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Employment growth drives employment rate to record high while pay growth ticks up

Gerwyn Davies, Labour Market Adviser at the CIPD, the professional body for HR and people development, comments on the official labour market statistics published by the Office for National Statistics (ONS): “This first set of figures for the new government will put an additional spring in its step. Employment growth continues to grow sharply, but what is most impressive is the proportion of people in full-time work.

“However, while this high water mark should be celebrated, it reinforces the need for government policy to raise the ambitions of employers, especially in relation to productivity which continues to drag its feet. It’s curious that while business investment remains strong, training spend is falling and too many workers are not being given the opportunity to use or gain the skills that are essential to progression. The UK may be enjoying an upward trajectory of employment but this can’t last forever. While there is plentiful supply in the market now, we expect the labour market to tighten by the end of this year and skills shortages to emerge more strongly. Now is the time for businesses to allocate more spending towards workforce development and they need to do this before the labour shortages begin to bite and pay inflation accelerates. The new Government should also review its skills policy to reflect this bump in the road ahead and plan ahead for where demand will land.

“Pay growth continues to pick up modestly but the average earnings figures tell a mixed picture between those sectors such as finance, retail and hospitality that are performing well, and others, such as manufacturing, that are continuing to struggle. It’s no surprise to see pay growth remain modest given our productivity performance. Equally the increased supply of workers, especially older workers and EU migrants, means that employers are under little or no recruitment pressure to boost pay growth. As the ONS figures show, the number of EU migrants in employment has increased by seventeen per cent during the past year alongside an increase of nine per cent of people aged 65 and over. Until this supply begins to diminish, employers will be under little pressure to increase starting salaries and even then, we still have some way to go to see wages significantly exceed living costs.”

Full press release on www.cipd.co.uk

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