REC/KPMG ‘report on jobs’ shows anticipated pay growth in 2015 of just 1%
As befits the seeming ‘good-economic-news-only’ environment in the run up to the election, last Friday’s REC (The Recruitment & Employment Confederation) report on jobs was issued under the banner:
“Stronger growth of staff placements in February”
But in the last section of the report (not the press release) there was an additional analysis, headed:
“Weak pay growth expectations among broader workforce despite rising salaries for new hires”
The most telling statement
“only one-in-five anticipate an increase of 2 percent or more”.
I include the full text of this sections at the end of this short post. But the findings are captured clearly on their helpful chart:
A simple average of these figures comes in at 1.0 per cent.
(Done by reading ‘% of survey responses’ off the chart, and taking the mid-points for each salary range, using -1% for ‘pay cut’ and +6% for ‘above 5%’. An alternative approach would be to drop the bottom category and top 3 categories, which then gives an average of 0.8 per cent; the chart is a little biased as it gives fewer pay cut categories than ‘higher’ pay rise categories.)
If these expectations are a good guide to outcomes (and they are meant to be ‘representative’ of British households, see below), then already-low earnings inflation is heading back down, perhaps indicative of deflationary factors at play.
A survey of just under 1,000 (973) employees in March showed an ongoing lack of pay pressures in the economy at the end of the first quarter. The representative panel of British households, polled by IPSOS Mori on behalf of Markit, found that, while 58 percent of employees expect a pay rise in 2015, only one-in-five anticipate an increase of 2 percent or more. Just 8 percent anticipate a pay rise in excess of 3 percent.
Only 10 percent of public sector employees expect their pay to rise by more than 2 percent compared to 27 percent in the private sector. Meanwhile, just over one-in-three employees (35 percent) expect to see their pay frozen compared with 2014, while a further 7 percent expect their pay to be cut.
Taken in conjunction with survey evidence from the Report on Jobs, the findings suggest a divergence of pay pressures between those changing jobs and those staying in their current roles. The former group are frequently seeing higher salary offers, linked to skill shortages (see sections 5 and 6). However, people not changing jobs, constituting the majority of the workforce, are clearly struggling to negotiate higher pay, partly reflecting record low inflation.