UKAug 14 2017

Wage growth expected to remain weak

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Wage growth expected to remain weak

Wage growth is expected to remain weak despite a record low in unemployment, a new survey has shown.

The Labour Market Outlook from the Chartered Institute of Personnel and Development and Adecco suggests UK employment will grow again in the third quarter but with 24 applicants chasing every low-skilled job vacancy, pay rises will remain low at 1 per cent.

The study surveyed more than 1,000 employers and showed the difference between the proportion who intend to increase staff levels versus those who intend to decrease has increased from +20 to +27 during the past three months. 

Gerwyn Davies, senior labour market analyst for the CIPD, said the report showed an increase in the supply of labour over the last three months, including ex-welfare claimants, non-UK nationals from the EU and older workers in the 50-64 age bracket.

Pointing out that future employment trends remain uncertain, he said: “Productivity levels are stagnant, public sector pay increases remain modest while wage costs and uncertainty over access to the EU market have increased for some employers.

"At the same time, it is also clear that the majority of employers have still been able to find suitable candidates to employ at current wage rates due to a strong labour supply until now. 

“The good news is that the UK labour market continues to go from strength to strength. This is particularly good news for jobseekers, especially the long-term unemployed, who have recently been able to move into work more quickly than in the past.”

In the private sector almost a quarter of firms

In the private sector almost a quarter of firms (23 per cent) said delivering the National Living Wage was a brake on pay growth, a further fifth (21 per cent) cited uncertainty over access to the single market, and a fifth (21 per cent) referenced auto-enrolment as a challenge.

Around three quarters of public sector employers (72 per cent) say restraint in the public sector is the main reason why they cannot match the inflation rate target of 2 per cent in their next basic pay award.

Alex Fleming, president of general staffing at The Adecco Group UK&I said: “Employers continuing to hire isn’t, necessarily, an indication that they are convinced of a bright economic future, rather that nothing significant has changed in recent months.

"Many employers are getting on with the day-to-day hiring required to keep their businesses ticking along until they have enough information to build concrete recruitment plans.”

Official labour market data published later this week is expected to show a similar picture of stagnating wage growth and falling unemployment, while higher inflation figures are also expected to be posted.