National Living Wage likely to temporarily boost earnings, but weakening employment growth is not just about the uncertainty of EU Referendum

Commenting on today’s ONS Labour Market Statistics, Gerwyn Davies, Labour Market Adviser at the CIPD, the professional body for HR and people development, says:

'The pick-up in wage growth we’re seeing today might seem to suggest that the tight labour market is finally feeding through to wages. However, this boost to earnings may be short-lived unless employers are able to increase their productivity to meet the additional cost of the National Living Wage.

'If efforts to improve productivity fail to materialise, the obvious response from many employers will be to cut back on overall pay awards or wider employee benefits. If this doesn’t happen, we can expect to see lower pay growth in some of organisations and job losses in others.

'In addition, many commentators will cite the uncertainty about the upcoming EU Referendum vote as the key reason for the slowdown in hiring. However, this would ignore the wider concern about a slowing economy and employers’ increasing concerns over the cost implications of the National Living Wage, pension auto-enrolment and the impending Apprenticeship Levy.

'Overall, the data makes the case for improved productivity an even more pressing concern. If businesses are putting employment decisions on hold, they should use this time to take stock of the skills, technology and working practices needed to move their businesses forward in the long-term, regardless of what the EU decision is. They can do this by improving the quality of leadership and management, up-skilling existing staff and redesigning jobs to enable people to work smarter rather than harder.'

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