Bosses reluctant to give inflation-busting rises despite struggle to hire enough staff!
Employers expect to hand out pay rises of only 2% this year, according to a new survey of 2,000 firms — a blow to workers who have seen their incomes squeezed by inflation over the past year.
The quarterly survey by the Chartered Institute of Personnel and Development (CIPD) due to be published tomorrow, is the latest sign that bosses are reluctant to hand out inflation-busting pay deals despite labour shortages in many sectors.
Figures from the Office for National Statistics this week are expected to show average weekly pay climbed 2.5% in the year to February, the same rate as January and below the current inflation rate of 3%. Unemployment is set to stay at a four-decade low of 4.3%, according to City forecasts.
“So far there’s no tangible sign that wage settlements are picking up,” said Gerwyn Davies, senior labour market analyst at the CIPD.
The gloomy picture painted by the CIPD research counters a rosier view coming from the Bank of England, which in its own survey last week said wages were set to rise by 3.1% in 2018.
Many economists are sceptical about the Bank’s optimism, given that previous forecasts of an explosion in wages have not materialised. In May 2016 Threadneedle Street was predicting pay growth of 3.75% for 2017. Wages in fact climbed 2.5% last year.
Despite record numbers of people in work, the supply of workers has been boosted in recent years by older workers staying on in the jobs market, part-timers taking on more hours, and the arrival of migrants, said Davies.
A slowdown in immigration from the EU since the Brexit referendum could add to the upward pressure on pay. The latest quarterly immigration figures are published by the ONS on Thursday and are expected to show a further slowing of arrivals from the Continent.
Industries that rely on EU workers, including hospitality, agriculture and construction, claim they are struggling to hire enough staff.
However, employers are reluctant to boost pay to attract the workers they need, preferring to squeeze more from their existing workforce or invest in training, Davies said.
The uncertainty of Brexit has also left some firms nervous about their ability to take on higher costs.
“A lot depends how much firms are able to pass on wages in the form of higher prices,” said George Buckley, UK economist at Nomura. “It does look like wages are set to pick up, but the jury’s still out.”