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Salary growth to remain weak despite falling unemployment

Families across the north and north-east will benefit from grants for school uniform
Families across the north and north-east will benefit from grants for school uniform

UK pay growth is likely to remain weak despite falling unemployment, with wage rises over the next year expected to be 1%, according to a new report.

An increase in the number of workers from the EU, ex-welfare claimants and older workers are key factors in the predictions of modest pay increases, the Chartered Institute of Personnel and Development (CIPD) and Adecco Group said.

The increase in the supply of labour has led to 24 applicants chasing every low-skilled job, 19 for every medium-skilled vacancy and eight for high-skilled posts.

Nearly one in four firms say the national living wage has put a brake on pay growth, while one in five say the UK Government’s auto-enrolment pensions scheme is a “challenge.”

Gerwyn Davies of the CIPD, the professional body for human resources employees, said: “Predictions of pay growth increasing alongside strong employment growth is the dog that hasn’t barked for some time now, and we are yet to see tangible signs of this situation changing.

“Productivity levels are stagnant and public sector pay increases remain modest, while wage costs and uncertainty over access to the EU market have increased for some employers.

“The majority of employers have still been able to find suitable candidates to employ at current wage rates due to a strong labour supply, until now.” Looming migration curbs could change this, he added.