Wage growth expected to continue in 2024 as employees hold all the cards
Pay growth has remained stubborn in recent months, and is likely to remain so over the coming year, as the Bank of England signalled it needs to see more evidence of slowing wage growth to consider cutting rates.
According to data from XpertHR, the median pay award in the three months to November was six per cent, unchanged from the previous rolling quarter.
This means that wage growth has remained at six per cent for all but three rolling quarters of this year, a level not sustained for over 30 years.
Looking ahead into next year, Sheila Attwood, XpertHR senior content manager, data and HR insights, said wage growth would ease – but only slightly.
“Employers have indicated that there may only be a small drop-off – our prediction for the going rate of pay awards in 2024 sits at five per cent,” she said.
“Organisations are still keeping a close eye on inflation but also the loosening of the labour market and the health of the economy – deteriorating conditions will likely drive pay awards down in the busy January and April months,” she added.
Wage growth is a key proxy for the Bank of England as it attempts to determine how fast inflation will fall next year. Policymakers at the Bank see bigger pay packets as a sign that inflation is domestically driven.
In its November round of forecasts, the Bank predicted that inflation would only fall to 3.1 per cent by the end of next year. This more persistent inflation will primarily be driven by a tight labour market, supporting wage growth.
Official data shows annual wage growth at 7.3 per cent, down from its summer peaks but still inconsistent with the Bank’s two per cent target.
Yesterday, Ben Broadbent, a deputy governor at the Bank, said the Bank would need to see “further evidence” of easing wage pressures given the “slightly muddy picture” painted by different pieces of data.