CIPD: The Bank of England and the Office for Budget Responsibility are wrong about wage growth in 2016

Emma Haslett
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The Uk Minimum Wage Of GBP5.05
The new National Living Wage will have a temporary effect on average pay (Source: Getty)

Wage growth next year won't be as optimistic as the Bank of England and Office for Budget Responsibility (OBR) anticipate, the Chartered Institute for Personnel and Development (CIPD) has warned.

Despite the introduction of the National Living Wage, wage growth will remain at two per cent in 2016, the organisation said - much lower than the 3.5 per cent expected by the BoE and OBR.

But the good news is that employment is likely to grow by more than forecast - the CIPD reckons half a million more people will find themselves in employment in 2016, a quarter more than the 400,000 expected by the OBR.

But Mark Beaston, chief economist at the CIPD, suggested new legislation will cause employers to shy away from awarding pay rises.

"Some are worried how they will pay for the National Living Wage, especially those in retail, hospitality and social care.

"Larger businesses will also have to pay the Apprenticeship Levy from April 2017, while many businesses with fewer than 30 employees will have to pay additional pension costs during 2016 as auto-enrolment is rolled out further.

"With inflation close to zero, some employers will try to manage these costs by restricting pay rises for their better-paid employees."

He added that while the National Living Wage will push up average pay in the short-term, that's likely to be a "temporary effect".

"Other cost increases... will potentially restrict the ability to employers to afford significant payrises."

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