Pay growth continued to outpace inflation in July to September 2023, but it grew at a slower rate than in previous months, new labour market figures have revealed.
Annual growth in regular pay excluding bonuses in Great Britain was 7.7% in July to September 2023, according to the Office for National Statistics. This was slightly down compared with previous periods, but was still among the highest annual growth rates since comparable records began in 2001.
In real terms, adjusted for inflation using the consumer prices index including housing costs (CIPH), regular pay grew by 1.3% compared with the same period in 2022.
Average pay including bonuses grew by 7.9%, driven mainly by one-off bonus payments made in the Civil Service in July and August. In real terms, employees saw their pay including bonuses rise by 1.4%.
Michael Stull, director at recruitment firm ManpowerGroup UK, urged caution over further pay rises.
“While uncertainty remains so prevalent, our recommendation is to look instead at ways to retain existing staff by bolstering benefits packages and by offering opportunities to upskill and reskill, especially across the areas where talent shortages prevail,” he said.
Labour market in November 2023
One in four UK jobs are ‘bad’ jobs
“Businesses must be prepared to make braver long-term decisions in areas such as their values and overall purpose. There is an opportunity to be seized by those who are prepared to adapt and do things differently – both in terms of employee retention and customer and client loyalty.”
The labour market figures for November 2023 also show that 229,000 working days were lost because of labour disputes in September 2023, with strikes mainly affecting the health, social work and education sectors.
The UK’s unemployment, employment, and economic inactivity rates remained stable at 4.2%, 75.7% and 20.9% respectively. However, the ONS said these were derived from PAYE real-time information submissions, rather than the usual Labour Force Survey estimates, to “provide a more holistic view” of the state of the labour market while there is uncertainty around the survey’s estimates.
Vacancies continued to fall, dropping by 58,000 to an estimated 957,000 in August to October. This was the 16th consecutive period that vacancies have fallen, and declined in 16 of the 18 industry sectors monitored by the ONS.
The sector showing the largest annual decrease in the number of vacancies was the professional, scientific and technical activities sector, which saw job postings fall by 35,000 from the equivalent period last year.
However, Neil Carberry, chief executive of the Recruitment and Employment Confederation, noted that vacancy numbers were still higher than before the Covid-19 pandemic, suggesting that the labour market is still resilient.
He said: “The overall picture is more nuanced than a year ago, with temporary work and sectors like hospitality and healthcare doing better than permanent roles, and jobs in IT and construction. Pay is still rising – but this is now being driven by pay awards designed by employers to help staff facing rising prices, not labour market competition for staff.”
Carberry urged the chancellor to include more support for people to enter the jobs market in his Autumn Statement next week.
Let’s have a plan from the chancellor next week to get economic growth going, which will get more employers back into hiring,” – Neil Carberry, REC
“The labour market is just marking time waiting for economic growth to return. Let’s have a plan from the chancellor next week to get economic growth going, which will get more employers back into hiring,” he said.
Ben Harrison, director of the Work Foundation at Lancaster University, said the focus of the chancellor’s statement should be on improving the quality of jobs and providing more tailored support for jobseekers.
“With so much uncertainty surrounding the true picture of the labour market, it’s critical that the chancellor confirms that welfare payments will be uprated next year in line with inflation. And he should resist calls to further increase benefit sanctions on some of the most vulnerable people in society – which the government’s own research suggests does not result in more people moving into work,” he said.
Julia Turney, partner at business consultancy Barnett Waddingham, said: “At a time when ONS data shows economic inactivity rising, and those inactive due to long-term sickness hitting a record high, there is no denying the need for action to revitalise the workforce and supercharge employer productivity. The chancellor holds some the keys to solving the productivity puzzle, so all eyes will be on the Autumn Statement to see what measures he has to boost productivity, but employers need to support this transition internally too.”
Turney said employers should consider whether their working models and benefits packages cater to a more diverse workforce, including older workers seeking to re-enter the workplace.
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