Since the Great Recession, America’s pay increases have stacked up poorly compared to other developed countries.
Eight years after Lehman Brothers’ bankruptcy filing signaled the start of the financial crisis, the U.S. has posted the worst salary recovery among developed Group of 20, or G-20 countries, according to executive search firm Korn Ferry’s Hay Group unit.
U.S. salaries have fallen 3.1% after adjusting for inflation since Lehman’s bankruptcy on Sept. 15, 2008, the study says. That’s the worst among the G-20 group, which also includes the United Kingdom, Canada, France, Germany, Italy, Japan and Korea.
Hay Group didn’t review all jobs in these economies but rather sampled the entry-level, mid-level and senior manager jobs it tracks globally. The firm says that allowed it to conduct a valid comparison that wouldn’t have been possible by analyzing government data, which is collected differently in each country.
Canada notched the best pay recovery among the nations, with inflation-adjusted salaries rising 7.2% since 2008. Pay rose 5.9% in Australia, 5.2% in France, 5% in Germany and 2.4% in Italy. Salaries fell 0.1% in the UK.
America’s poor performance can partly be traced to its preponderance of jobs in low-wage sectors such as retail, restaurants and hotels, and healthcare, says Benjamin Frost, a Korn Ferry product manager.
But even within entry-level jobs – a category that includes clerks, call center representatives,, carpenters and production line supervisors — the U.S. fares worst, with salaries falling 14.8%.
The disparity with other countries is narrower for higher-paying positions, but the U.S. still lags. U.S. wages fell 2% for professional, mid-level jobs such as product manager, network administrator and entry-level accountant. And U.S. salaries rose 3.5% for senior managers, including information technology executives and chief accountants. By comparison, senior managers in Germany notched 6% pay gains.
Frost largely attributes the bigger raises overseas to the pervasive influence of labor unions and collective bargaining agreements that help support wage growth broadly in countries such as Italy, Germany, France and Australia. Unions have been on the decline in the U.S. for decades.
Also, he says, federal minimum wages are more generous abroad. The federal pay floor is about 55% of the median wage in France and 45% in Canada, compared to 30% in the U.S, Frost says.
There is a silver lining for Americans: The U.S. is tops in job growth. The U.S. unemployment rate is at 4.9%, compared to 10.1% in the euro area.
Less encumbered by unions, higher minimum wages and other taxes, “Companies are freer to create jobs where they want to,” Frost says.
So which is more desirable — faster wage gains or stronger job growth? Mark Zandi, chief economist of Moody’s Analytics, notes that economic growth in the U.S. generally has outpaced other developed countries in recent years.
“You’d probably want to take…lower unemployment,” he says.