Pay growth strengthens while employment growth cools



In response to the latest ONS employment and pay statistics, Mark Beatson, CIPD Chief Economist, comments: “The new figures suggest that the recent increases in employment may be starting to level off, which appears to be hitting the short-term unemployed and young people in particular. The government needs to ensure that it maintains an adequate level of support for people becoming unemployed alongside its quite justified focus on support for the long-term unemployed and other disadvantaged groups in the labour market. The target to increase the number of apprenticeships is welcome, but they are only part of the solution because apprenticeships aren’t suitable for all employers. To combat this, we need to see national programmes complemented by more local initiatives that can meet the needs of local employers and get more young people into work.

“The three-month average rate of wage growth remains unchanged at 2.7%. However, this disguises a ‘tale of two workforces’; where the living standards of workers in sectors such as manufacturing and public sector are falling further behind other booming sectors such as construction and finance. Inflation is unusually low and many firms are still not having pay reviews either because they see no need to put wages up, or are awarding low pay rises because they say they can’t afford to pay more. Looking ahead, there is also a question of whether some employers might change how they set pay in anticipation of the proposed National Living Wage, especially in low paid sectors.

“This period of low inflation creates a window of opportunity for firms to complement rising investment in capital equipment with increased investment in their own people; especially given the welcome increase in the investment allowance announced by the Chancellor. This doesn’t mean spending a fortune, what matters is relevant learning opportunities delivered in a way that suits employees and – most important of all – jobs designed to give employees the chance to use these skills.”

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