."