By Gavin Davids
Hays Group report forecasts real salaries in the UAE to rise by 0.8% in 2011.
A rise in living costs will mean that workers in the UAE may see a more modest real income growth next year, after a decade of rocketing salaries, a new study said.
A report published by the management consultancy Hays Group, forecast that real salaries in the UAE, or salaries adjusted for changes in consumer prices, will rise 0.84 percent next year, the lowest increase in the Gulf, according to UAE daily, The National.
According to the report, Ten Years of Pay in the GCC, consumer prices in the UAE jumped by more than ten percent annually in 2007 and 2008, but settled down to a more sustainable 1.6 percent annual rate of increase in 2009.
The International Monetary Fund projected 2.2 percent inflation for 2010 and a three percent rise next year.
Vijay Ghandi, regional director, Hay Group, said: “One of the main factors in the UAE is that the housing and other living allowances are not increasing due to the drop in house rents. Organisations have effectively frozen allowances in the country.”
Despite this, the study noted that UAE workers could expect a better deal than their European counterparts.
The Hays Group said that real incomes would creep higher in the EU, but would fall slightly in the UK.
The consultants also predicted that the US would see greater income growth than the UAE, with salary increases of 1.1 percent in real terms.
The National reported that Kuwait should see the biggest salary rise in the Middle East, as non executive salaries are projected to rise by 3.6 percent in real terms.
However, professionals in the UAE may escape the gloom, with management salaries projected to rise by 2.14 percent in real terms, 1.3 percentage points above the UAE average
Gandhi said that performance related pay would become more common as companies became more cautious in increasing compensation and would want to reward high performances rather than giving general increases.
Although pay in the UAE has soared by 64 percent in absolute terms in the last 10 years, salary increases taking into account inflation (known as ‘real’ salary increases), amounted to rises of 17 percent during the same period.
In terms of real salary increases, Saudi Arabia came out on top, with the average salary rising by 50 percent over 10 years. The kingdom was closely followed by Oman, where employees saw 45 percent real pay rises.
In absolute terms, pay packets in Qatar rose the most in absolute terms, with the average salary increasing by 80 percent. Once adjusted for inflation, that figure dropped to 20 percent.
In real terms, Kuwaiti workers saw a mere 10 percent increase in pay rises.
Some analysts disagreed with the Hays report, arguing that securing averaging income on salary figures in the region would be ‘fairly hard’.
An analyst at Saudi Arabian based Samba Financial Group, who asked not to be named, said that the study’s predicted increases in the cost of living were too high.
He said: “One of the key elements in any salaried employee’s expenditure is rents, and rents have come down substantially. Disposable income going forward is probably going to be stronger.”For all the latest UAE news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.