Wages

The pandemic had a notable impact on wage growth, stemming from a perfect storm created by the e-commerce boom, the Great Resignation and record high inflation.

And while most countries saw a significant increase in higher wages, with certain sectors experiencing increases of 25% or more, Australia stands out as the outlier with stagnant wages that have remained flat since the early 2010s.

United States

Average hourly earnings in the US have increased by an average of 27% since 2019, with a significant spike during the pandemic. However, the rate of increase has been slowing down recently as the labor market cools. Despite this nominal wage growth, real earnings have only risen by 1% since 2019, as inflation continues to dampen the purchasing power of wage earners. This disparity shows the ongoing challenge of maintaining real income growth as the US economy is experiencing a higher level of inflation than the past 40 years.

Wages across major Allegis Global Solutions (AGS) labor categories have seen significant increases from 2021 to 2024, according to Lightcast data.

Engineering +41%
Scientific and healthcare + 25%
IT and Light Industrial +20%
Professional services +18%

Even as the labor market continues to cool, wages will continue to grow, albeit more slowly, and remain elevated at pandemic levels.

Canada

Canada has seen significant wage growth from 2019, and wages are likely to stay elevated. Average hourly earnings in Canada have grown 24% since 2019, and now sit at CAD 34.94. Real earnings have grown as well. From 2011-2019, real earnings grew at an average of 1%, but since 2019, have grown an average of 2.5%. Even with a high level of inflation, Canadian workers have seen wage increases that have not been eroded by inflation. Employers should continue to expect higher wages in the near- to mid-future, even with increasing slack in the labor market.

United Kingdom

The UK is facing challenges with low productivity and real wage growth, providing some relief to workers who have seen stagnant wages over the past decade. However, this presents issues for the Bank of England, which is hesitant to lower interest rates. Factors driving this trend include the post-pandemic inflationary period leading to high housing costs, strong union bargaining power, high employee confidence and increased job switching. The CEBR Jobs Confidence Index indicates 56.1% of workers are confident in their job security over the next six months, spurring wage growth as employees either seek better offers or negotiate competitive counter offers. It is possible for this trend to continue, as pressures to reduce migration and expected economic growth in 2025 will likely maintain the current supply-demand imbalance in the labor market.

A Look at the Canada Labor Market: Now & Then

In 2024

20.2M

Employed Workers

(2023)

400K

Jobs Added (2023)

CAD34.94

Average Hourly

Earnings

In 2019

19.1M

Employed Workers

320K

Jobs added

CAD28.32

Average Hourly

Earnings

Poland

In other parts of Europe, few regions offer a safe haven for rising wages. Poland, for instance, stands out as a popular outsourcing hub due to its lower wage costs and high graduate turnover. Over the past three years, wages in Poland have increased at an average annual rate of 10%. IT and professional wages saw peak growth in 2021 but has since cooled as the supply of graduates has risen to meet the demand for high skilled labor. On the other hand, the manufacturing sector in Poland, despite experiencing stagnation, has seen higher wage growth than other sectors over the past two years. This trend suggests the current wage growth is related to supply issues, particularly an aging population, rather than being demand driven. This highlights a stronger possibility of continued wage inflation as growth is projected for most major Western economies in 2025.

Australia

Australia has long been struggling with stagnant wages as real wages have remained flat since 2011. The University of Sydney found that declining unionization and the Australian workforce shifting from manufacturing to public sector roles has left Australia with one of the largest drops in standard of living across the developed world over the last several decades. Real wages dropped nearly 5% over the pandemic, only now beginning to increase after a decade of decline. While many of its peers are experiencing strong economic growth, Australia is struggling to stay ahead of global inflation.

India

India is no stranger to the wave of inflation and wage growth that shocked the world in the years following the pandemic. The difference has been that India began at a much higher level than most of its peers. In 2020, India saw wages rise by 7.5% compared to the 3-4% average increases seen in the developed world. In 2023, that number shot up to 10%, with another 9.6% wage hike expected by the end of this year.

The global IT skills shortage has also disproportionately impacted India. EY projected in a recent report that workers with top-end skillsets like AI, machine learning and blockchain technologies are earning a 30-50% premium compared to IT workers with more generic skillsets. India’s strong economic growth and explosive demand for talent has driven major wage increases in the last few years, but upcoming policy changes will propel wage hikes into the future. India is set to roll out a living wage standard by 2025 in order to address poverty in its rural regions. While wages have been growing massively nationally, that has not always translated to the 83% of workers in the informal sector, especially in rural areas. This living wage standard will factor into local cost of living to determine a local minimum wage necessary for a basic standard of living. This new policy, along with India’s rapid economic development, leads us to expect India’s explosive wage growth to continue for the next several years.