Pay rise? What pay rise?

Workers can expect their pay packets to stagnate until at least 2020 unless the government intervenes to help raise productivity across the country, the Chartered Institute for Personnel and Development (CIPD) has warned.

In its’ latest Labour Market Outlook survey the CIPD said that wages are predicted to rise on average by only 1.7 per cent in the next year and will continue remain low for years to come.

The HR trade association’s survey of more than 1,000 employers found that low inflation, expanding labour supply and lack of productivity growth are working in combination to reduce the economic pressure for employers to pay their staff more.

In response, the CIPD called on the government to be more interventionist in its support and work in partnership with business to help improve organisations’ productivity.

Without economic intervention, the CIPD warned, employers will resort to reducing hours, chip away at other benefits or keep pay rises to an absolute minimum, to keep overheads low.

Many large employers have already initiated such measures since the introduction of the so called “living wage” last month.

No sign of change

“The UK is now in its eighth year of productivity ‘go-slow’ which continues to limit the scope for employers to pay more and recruitment and retention problems have so far proved manageable without across-the-board pay rises. This survey provides no indication of this situation changing any time soon,” said CIPD chief economist, Mark Beatson.

“The National Living Wage and roll-out of pension auto-enrolment were introduced to improve the living standards of low-paid employees.

“These policies have to be accompanied by a more active approach to helping businesses cope with these changes and make improvements to their productivity.”

This is the second quarter in a row in which the CIPD’s survey of employers has anticipated a figure below the government’s official inflation target of 2 per cent.

The year before the 2008 financial crisis saw pay growth of between 3 and 5 per cent, but since then wages have fallen in real terms and are struggling to recover.

Unite assistant general secretary Steve Turner said, “Working people have suffered an unprecedented seven year fall in real wages – the average wage remains £40 a week worth less than before the financial crash.

“The cuts in real wages, the fall in productivity and sluggish GDP growth can all be traced back to a government that has implemented austerity, an economic policy that has been a complete failure for the overwhelming majority of people.”

Turner added that a programme of economic investment was needed to increase productivity – a position also supported by the Labour Party and many senior economists.

He said, “We need investment to grow the economy in a sustainable way, that can create decent work for all with growing wages.”