A third of workers in the UK have said that Bank of England governor Andrew Bailey’s call for pay restraint in February would make a difference to their pay rise demands.
Bailey was criticised by unions and the Prime Minister after suggesting workers should not be asking for big pay rises, despite facing the worst cost-of-living crisis in a generation. He called for moderation in a bid to control inflation, which officials expect to hit 7.25% in April.
Backtracking from his original statement somewhat, Bailey said last week: “I’m not saying people should not take pay rises. I did make the point it was in the context of large pay rises. And my concern is the second-round effects. If everybody tries to get ahead of the shock we’ve had from outside, then we’ll get the second-round effects and it will get worse. That’s the problem.”
But a poll by recruiter Randstad UK suggested that more people than expected would accept exercising more restraint when it came to wages. When asked if the governor’s calls for restraint in the pay bargaining process would make a difference to them, 35% said they would, while most (55%) said they would not.
Pay and inflation
Victoria Short, chief executive of Randstad UK, said that despite being in the minority, the high proportion who would accept restraint on wages was “stunning”. She added: “It’s bizarre that people might willingly throw away their material aspirations because the governor of the Bank of England has asked them to. Perhaps the age of deference is not dead?
“I don’t think we’ve seen anything like this since 1977 – it harks back to the 1970s when unions pledged to do their bit to keep wages below inflation as part of a social contract.”
This suggested the Prime Minister was wrong to have rebuked Andrew Bailey, Short said, adding that perhaps people felt the ability to work at home more often was a pay rise in itself and would prefer to negotiate about other priorities away from pay.
She said: “Perhaps society is experiencing an altruistic surge in the wake of the pandemic? Or people may not be looking for a pay rise despite inflation because flexibility and hybrid working might have been a kind of pay rise. If you need to commute less frequently, your involuntary expenditure falls – and you see a big increase in your after-tax, discretionary spending.
Perhaps the age of deference is not dead?” – Victoria Short, Randstad UK
“You may even be able to move slightly further away from the office. So people may have made the decision that they’d rather reserve their negotiating power for locking into more flexibility in the face of demands to return to the office. Whatever the reason, while the market dictates pay and wages are no longer set by national policy, it turns out that plenty of professionals were listening to the governor.”
Average wage pay, excluding bonuses grew by 3.8% in the three months to November 2021, in part because of tight awards in 2020.
There are indications that wage pressure could continue. Very few people who want a job do not have one, which gives those in work greater power in wage negotiations. As food and energy prices rise, employers are bracing themselves for pay demands to grow louder.
Randstad said it expected median pay settlements to rise above 3% this year, compared with an average of 2% over the 2010s.