Wage rise to be ‘short-lived’ unless productivity boosts to meet NLW cost
The rise in employment and wages announced yesterday by the Office for National Statistics (ONS) will be “short-lived” unless employers increase productivity to accommodate the costs of the National Living Wage (NLW), according to the Chartered Institute for Personnel Development (CIPD).
The ONS figures show that in the first quarter of 2016, average total pay for employees in Great Britain was £503 a week before tax, compared to £490 at the same time last year. Adjusted for inflation, regular pay increased by 1.9%.
Overall, the employment rate was 74.2%, the joint highest since records began in 1971. There were 31.59m people in work, 461,000 more than at the same time last year.
Gerwyn Davies, labour market adviser at the CIPD, said: “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.”
He added that as well as the NLW, pension auto-enrolment and the apprenticeship levy were more pressing concerns than the upcoming EU referendum.
Following a report by the Public Accounts Committee, the Department for Health is also due to carry out a review of the impact of the NLW on the cost of social care.
The CIPD’s own Labour Market Outlook Survey found that median basic pay expectations for this year are below the cost of living.
“Overall, the data makes the case for improved productivity an even more pressing concern,” Davies said. “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.”
The figures also showed a small improvement in public sector employment, which has increased over the last two quarters after declining since March 2010. There are currently 5.35m people employed in the public sector, 6,000 more than the same point last year.
However, the overall percentage of the population employed in the public sector is 16.9%, the lowest since comparable records began.
Have you got a story to tell? Would you like to become a PSE columnist? If so, click here.