The outlook for UK wage growth will receive a boost today with two reports pointing to expected pay rises for employees – with an added bonus for those who move jobs.
A new report released today by the Resolution Foundation think tank will show UK pay growth is set to remain around its current pace of 2.7 per cent in the coming months. This is above the lows of 2009-2015 but below pre-crisis average of 4.5 per cent.
Wage growth for workers opting to move jobs in the past 12 months reached 11 per cent, the highest level in more than 15 years in what the report calls a “disloyalty bonus”.
The strength of the labour market is a key reason cited by economists for the Bank of England to justify an interest rate hike today. Headline unemployment is the lowest in 40 years and the employment rate, the proportion of the labour force in work, stands at a record high of 75.7 per cent.
Wage growth has been the weak link in the labour market, however, with earning growth below inflation for most of the past decade. This is now improving with inflation-adjusted wage growth positive for the past four consecutive months.
The report also updates estimates on under-employment, which captures those in work but with less hours than desired. The under-employment rate has dropped back close to the lows of 3.7 per cent of working hours seen in 2000s, but with the rate remaining particularly high at 11.2 per cent for those under the age of 30 and 4.7 per cent for women.
Read more: UK unemployment falls as wage growth slows
Stephen Clarke, senior economic analyst at the Resolution Foundation, said “for those moving jobs, pay growth has hit 10 per cent for the first time in over a decade. However, for the vast majority of workers who didnt move jobs in the last year, pay is still struggling along at just 2.5 per cent, barely higher than inflation”.
Separately, a survey released today by the British Chambers of Commerce and online recruitment agency Indeed, will show that half of UK business are set to give employees a pay rise of over two per cent in the coming year.
Jane Gratton, BCC head of business environment and skills policy, said “this is good news for employees who have felt the squeeze in their pay packets in recent months”.