Pay in the private sector is likely to be growing at its fastest pace in 15 years, a think tank has said today.
The Resolution Foundation believes workers’ pay packets – once inflation has been taken into account – will have grown between 3.4 and 3.6 per cent in the three months to August when official figures are published this week.
This is likely to be faster than in July 2002 when real pay rose 3.45 per cent and possibly even May 2001 when it grew 3.54 per cent.
While low inflation, driven this year by a collapse in the price of oil and commodities, has boosted the figure, the Resolution Foundation also says that the increase in pay is due to job creation shifting toward higher paid roles. Managerial roles have made up a growing sharer of the workforce over the last year, it said.
The government talked up the figures.
“Today's report by the Resolution Foundation is further evidence that our economic plan is working – We have one of the fastest growing advanced economies, there are more people in work than ever before and pay cheques are rising strongly,” a Treasury spokesperson said.
However, some were more cautious about the forecast.
“While the immediate outlook for pay is healthy, it will be far harder to maintain this ‘catch-up’ growth once inflation starts to return, especially with the labour market still under-performing in many key areas,” said Laura Gardiner, a policy analyst at the Resolution Foundation.
“The relatively subdued level of moving between jobs among young people is a particular cause for concern, as it can harm career prospects and their long-term earnings potential.
The Foundation also said there would need to be a substantial lift in pay growth once inflation begins to rise in order to keep up the pace. Inflation was zero per cent in August and the Bank of England is predicting it will hit one per cent sometime next spring.
“After a long wait, it’s good news that many workers are finally seeing real pay improvements,” said Frances O’Grady, general secretary of the Trades Union Congress.
“However, earnings remain some way off their pre-crash position, too many self-employed workers are stuck at the bottom, and there is no public sector pay recovery.”