Wage growth disappoints, as unemployment reaches 43-year low

Danielle Levy
14 August 2018
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Real wages have displayed their weakest growth rate in almost a year, despite unemployment falling to a 43-year low.

Average total pay including bonuses grew by 2.4% over the 12 months to the end June, according to the latest figures from the Office for National Statistics (ONS). This is only 0.1% higher than the average inflation increase. When bonuses are excluded, total pay increased by an average of 2.7% year-on-year. These growth rates were lower than analysts expected.

The disappointing pay growth figures potentially come as a surprise, given the ONS found the number of unemployed in the UK has fallen to 1.36 million, or 4%, which represents the lowest level since February 1975.

The number of people in employment rose to 32.39 million, with average weekly pay coming in at £488 excluding bonuses. When bonuses are included, this figure totalled £518.

Ahead of the UK’s deadline to leave the European Union (EU) next March, the number of EU nationals working in the UK dropped by 86,000 to 2.28 million. This represents the largest fall in records since 1997.

The number of people on zero hours contracts also fell to 780,000, down almost 12% in a year.

“Economists are predicting inflation figures tomorrow at 2.5%, so we will have to wait and see whether wages including bonuses have fallen behind inflation again,” Sarah Coles, personal finance analyst at fund broker Hargreaves Lansdown, comments.

“Given that unemployment is so low and vacancies are at their highest level since comparable records began in April 2001 (829,000), we would usually expect faster wage increases. However, higher employment doesn’t appear to be feeding so strikingly into higher wages at the moment.”

Comments

In reply to by anonymous_stub (not verified)

To add to my previous comment, I meant to emphasise that with a fixed mandated minimum Living wage, companies are often unable to compete properly for key workers because they face higher-than-necessary wage bills for non-key workers. Get rid of the artificial bottom line and you will see growth in other wages.

In reply to by anonymous_stub (not verified)

There is another reason for depressed wage growth despite high numbers of vacancies - there is no competition for workers at the lower end of the market, as all employers know that they can manage by paying the so-called Living Wage. Without the artificial platform, some jobs would inevitably see larger wage increases than others, according to the particular job market of the area and the type of job. Once competition for workers returns as employers find the wage levels they need to pay to get the workers they want without knowing in advance the bottom-line support level, proper fluidity would see properly representative wages.. Take politics out of the labour market. The only sting in the tail to this change would be the depression of wages for jobs currently acting as a magnet for workers from lower-wage countries, once employers establish the level at which they can get away with paying to such workers. The current system essentially dampens the impact of migrant labour, hence is useful for politicians who love the EU. In the long run (if such minimum wage rules were abandoned) , it would lead to wage harmonisation across the EU, which would of course be unpopular with the native workers of currently higher-wage countries. Hence we are unlikely to see the end of the minimum wage political fix that masks the effect of migration.and lower-end wages will continue to sit exactly at one level in this country.

In reply to by anonymous_stub (not verified)

The Tories need to stop doctoring the figures to make them look good - add the sanctions, zero hours, carers (who can't work as they care full time), underemployed people and the others who should be part of that figure then unemployment would skyrocket!

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