Experts have warned that workers still face a “big pay squeeze” despite official figures showing the labour market continues to be tight.
The latest estimates from the Office for National Statistics (ONS), published today (12 April), showed the number of job vacancies in the three months to March rose to another new record of 1,288,000 – an increase of more than 50,000 over the quarter.
At the same time, the unemployment rate for the three months to February fell, while the employment rate held steady.
However, while today’s figures showed that average earnings continued to increase, pay was still failing to keep up with inflation.
The growth in basic average total pay for the three months to February was 4 per cent, increasing to 5.4 per cent when including bonuses. However, when accounting for inflation, basic average pay fell by 1 per cent, and only grew 0.4 per cent including bonuses.
“The big pay squeeze is still in the pipeline,” warned Jonathan Boys, labour market economist for the CIPD, despite the labour market remaining tight.
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“Under such conditions, we would usually expect inflation busting pay rises, however, pay is struggling to keep pace with rising prices. This means that regular pay is now about where it was in September 2020 – the nation has effectively had a pay cut,” he said, noting that the Office for Budget Responsibility had forecast that inflation could reach 8.7 per cent this year.
Boys also warned about the emerging divide between public sector and private sector pay, noting that the private sector saw average basic earnings increase by 4.7 per cent in the three months to February, compared to an increase of just 1.7 per cent in the public sector.
While this might simply be because the private sector has “more wiggle room” to offer higher pay in the face of recruitment and retention challenges, Boys warned: “If a gap between private and public pay persists, a wedge will open up between the two and it could become increasingly hard for the public sector to compete for talent.”
Acknowledging that for some employers, the ability to award pay rises was limited, Boys advised that in these situations businesses look at other areas of their employment offering.
“This includes designing jobs that include ample flexible working options: financial wellbeing support can make a difference, as can revisiting the mix of benefits offered to make sure they work hard for employees, especially the lowest paid,” he said.