The latest Office for National Statistics (ONS) jobs figures showing a further rise in UK unemployment and further moderation in average pay growth add weight to the view of the Chartered Institute of Personnel and Development (CIPD) ñ based on the latest CIPD/KPMG quarterly Labour Market Outlook survey report published this morning ñ that pay pressures are not only subdued now but also likely to remain so during the important winter pay round.
Commenting on the ONS data, and todayís Bank of England Quarterly Inflation Report, the CIPDís Chief Economist Dr John Philpott said:
ìGrowth in regular pay (excluding bonuses) is failing to keep up with the cost of living as measured by Retail Price Index (RPI) inflation - and the latest CIPD/KPMG survey suggests that the squeeze on living standards will continue into next year.
ìThe much expressed fear that a high and rising RPI will start to trigger big pay demands looks increasingly unfounded. Rephrasing Nobel Laureate Bob Solowís famous early 1990s dictum about productivity, one hears talk of rapid wage inflation everywhere but sees no sign of it in pay statistics.
ìThe main underlying reason for this is the combination of high immigration and a rise in the number of home grown people entering the jobs market, especially the growing brigade of older workers, many above state pension age. With the size of the labour pool growing faster than labour demand, unemployment is thus set to stay on an upward path for some time to come even though, as todayís ONS figures also show, more jobs are being created.
ìRising unemployment is helping employers resist demands for higher pay ñ even in relatively buoyant private sector services where, as Bank of England Governor Mervyn King noted earlier today, trade unions are weak and wage bargaining is quite localised and decentralised.
ìGradual implicit acknowledgement that the spectre of an imminent pay-price spiral may be more imaginary than real helps in part to explain the less hawkish tone of this quarterís Bank of England Inflation Report. However, while this may ease concern about the outlook for inflation a continued squeeze on living standards at a time when many people are burdened with high levels of debt could spell trouble for the economy next year, especially if interest and mortgage rates were to rise above 5%.î
Growth in average pay dips below cost of living
Growth in average pay dips below cost of living as migrants and ëgrey workersí boost labour supply
