UK Employers Grow Optimistic About Raises This Year, But Think Tanks Disagree

UK Employers Grow Optimistic About Raises This Year, But Think Tanks Disagree

In the UK, as in the US, persistent wage stagnation has been a painful long-term consequence of the financial crisis and the Great Recession. A new survey from XpertHR finds that employers there are increasingly optimistic about the raises they will be able to offer this year, predicting an average increase of 2.5 percent, Ashleigh Wight reports at Personnel Today:

A survey of more than 200 private sector employers found that they were more optimistic about the pay increases they plan to offer their staff in 2018 than six months ago, when they expected to offer a 2% pay rise. Of the organisations surveyed, the most common pay award prediction remained at 2%, with 28.9% of employers expecting to offer this level of increase. One in 10 (11.4%) employers forecast a pay increase of 4% or more, while just 5.3% of employers predicted a pay freeze.

In the three months to the end of February, XpertHR found there was a 2.5% median basic pay increase, based on data from 169 pay awards. … XpertHR pay and benefits editor Sheila Attwood said: “It is several years since employers have been so optimistic about prospects for pay rises. If private sector pay awards stick at 2.5% over the course of the year, this will mark the first time since 2012 that increases have been consistently above 2%.”

These findings mirror a survey of US employers conducted in the last quarter of 2017, which registered growing levels of business optimism and predicted that wages could rise 4.27 percent in the coming year, compared to the 3.39 percent figure PwC found in Q3 and just 2 percent a year ago.

Reports issued recently by two leading think tanks paint very different pictures of the economic outlook for UK workers, however. In early November, the Resolution Foundation asserted that the average pay package in Britain in 2022 would still be £20 lower than it was before the financial crisis, according to the Guardian:

The thinktank said wages were on course to be £24.50 a week lower in inflation-adjusted terms in 2022 than anticipated at the time of the March 2017 budget. This would leave them £22.70 or just over 4% below their level in 2007 and delay the return to their pre-crisis peak into later in the 2020s. According to the foundation, the last time Britain suffered a decade of productivity growth as weak as that since 2007 was in the 10-year period which started in 1812 – the year of Napoleon’s invasion of Russia. Wage growth over the past 10 years has been the worst since the period starting in 1825.

Another report issued later that month from the Institute for Fiscal Studies also pointed to forecasts of stagnant productivity in the coming years to conclude that “an unprecedented two lost decades of earnings growth and many more years of austerity” were in the cards for British employees, the Guardian reported at the time:

In its analysis of the budget and the report from the independent Office for Budget Responsibility, the IFS said:

  • GDP per person will be 3.5% smaller in 2021 than forecast in March 2016. The loss of growth will mean the economy is £65bn smaller in 2021 than previously thought.
  • Average earnings are on course to be £1,400 a year lower in 2021 than forecast in 2016. That means the recovery in wages will have failed to materialise and average earnings will be below their 2008 level adjusted for inflation.
  • Borrowing will be £12bn higher in 2021 than was forecast in March. …

Paul Johnson, the IFS director, said the OBR’s decision to reduce its growth forecasts by one-quarter over the next five years would delay deficit reduction, limit Hammond’s ability to ease pressure on welfare and public services and harm living standards.