Articles From the Team
Wage growth reaches six year-high, but unemployment rate remains unchanged
Comparing May to July 2015 with a year earlier, both total pay (including bonuses) and regular pay (excluding bonuses) for employees increased by 2.9 per cent.
The ONS said that was the fastest pace of wage growth since the three months to January 2009.
The number of people in work reached 31.09 million in the second quarter of 2015, 413,000 more than a year earlier, and 42,000 more than for February to April this year.
There were 1.82 million people not in employment, but seeking and available to work, according to the figures; 10,000 more than the previous quarter but 198,000 fewer than the same period in 2014.
At 5.5 per cent, the unemployment rate remained unchanged in the three months to July, compared to the previous quarter.
While employment continues to increase, it is at a rate that is much slower than the quarterly growth rates seen since 2012. Mark Beatson, chief economist at the CIPD, said it was an indication that the labour market had “hit the pause button”.
“While today’s numbers show a drop in unemployment back towards the low point seen three months ago, the main point to draw from this set of figures is how little the overall levels of employment and unemployment have changed in the last six months,” he said.
“After a long period of sustained employment growth and falling unemployment, we seem to have entered a more stable phase.”
Commenting on the hike in pay, Beatson said: “As the economy was still growing strongly in the second quarter of 2015, stable employment levels suggest that productivity has been growing. If this is the case, it helps to make average earnings growth sustainable.
“The latest figures have been boosted by earnings in construction and by bonuses, especially in financial services, both consistent with a growing economy,” he added.
John Philpott, director of The Jobs Economist said public sector workers would be feeling “less than chipper” as the ONS figures revealed employment in the sector fell to 5.4 million in the second quarter of 2015, its lowest level since records began.
“Their average weekly pay is rising at a rate of 1.3 per cent, almost three times slower than the average rate of pay growth in the private sector,” he added.
Katja Hall, deputy director-general of CBI, welcomed the fact that pay growth was ticking up. The continued low rate of inflation has helped employees keep “more of their hard-earned money,” she added. “If we are to achieve sustainable higher wage growth, boosting productivity remains crucial.
“However, with the National Living Wage increasing pay for entry level workers by 7.5 per cent, this is running well ahead of private sector regular pay,” she said. BCL Legal opinion:
The legal jobs market is indeed in rude health and we are seeing a continued demand for lawyers to fill new in-house and private practice vacancies. This is not without it challenges and in a lot of cases employers are now struggling to fill specialist roles quickly – there is much more demand for quality talent than there is supply and there is increased pressure by employers to retain the talent they already have, which results in offers of employment being rejected and/or less candidates applying for jobs. The upshot of this however, and perhaps most important for the majority, is that wage growth is filtering down to all employees, resulting in an overall growth in wages. Quite simply, employers that are unable to source the new talent they require cannot afford to have their existing talent poached by a competitor, this drives up wages on offer to the employees and in turn results in recruiting companies having to offer more to temp talent away.
The point about productivity levels growing is particularly interesting as Britain is often seen as a country with low productivity, relatively low unemployment and relatively stagnant wage growth. In those industries where skilled talent is scarce, which is applicable to certain areas of the legal profession, an increase in productivity per employee has been the only way to satisfy demand. For some this has come due to efficiency saving tools and clever ways of working however for others it simply means working your existing people harder. In the case of the latter, wage growth is an important consideration to ensure those staff are willing and happy to undertake the additional workload.
As I’ve said in a previous blog, the biggest challenge now faced by employers is that of retaining talent. Wage growth is the key to this for two reasons. Firstly, employees who feel valued and well paid are often less likely to actively seek a new role – certainly for pure financial gain; and, secondly, by retaining talent you are less likely to put strain on your other employees as a result of being short of staff – a problem in a market where recruiting skilled talent is taking longer and longer. As we all know, feeling overworked and underpaid tends to result in unhappy staff.
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