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Jobs figures expose tough squeeze on pay

Article by: Gerwyn Davies | Published: 17 April 2017

Commenting on  ONS Labour Market figures, Gerwyn Davies, Labour Market Analyst at the CIPD, the professional body for HR and people development.

“The latest jobs data suggests that employment and wage growth are running out of steam. Year on year living standards fell in February for the first time since 2014, due to the slower earnings growth and rising inflation we’ve seen during the past six months.  It seems highly likely that the annual rate of wage growth will fall in the coming months with inflation predicted to continue to rise during 2017. This is perhaps no surprise given the UK’s ongoing productivity crisis, which limits the ability of employers to increase pay.   At the same time, low pay growth may also be a sign that employers are seeking to offset the impact of increasing labour costs, such as last week’s Apprenticeship Levy and the latest National Living Wage increase.”

“The squeeze on pay may explain why there is greater demand for full-time employment and extra hours in today’s data and points to a labour market where supply is becoming more constrained, rather than a lack of demand. Overall, the data will heighten fears that the living standards of British workers will fall this year, which will curb consumer spending.”

“As the Bank of England has pointed out recently, the solution to the problem lies in improving the management practices and processes of laggard employers.  And there is little to suggest this situation will improve unless the forthcoming industrial strategy provides greater support for SMEs and employers and government invest more heavily in the skills of the UK’s adult workforce.”