2017 and the return of wage growth
Wednesday, 11th January 2017
In the UK various leading financial experts predict that employers will face pressure to increase wages in both the private and public sectors in order to remain competitive.
Slowing income growth has been publically criticised and will be well known to most of the public. Analysts have blamed a number of factors, including weak productivity growth, memories of the recession and intense foreign competition. Experts are now predicting this is set to change, with Adam Slater at Oxford Economics predicting that UK wage inflation will rise from 2.4% in 2016 to 2.9% in 2017. His findings show that workers are far more willing to quit their current job prior to first securing a better position, a strong indication of the strength of the job market.
This is further evidenced by the Office for National Statistics, who have stated that there are currently 750,000 job vacancies available: this is one of the highest numbers on record, and given that unemployment is also currently at an 11 year low of 4.8% employers will be forced to pay higher to attract new employees and also to retain the staff they already have.
The Bank of England's findings also show that an increase in wages may be driven by households demanding more pay to maintain living standards at a time of rising prices. Wages are currently rising faster than prices; however inflation is set to pick up pace.
All employers, including those in the public sector, will be required to take a long hard look at employee wages to ensure that they remain competitive in attracting new talent, and perhaps even more importantly to stop employees being picked up by other competing businesses.