Why is it that pay growth remains slow even though we’ve had the biggest rise in average pay since 2008?
32.4 million people are employed within the UK and average weekly pay has seen the biggest rise since 2008, but real wages will not be back at pre-recession level before 2024, according to the general secretary at the TUC.
The percentage increase of 3.3% on the same quarter last year does little to console workers who find themselves in the longest pay squeeze for 200 years.
Record levels of employment and increase in vacancies
The UK has a record number of people employed in 2018, and it continues to be a challenge to fill the increasing number of vacancies. A total of 849,000 jobs were unfilled in September-November 2018, compared to the same period last year where the figure was 809,000.
The unemployment rate is down to 4.1 %, a decrease of 1.1 % from last year. However, despite employers having trouble finding the workforce they need, pay growth is still lower than seen historically during periods of low unemployment.
Could there be another explanation for the market not reacting the way we expect it to?
According to the ONS latest labour market economic survey, the explanation might be that the unemployment rate inadequately captures the extent of slack in the labour market and the extra slack reduces wage growth. In other words, the low unemployment rate has not been able to sufficiently stimulate the average weekly earnings because of the high level of underemployment e.g. part time workers and zero hours contracts.
Minimum wage should be £10
Frances O’Grady, general secretary at the TUC says, “We need a plan that supports jobs and wages. That means the government putting the minimum wage up to £10 as quickly as possible. And it means giving unions the freedom to enter every workplace and negotiate fair pay rises.”
Despite pay growth improving at a substantial speed not seen in the last decade, it is unfortunately slower than the UK has seen in the past. Real average pay is £13 less per week than in 2008, according to the Resolution Foundation.
A year ago the government launched its industrial strategy, and there has been some progress, but work still needs to be done to provide a focused and compelling vision for the years ahead for both the private sector as well as the public sector in all regions of the country.
Challenging times await in the coming months and only time will tell if real earnings growth and productivity are likely to suffer from Brexit.