Bangkok--24 Mar--Grant Thornton
Emerging markets regions including Latin America and South East Asia look set to award the biggest pay rises this year, fuelling fears of rising inflation, according to the latest Grant Thornton International Business Report (IBR).
As part of the survey amongst over 5,700 businesses across 39 economies, privately held businesses were asked what size of pay rises, if any, they expect to award in 2011. 23% of business owners in South East Asia (25% in Thailand) plan to award pay rises above their inflation rates, the highest level recorded, along with 17% of business owners in Latin America.
Ian Pascoe, Managing Partner of Grant Thornton Thailand, said: “Workers looking for pay rises this year should head for South East Asia or Latin America. The increased likelihood of receiving an inflation-busting pay rise in these regions can be attributed to their tight labour markets. Skilled workers are in great demand in these countries, but not in such abundant supply. Their value to their employers is reflected in these plans for big pay rises.”
“At the same time, these regions also have rapidly growing economies. Brazil’s economy grew by nearly eight per cent last year, and Malaysia and Thailand grew by seven per cent. With GDP growing so strongly, business owners are simply in a better position to award their staff higher pay.”
“However, a real danger lurks for the governments in these fast growth economies. The continued willingness of their business owners to award big pay increases will put significant pressure on their economies at a time when many of them are already grappling with increasing inflation. Brazil’s inflation rose to 5% in 2010, Argentina’s to 10.5%, and Singapore’s has shot up from -0.5% to 4.6%. Governments in emerging markets must ensure they do not fall prey to a vicious circle of rising prices and higher pay.”
The research from Grant Thornton reveals that, by comparison, just 11% of eurozone and EU business owners plan to award above-inflation pay rises over the next 12 months. In North America however, nearly one fifth (18%) of employers plan to do so.
Skills shortage threatens emerging markets The survey also reveals that 42% of businesses in the BRIC economies believe a lack of availability of skilled labour will constrain their ability to grow this year. This is a 17 percentage point upswing on 2010 and is now the most cited constraint on growth in these countries. Latin America shares the same concern, with 43% of businesses citing a lack of skilled labour as a constraint, an increase of 20 percentage points.
Half of privately owned businesses in India (51%) and Brazil (49%) stress that a lack of availability of skilled labour will constrain their ability to grow this year. The problem is also a major issue for businesses in mainland China (40%), Thailand (46%) and South Africa (37%).
Ian Pascoe added: “A lack of skilled workers will weigh on the confidence of businesses in emerging markets and they will find this a very real obstacle to their growth. A clamour for skilled people has the potential to cause wages to rise, especially in Thailand which is already nearing what would be considered full employment. This in turn will inflate selling prices and will narrow its competitive advantage.”
“In the short term this constraint has seen a greater use of overseas workers both skilled and unskilled. For example, in the construction industry, we are seeing a significant increase in the use of Burmese workers. In the long term the government will need to address how to appropriately educate and skill the population in order to fuel economic growth. For now, however, observers will be looking to see the inflationary pressure it will create.”
Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of over 11,000 businesses per year across 39 economies. This unique survey draws upon 19 years of trend data for most European participants and nine years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com.
Data collection
The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (postal), Philippines and Armenia (face to face), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach. Telephone interviews enable Grant Thornton International to conduct the exact number of recommended interviews and to be certain that the most appropriate individuals are interviewed in an organisation which meets the profile criteria.
Data collection is managed by Grant Thornton International's core research partner - Experian Business Strategies. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. From 2011, fieldwork takes place on a quarterly basis every quarter with fieldwork lasting approximately one month and a half.
Sample
IBR is a survey of medium to large privately held businesses*, researching the opinions of over 2,700 businesses globally each quarter, and over 11,000 per year. In Q1 2011, the IBR Quarterly Economic Update data will consist of:
? Q1 quarterly update figures collected in February 2011
? rolling average data combining data collected in Q4 2010 and Q1 2011.
The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 39 economies primarily across five sectors: manufacturing (25 per cent), services (25 per cent), retail (15 per cent) and construction (ten per cent) with the remaining 25 per cent spread across all sectors.
Locally, the sample tends to cover the sectors mentioned previously, with some countries being able to have local valid data for specific sectors or regions when the sample size is large enough.
*some counties may include a small proportion of listed businesses in their sample when reporting locally.
About Grant Thornton Thailand
Grant Thornton Thailand is well recognised by the business community as one of the leading professional service firms in Thailand since 1991. We have helped many clients successfully navigate the Asian economic crisis of the late 1990s, applying a mixture of techniques including debt restructuring, cost cutting and business plan revision. We have also helped many clients grow through acquisition and look into expansion opportunities.
Our services include business consulting, external and internal auditing service, domestic and international tax planning, corporate finance advisory, restructuring and reorganization, merger and acquisition, forensic/investigation, risk management, finance & tax due diligence, transaction support, valuation, exit strategies, executive recruitment, succession planning and remuneration planning. To learn more about our firm, please visit our web site www.grantthornton.co.th.
Further enquiries, please contact:
Ian Pascoe
Managing Partner Grant Thornton
T: 02 205 8100 E:
[email protected] ?
Lakpilai Worasaphya
Senior Manager, Marketing and Communications Grant Thornton
T: 02 205 8142 E:
[email protected]