Employees expecting weak pay rises could risk economic recovery, economist warns
Employees are anticipating a year of weak pay growth, a set of new survey data shows, with one economist warning it could hamper the UK’s economic recovery.
“The survey data indicate that there are clearly few signs of pay growth picking up in 2015. This is a major concern as the sustainability of the economic upturn is largely dependent on pay growth reviving,” said Chris Williamson, chief economist at financial data firm Markit.
A pay increase of two per cent or more was expected by just 21 per cent of employees, according to figures released by Markit today. Only eight per cent of workers believe they will see a pay rise of over three per cent.
A pay freeze is anticipated by 35 per cent of workers while pay growth is expected to be between zero and two per cent by 27 per cent of workers. Only seven per cent said they expected a pay cut.
However, the figures do not account for inflation, which fell to zero per cent in February.
“The weakness of pay growth is not just a consequence of public sector pay being hit by austerity-related spending cuts. There are scant signs of pay growth reviving in the private sector, where 40 per cent of employees are either facing a pay freeze or pay cut this year,” Williamson said.
“The only real signs of rising pay pressures are among new hires, where skill shortages are forcing employers to offer higher salaries to attract suitable staff. People not changing jobs, constituting the vast majority of the workforce, are clearly struggling to negotiate higher pay, linked partly to record low inflation.”
The survey points to an expected average wage increase of 1.1 per cent in 2015 – 0.8 per cent for the public sector and 1.2 per cent for the private sector. In the final three months of 2014, pay excluding bonuses was 1.7 per cent higher than the same time a year ago, according to the Office for National Statistics.