October 22, 2016

Pay growth ‘stuck in the slow lane’


Growth in wages is likely to remain “stuck in the slow lane” until the end of the decade, according to a survey by the Chartered Institute of Personnel and Development (CIPD).
It suggests that pay will rise by 1.7% in the next year, as the “jobs-rich, pay-poor” economy continues.
Separately the CBI has cut its economic growth forecast for this year and next.
The business group said Brexit uncertainty was having a “tangible impact” on spending plans.
The economy will grow by 2% in 2016 and 2017, the CBI predicted, down from a previous forecast of 2.3% and 2.1% respectively, with household spending the main driver of that growth.
‘Dark cloud’
The first rise in interest rates will now be in the second quarter of 2017, rising to 0.75%, according to the business group’s forecast.
Interest rates have been held at 0.5% since 2009.
“A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms’ plans to invest,” said CBI director general Carolyn Fairbairn.
“At present, the economic signals are mixed – we are in an unusually uncertain period.”
Pay pressure
Meanwhile, employees are unlikely to see much of a boost to their pay, the HR body the CIPD has said after surveying more than 1,000 businesses.
Since the financial crisis, pay growth has struggled to keep up with rising prices. Last year, wage increases did outstrip the rate of inflation but levels are still historically low.
The latest figures are due out this week.
Low inflation, available skilled workers and a lack of productivity growth are working together to reduce the economic pressure for employers to pay their staff more, the CIPD said.
At the same time, firms are juggling increased costs to employing people.
“For now, there’s no sign of the economy running out of jobs, or out of people to fill those jobs,” said Mark Beatson, chief economist at the CIPD.
“However, the UK is now in its eighth year of productivity ‘go-slow’… employers are having to manage the consequences of government-imposed increases to the cost of employing people.
“The National Living Wage and roll-out of pensions auto-enrolment were introduced to improve the living standards of low-paid employees, but this can only happen without significant job losses if the productivity of low-paid employees also increases.”
The new mandatory National Living Wage (NLW) came into force in April. It requires employers to pay workers aged 25 and over at least £7.20 an hour.
Mr Beatson said that it would be no surprise if companies chose easier options – such as reducing hours, benefits and pay rises as a result. He called on the government to give more practical advice and support for businesses.

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