Wages set for “slight” rise after ten-year lull - 22nd March 2018

A survey of leading economists has found that workers are likely to get a pay rise in 2018 following a decade of stagnant wage growth.

Most of the respondents to the Financial Times survey expected the rate of wage growth to rise as firms experience labour shortages and unemployment stays close to multi-decade lows.

However, this welcome news is tinged with the warning that any increase in wages is likely to be “slight”.

Lacklustre wage growth has been a feature of the UK’s recovery since the post 2008 recession and workers have not seen any acceleration in pay growth despite falling unemployment.

Many economists questioned by the survey said that UK workers remained “weak” and lacked “bargaining power” but others said they expected the pattern of stagnant real wages could end as, with migration falling due to Brexit, it was difficult to see where a new supply of workers could come from.

The Office for National Statistics’ latest snapshot of the labour market showed that a record high level of employment and a move from part-time to full-time work pushed up wages in the three months ending in January.

With inflation falling, the ONS said the squeeze on living standards that had previously dampened consumer spending had come to an end if bonuses were included in the metrics used to calculate earnings.

Including bonuses, average earnings in the three months to January were 2.8% higher than in the same quarter a year earlier, the highest since September 2015. Excluding bonuses, earnings were 2.6% higher.

There was some welcome news on the wages front this week for more than one million NHS staff. The employees, including nurses, porters and paramedics, are being offered increases of at least 6.5% over three years with some receiving as much as 29%.

The £4.2 billion deal has been formally agreed by union leaders and ministers and staff will now be asked to vote on the deal, with rises backdated to April if they agree by the summer.

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