Employment Down, But So Are Wages
Figures in from the ONS today show that unemployment is down by 5,000 but take home pay is down in real terms too…
The latest data from the Office of National Statistics (ONS) shows that 2.51 million are currently out of work, indicating no change in the unemployment rate of 7.8% despite 5,000 fewer people being registered as unemployed.
In other figures, average earnings are also up by 1.3% on the same period last year and rose by an apparent 3.3% in April alone.
The reason for the sudden increase in pay may be down to the abolition of the 50% tax rate (now set to 45%) and later monthly bonuses.
Some sectors have seen this an encouraging sign with The CBI’s director for Employment and Skills, Neil Carberry, saying:
“It’s encouraging to see businesses feel able to pay people a little more through one-off bonuses, as economic conditions appear to have brightened. The use of bonuses rather than base pay awards suggests firms are still being cautious.”
However, with the rate of inflation (CPI – Consumer Price Index) at 2.4% this shows that wage rises are failing to meet the increasing cost of living.
The Institute for Fiscal Studies (IFS) has noted that real wages have fallen by a level more than at any other five year timescale.
Looking at the difference between large and small firms, the IFS has seen big businesses lay off staff whilst small businesses have tended to freeze or reduce wages.
Furthermore, productivity in small firms has been hit harder than at large firms as has the level of investment. Only yesterday, reports from the Big Innovation Centre highlighted that small business growth is being stunted by a lack of investment in innovative small businesses.
Claire Crawford, the IFS’ Programme Director and Managing Editor of Fiscal Studies, said of the findings:
“The falls in nominal wages that workers have experienced during this recession are unprecedented, and seem to provide at least a partial explanation for why unemployment has risen less – and productivity has fallen more – than might otherwise have been expected.”
“To the extent that it is better for individuals to stay in work, albeit with lower wages, than to become unemployed, the long-term consequences of this recession in terms of labour market performance may be less severe than following the high unemployment recessions of the 1980s and 1990s.”
The CBI’s Neil Carberry remained upbeat though, adding:
“The labour market always lags a few months behind the economy, so it’s not surprising that overall, the picture on unemployment remains fairly flat.”
“However, we expect to see improving economic conditions making a more positive impact on job creation later this year and it’s encouraging that once again the private sector more than offset the number of positions lost in the public sector during the first quarter.”
For further details see the ONS’ Statistical Bulletin on Labour Market Statistics for June 2013 here.