Global real salary growth slows as inflation bites

Global real salary growth slowed to 0.6% in 2026 as higher-than-expected inflation eroded the value of pay rises in most countries, according to ECA.

The report found median inflation reached 3.6% worldwide, above the 2.5% forecast, while median pay rises were 4.1%, below the 4.7% forecast. As a result, real salary growth, which measures pay increases after inflation, fell from 1.7% in 2025 and came in well below the 1.8% expected a year earlier.

In the US, nominal pay rose 3.5%, in line with forecasts, but inflation climbed to 3.6%, leaving workers with a 0.1% fall in real pay. The report ranked the US 49th out of 66 countries, compared with a real-terms gain of 0.8% a year earlier and an earlier forecast of 1.1% growth for 2026.

The UK also posted weak gains. Nominal pay rose 3.5%, slightly below the 3.6% forecast, while inflation reached 3.3% against an expected 2.5%, leaving real salary growth at 0.2%.

That placed the UK 44th out of 66 countries overall and 19th out of 25 in Europe. Among G7 economies, only the US and Italy performed worse on the measure.

Neil Ashman, Analytics Manager, Location Insight at ECA, said price rises rather than wage restraint explained much of the shortfall. "In most markets, the lack of real salary growth came from prices rather than pay. Pay awards landed on or close to forecast in several large economies, including the UK and US, while inflation ran ahead of expectations in most countries," he said.

The report linked much of the inflation overshoot to higher fuel and energy costs after conflict involving the US, Israel and Iran disrupted flows through the Strait of Hormuz. It identified rising fuel prices as a major factor in both the US and UK results.

Regional split

Across regions, Asia Pacific recorded the strongest median real salary growth at 1.4%. Europe lagged at 0.4%, while the Americas posted 0.5%, and Africa and the Middle East also recorded 0.4%.

Hungary led the global ranking with real salary growth of 4.4%, followed by India at 3.5% and China at 3.0%. At the bottom of the table, Myanmar and Argentina recorded the steepest declines, with real pay falling 12.6% and 12.5% respectively as inflation surged.

Turkey saw one of the survey's sharpest reversals. After ranking fourth in 2025 with real pay growth of 5.1%, it fell to 62nd in 2026 with real salary growth of minus 3.7%.

Nominal pay in Turkey rose 27.5%, but inflation reached 31.2%. A year earlier, forecasts had pointed to Turkey leading the world in 2026 with real salary growth of 8.1%.

Ashman said the shift showed how quickly assumptions can change when inflation rises suddenly. "Much of this year's higher inflation comes down to events in the Middle East. Fuel and energy costs rose fast and pay rises simply did not keep pace. Employers and employees need pay plans built on the latest data, because a forecast can pivot within months. For employers, that means checking pay reviews against current inflation before budgets are set," he said.

Outlook

ECA expects global real salary growth to recover to 1.0% in 2027. The projected improvement depends largely on easing inflation rather than faster nominal wage growth, with employers in most regions expected to keep headline pay rises broadly unchanged.

In the US, nominal pay rises are forecast to remain at 3.5% while inflation falls to 2.8%, lifting real salary growth to 0.7%. UK workers are also expected to see real pay growth of 0.7%.

India is forecast to top the global ranking in 2027, with real salary growth of 4.6%, while Hungary is expected to remain Europe's leading country at 3.3%.

The survey covered 66 countries and drew on data from more than 200 multinational companies, with inflation assumptions based on IMF World Economic Outlook figures. The 2027 outlook assumes the Strait of Hormuz begins reopening in March. ECA warned that if the route remains closed for longer, real pay rises could disappear again in some countries because salary awards are usually set in advance.