Category Archives: Pay Trends

Viewpoint: ‘There are bad times just around the corner…’

The Budget on 22 November sparked a debate over the prospects for wage growth over the coming period. The Bank of England is on one side, while on the other stand the government’s Office for Budgetary Responsibility (OBR) and the Institute for Fiscal Studies (IFS).

Earlier, in announcing its decision to raise interest rates marginally on 2 November, the Bank argued that while pay increases are currently subdued – mostly because employment has been growing in lower-paid occupations and industries – it expected earnings growth to strengthen during 2018. This will occur, the Bank said, ‘as the tightening labour market starts to put more widespread upward pressure on wage demands’.

The Bank’s position is perhaps a logical corollary of its decision to raise interest rates, a move designed to reduce the potential for over-heating in the economy. But it nevertheless highlights a number of signs of increasing wage demands.

One of these is greater ‘churn’ in the labour market, with the proportion of people moving from one job to another close to the pre-recession rate. The Bank thinks this might indicate confidence among workers about their prospects in the labour market, which could increase pressure on employers to retain them by raising wages.

The Bank’s agents have also found employers are more willing to award bigger pay rises. In their November report, they found recruitment difficulties had increased, contributing to a slight increase in pay growth, with expectations that settlements could be clustered around 2.5% to 3.5% in 2018, compared with 2% to 3% this year.

Our own research on pay in two key sectors tends to support the Bank’s findings. In call centres, pay settlements have increased slightly, and recruitment and retention problems have worsened. Meanwhile in engineering, pay growth for shopfloor staff is greater than for white-collar workers and managers, with recruitment pressures playing a part.

However the Bank also points to a potential offset to its predictions of wage growth, namely that employers’ uncertainty over the economic outlook could affect their willingness to raise pay until they have more clarity about future demand for their products and services.

Downgraded
This is where the IFS and the OBR come in, warning of bad times around the corner, in an echo of the old Noel Coward song. In the wake of the Budget, both bodies think economic and productivity growth will be weaker than before and have downgraded their predictions for earnings growth. They could be right but they may not be. While the Budget increased spending and reduced tax, the overall policy position is still one of austerity, and the OBR and IFS positions reflect this.

In at least two respects though, the Budget has contributed to potential upward pressure on pay. The first is the chancellor’s announcement of a 4.4% rise in the National Living Wage, from £7.50 to £7.83 from 1 April 2018. The second is his reiteration of the government’s intention to ‘move away from’ the 1% public sector pay cap and a promise to fund an NHS pay deal linked to productivity gains, and justified on recruitment and retention grounds. Any NHS award will influence claims in the public sector, and could be a trigger for a more generalised catch-up after years of restraint, perhaps leading to spillover effects in the private sector.

Settlements in brief: private sector median unchanged at 2.5%

Our latest pay settlement analysis shows the private sector median is unchanged at 2.5% in the three months to the end of August. Meanwhile the whole economy median has fallen from 2.4% in July to 2% in August, owing to the inclusion of some lower-level awards in the not-for-profit and public sectors. Continue reading Settlements in brief: private sector median unchanged at 2.5%

Settlements rise to 2.4%, highest level so far in 2017

According to the latest monitoring figures from IDR, the median pay settlement across the economy rose to 2.4% in the three months to July. This is the highest we have recorded so far in 2017, up from 2% in the previous three rolling periods. The latest figures are based on 75 pay settlements, mostly at organisations in the private sector.

For the full article see http://www.incomesdataresearch.co.uk/subscribers-2/idr-pay-settlement-levels/

Settlements in brief: median at 2% for May

Our latest analysis of pay settlements shows the median falling back to 2% in May. However the interquartile range, where half of awards are set, remains at between 1% and 2.8%. This partly reflects a wide range of pay outcomes, with increases monitored in the latest period ranging from a pay freeze to 10.5%. The analysis is based on 130 pay settlements monitored by IDR in the three months to the end of May.

Pay settlement data - three months to end of May 2017
Whole economyPrivate sector
Median2.0%2.4%
Average2.2%2.5%
Interquartile range1.0 to 2.8%1.9 to 2.9%
Based on 130 settlements covering 3.3M employees in total.

The median had risen to 2.4% in the three months to the end of April, under the influence of more awards worth 3% and above. Many of these were aimed at bringing lowest pay rates in line with the new National Minimum and National Living Wages. Indeed a closer look at private sector awards in the latest period shows that the median here is still at 2.4%.

Our next full quarterly analysis will be in Pay Climate, release date Thursday 7 September.

Earnings growth remains steady at 2.3% in February

Average weekly earnings rose by 2.3% in the year to February, the same as in the year to January.  Previously the ONS put the January figure at 2.2%, but this has been revised up to 2.3% in the latest figures. Looking back at the rate of growth in earnings over the past ten months we can see the rate has been fairly steady at around 2.4 to 2.5%. All these figures are for total earnings, across the whole economy, which include bonuses. Continue reading Earnings growth remains steady at 2.3% in February

NLW leads to significant pay increases in retail

The introduction of the National Living Wage (NLW) in April 2016 has led to a 5.3% increase in median minimum pay rates for established staff across retail. Many employers have revised their pay structures to accommodate this increase, typically by eliminating starter rates or harmonising premiums for unsocial hours. At £7.20, the median rate for the whole sample equals the NLW, though food and non-food retail firms tend to pay higher on average than employers in catering/hospitality. Many firms are paying the new minimum to all staff, despite it being a legal requirement to only pay it to staff aged 25 or over. Continue reading NLW leads to significant pay increases in retail