Higher pay growth in lower paid industries
There are countless reasons to not get carried away by today’s pay growth figures – with regular pay in the private sector hitting 3 per cent in November.
(To recap: with accelerating inflation, real pay growth has stalled at 1.7% and is likely to get worse. We’ve been here before: with nominal private sector pay accelerating up to 3.4% in May 2015, but then falling back to 2.1% six months later in November. And, most substantially, real pay across the whole of the income distribution is still down on the pre-crisis peak as we have repeatedly explained.)
Another big worry is the way rising pay is confined mainly to lower paid industries. In the majority of industries, pay growth is still low and in many cases slowing.
The chart below shows annual pay growth by industry in November 2015 (gold), November 2016 (green) and the change over 2015 to 2016 (red).
- In November 2016, for 9 of 19 industries pay growth was still below 2%. Correspondingly, the median industry pay growth was 2.1% in November 2016, up only marginally from 1.9% in November 2015.
- The areas that have seen the biggest rises in pay (largest red columns) are wholesale, arts and other services, and those still with relatively high but not increasing pay growth are retail, administrative services, construction and agriculture. These are in the main lower paid industries. And the recent increase to the national minimum wage is likely to be an important factor, with 1.5 million workers (for those aged 25 and above) advantaged by the rise of 7.5% in the minimum wage from £6.70 to £7.20 over the past year.
To illustrate this relationship, the next chart shows pay growth in the year to November 2016 compared with the average pay level in each industry.
There are still a number of low paid industries with dismal pay rises. Most obviously there is the savage and unfair pay restraint in the public sector – and the TUC has put out a report (pdf) on this today. But there is also the appalling pay in the accommodation and food industry, where increases over 2015 proved surprisingly short-lived, given many workers are likely to be on the minimum wage. Conversely not a single high paid industry is enjoying high pay rises.
It is a good thing the government is supporting those on the lowest pay. But while these microeconomic initiatives are necessary, they are far from sufficient. To deliver decent wages and decent work for all workers, the government needs to take responsibility for the macroeconomy.