Tight labour market but pay struggles to compete with rising prices
‘The big pay squeeze is still to come’, says the CIPD in response to the latest labour market statistics from the ONS
Responding to today’s ONS figures, Jonathan Boys, labour market economist for the CIPD, the professional body for HR and people development, comments:
“The labour market remains tight. At 3.8% unemployment is incredibly low. Candidates for jobs are in short supply but demand for staff continues at pace with another record-breaking vacancy level reached this month.
“Under such conditions we would usually expect inflation busting pay rises. However, pay is struggling to keep pace with rising prices. This means that regular pay is now about where it was in September 2020: the nation has effectively had a pay cut.
“A gap is also emerging between public sector and private sector pay. Regular pay (excluding bonuses) in the private sector grew at 4.7% compared to 1.7% in the public sector in the year to February 2022. It may simply be that the private sector has more wiggle room to offer candidates and existing staff the pay they need to abate recruitment and retention difficulties. If a gap between private and public pay persists, a wedge will open up between the two and it could become increasingly hard for the public sector to compete for talent.
“Today’s statistics look backwards but it’s what’s to come that is concerning. The OBR forecasting that inflation could reach 8.7% this year. The big pay squeeze is still in the pipeline. Employers a big role to play in supporting their staff through this time. If the ability to award pay rises is limited, employers can look at the total employment offer. This includes designing jobs that include ample flexible working options. Financial wellbeing support can make a difference, as can revisiting the mix of benefits offered to make sure they work hard for employees, especially the lowest paid.”
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