Pay Growth Weighed Down By Low Productivity Levels: Study

Any kind of pressure to raise wages of employees from most of their employee was not felt by about one fourth of respondents, claimed the Chartered Institute of Personnel and Development and The Adecco Group in its newest edition of the quarterly published Labour Market Outlook.

However, either some or significant pressure was felt by 59% of public sector organisations to raise wages as that figure of 24% did not quite get transmitted to the employers within the public sector.

Any form of pay pressure to the employers was most probably to emerge from a lack of skills in the labour market because the employers said that only 13% of all of the current vacancies in the private sector were related to skill-shortage. This was the reason that most of the employers faced no major problems in the skill assessment of their employees, the report found.

Official data has shown that stuck between 1.8% to 2.2% percent was the basic average salary during the first half of the year and this was in line with what the study found – just 2% was the expectation of the pay raise demand for next year as reported by employers. This is 1% increase on the previous quarter.

There was however a positive outlook in the short-term jobs.

Remaining at an all-time high levels at +26, in comparison to +27 for the previous quarter was the net employment balance, an index that measures the difference between those employers who planned to reduce the level of staff and those who planned to recruit more staff in the third quarter, for Q3 of 2017.

Gerwyn Davies, CIPD’s senior labour market analyst, said, “This survey provides further evidence that productivity has a far more significant bearing on pay growth than the tightness of the labour market. Over time we might expect low unemployment levels to lead to increased pressure on pay, as the Bank of England has predicted.”

“However, it’s the UK’s ongoing poor productivity growth that’s currently preventing employers from paying more, not their inability to find or retain staff. This is why the Chancellor in this month’s Budget has to prioritise investments that will support workplace productivity improvements. For example, investing in support for small firms and skills development initiatives that can help to drive productivity gains over time.”

“In terms of employment, despite the evident optimism in this quarter’s survey, it remains likely that the sharp increase in the number of people in work over the past year will ease during the course of 2018. This is due in part to the impact of continued slower economic growth, the uncertainties associated with Brexit and the prospect of further interest rate rises. However, employment prospects for the manufacturing sector look bright, perhaps buoyed by the benefit of a weaker currency and the strength of global demand.”

Alex Fleming, president of general staffing at the Adecco Group, noted, “It is important to note that productivity remains as a critical and national issue for the majority of employers as well as some specific sectors, whilst some other sectors have other priorities and are focused on filling specific skills gaps which are vital to their business model’s success.

“The key takeaway is for organisations to remember that talent mapping remains prudent; organisations need to be ready to react quickly to possible future talent restrictions,” he added.



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