Highest pay rises for four years

Average pay rises are more than 2% for the first time since 2011.

According to the Office for National Statistics, average regular pay (excluding bonuses) for March 2015 was £460 per week before tax and other deductions.

This was a 2.2% increase on the same period last year; the highest annual growth rate since April to June 2011.

For the month of March, higher growth rates were recorded across the private sector, particularly for construction, compared with February.

With the Consumer Prices Index (CPI) measure of inflation still hovering at around 0%, thanks largely to the low international oil price, it means pay rises are starting to catch-up with the lost equality during the recession.

The Chartered Institute of Personnel and Development welcomes the results, but its latest Labour Market Outlook which was published yesterday warned that pay rises would likely dip throughout the year.

CIPD labour market adviser Gerwyn Davies said it reinforced the need for government policy to raise the ambitions of employers, especially in relation to productivity.

He added: "Pay growth continues to pick up modestly but the average earnings figures tell a mixed picture between those sectors such as finance, retail and hospitality that are performing well, and others, such as manufacturing, that are continuing to struggle.

"It's no surprise to see pay growth remain modest given our productivity performance. Equally the increased supply of workers, especially older workers and EU migrants, means that employers are under little or no recruitment pressure to boost pay growth. As the ONS figures show, the number of EU migrants in employment has increased by 17% during the past year alongside an increase of 9% of people aged 65 and over.

"Until this supply begins to diminish, employers will be under little pressure to increase starting salaries and even then, we still have some way to go to see wages significantly exceed living costs."

The Labour Market Outlook survey of more than 1,000 employers revealed continued optimism on hiring intentions but basic pay was expected to grow by just 1.8% in the coming year, down from 2% in the previous quarter.

The report noted that this projection remained well below pre-recession levels and was just half that of the average pay increase forecast in spring 2008 (3.6%) however added that inflation in the spring of 2008 was much higher than it is now.

Posted: Fri 15 May 2015
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