Current weakness in the labour market means that wage increases will continue to be muted for the next five years, with the average pay award estimated to be between 2.2% and 2.5%.
According to the Centre for Economics and Business Research, even though the UK has now officially exited recession, the slack in the labour market means that average gross earnings, including bonuses, are expected to grow by only 2.2% next year, following on from dismal 1.5% growth in 2012.
A survey among 343 groups of private sector employees conducted by XpertHR predicted that the median pay increase in 2013 was likely to be a slightly higher 2.5%, however, with the key influencing factors being company performance/ability to pay (92.5) and inflation (79.5%).
But even by 2017, the Cebr does not expect the picture to look much rosier, with wage rises anticipated to hit no more than 3%, well down on the pre-financial crisis average of 4.3%. This inevitably means that staff spending power will remain under pressure for the foreseeable future.
Scott Corfe, the Cebr’s senior economist and main author of the report, said that, even though employment levels had hit record highs recently, it had been almost entirely due to the creation of part-time jobs, while the number of full-time positions was 700,000 lower than during the previous employment peak.
This “substantial slack” in the labour market meant that it remained “a buyers’ market with little pressure for firms to increase salaries”, he added. Moreover, rather than laying off staff, employers still appeared to be cutting hours and restraining pay in a bid to contain costs and retain skills.
Official figures from the Office for National Statistics released earlier this week also revealed that national income per head, taking inflation into account, had dropped by more than 13% since the start of 2008.
