Wage growth fastest in 11 years

The construction sector saw some of the strongest wage growth at 5.9%
Photo: Matt Dunham/AP/REX/Shutterstock

Wages are growing at their fastest rate for 11 years, according to official figures released today.

The Office for National Statistics said that wage growth reached 3.9% for regular pay excluding bonuses in the year to June. Including bonuses, weekly earnings grew 3.7%.

It appears as though impending Brexit decisions are slowing down the economy as businesses collectively shut their eyes, hold their breaths and hope for the best” – Michael McLaughlin,DWF

In real terms, after adjusting for inflation, total pay is estimated to have increased by 1.8% compared with a year earlier, and regular pay is estimated to have increased by 1.9%.

Matt Hughes, deputy head of labour market statistics at the ONS, said: “Excluding bonuses, real wages are growing at their fastest in nearly four years, but pay levels still have not returned to their pre-downturn peak.”

Annual pay growth in the public sector accelerated to 3.9% and is now at its highest since May 2010, but this was largely attributed to the timing of pay rises for some NHS staff, which is different this year compared with 2018.

The employment rate was estimated at 76.1%, the joint highest on record since comparable records began in 1971, but the unemployment rate increased slightly over the quarter to 3.9%.

Gerwyn Davies, senior labour market adviser at the CIPD, said: “Employer demand for workers remains robust, which is partly being met by a relatively sharp increase in the number of non-UK nationals in employment. A significant proportion of migrants workers are filling skilled vacancies, especially in healthcare, which may not otherwise be filled.

“Non-UK citizens are therefore playing an essential and complementary role to the demands of the UK labour market. It is key that the UK’s future immigration system is flexible and responsive to the specific skills needs of the UK economy.”

Davies added that, especially in sectors such as construction, which saw total earnings increase by 5.9% over the year, the tightening labour market is “is clearly putting pressure on firms to raise wages for staff”.

He added: “Looking ahead, organisations need to address their workforce pipeline challenges before migration restrictions hit them hard – improving pay on its own will not be enough.”

Michael McLaughlin, head of the employment practice at law firm DWF, said: “It appears as though impending Brexit decisions are slowing down the economy as businesses collectively shut their eyes, hold their breaths and hope for the best.

“Depending on decisions made over the coming months, these record-high employment figures could well be short-lived. Factoring in the potential reduction to the gig economy and the possible loss of immigration workers in the service sector.”

ONS data also showed that while the number of vacancies has been generally increasing since 2012, it has been falling since early this year. For May to July 2019, there were an estimated 820,000 vacancies in the UK, 20,000 fewer than a year earlier and 20,000 fewer than for the three months to April 2019.

There were an estimated 138,000 vacancies in health and social care in May to July 2019, accounting for one in six of all vacancies in the UK.

TUC general secretary Frances O’Grady said: “With wages not yet recovered from the financial crisis, workers now face the risk of a new recession. And although full-time employment is up, the fall in vacancies is a worrying sign.

“A no-deal Brexit would shrink the economy, wipe out jobs and hold back pay. No responsible prime minister would ever consider causing that kind of crisis.

“The government must protect jobs and pay by ruling out a no-deal Brexit and putting urgent investment into public services to support growth.“

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