Employment Law Cases

Wage growth expectations strengthen 'modestly'

Poor productivity growth is preventing employers from paying more, not their inability to find or retain staff according to CIPD research.

The CIPD’ Labour Market Outlook survey (LMO) provides a set of forward-looking labour market indicators highlighting employers’ recruitment, redundancy and pay intentions and I based on responses from about 2,000 employers. The autumn 2017 edition focuses on the fourth quarter of 2017 onwards. Some take outs from the survey appear below.

  • Demand for labour remain ‘robust’ and is most marked in the technology, manufacturing and professional, scientific and technical sectors - but the LMO predicts an easing of this demand during 2018.
  • Only a quarter of employers (24%) in the private sector say they are under some or significant pressure to raise wages from the majority of their workforce, while almost four in ten private sector firms (38%) say they face no pressure at all to raise wages. A slightly higher proportion of private sector employers (36%) cite either some or significant pay pressure to raise wages for certain roles, particularly among high and middle-skilled jobs.
  • In contrast, the share of public sector organisations that are under pressure to increase wages is much higher than in the private sector. Almost three-fifths (59%) of public sector organisations say they are under some or significant pressure to raise wages for the majority of the workforce. In addition, a quarter of public sector organisations say that they are under some or significant pressure to raise wages for certain roles.
  • The LMO also suggests a significant majority of employers, apart from a few specific sectors, do not face significant difficulties accessing the skills they need – only 13% of all current private sector vacancies are skill-shortage vacancies. Only a quarter (29%) of all employers with a vacancy report it to be from skills shortages, suggesting says the LMO that pay pressure is unlikely to come from a lack of skills in the current labour market.
  • Wage growth expectations for the year ahead have ‘strengthened modestly’ but remain subdued. Median basic pay expectations in the 12 months to August 2018 are 2%, up from 1% growth in the previous LMO report. The median average basic pay increase expectations are: 2% for the private sector, 1% for the public sector and 1.5% for the voluntary sector.

The full survey can be accessed via the CIPD website.