Work­ers more pes­simistic over pay growth than Bank fore­casts

The Sunday Telegraph - Money & Business - - Business - By Tim Wal­lace

BRI­TISH work­ers are in­creas­ingly pes­simistic about their pay prospects, an­tic­i­pat­ing wage growth will slow down again this year.

House­holds ex­pect pay growth to fall from 2.7pc in 2017 to 2.4pc this year, ac­cord­ing to a study of more than 5,000 peo­ple by Bank of Amer­ica Mer­rill Lynch.

This con­tra­dicts fore­casts by econ­o­mists at the Bank of Eng­land who be­lieve pay pres­sures are start­ing to rise as un­em­ploy­ment is at a 42-year low, forc­ing em­ploy­ers hav­ing to pay more to get the staff they need.

“It is pos­si­bly be­cause em­ploy­ees don’t have a route to bar­gain for more, or are still con­cerned about their job se­cu­rity and so are happy to have a job even if the pay in­crease is not what they would like,” said econ­o­mist Rob Wood at BAML.

Re­search from the pre­vi­ous month’s sur­vey in­di­cates that the level of pay rises has lit­tle in­flu­ence on work­ers’ de­mands for more or the like­li­hood of them seek­ing an­other job. How­ever, a pay cut prompts peo­ple to act.

“The change in the struc­ture of work, with more Uberi­sa­tion, more piece­work pay, lower union­i­sa­tion – these de­crease the abil­ity of work­ers to bar­gain for more,” Mr Woods said.

It could be that the long-term rate of pay growth has now fallen from 4pc to 5pc per year be­fore the fi­nan­cial cri­sis to 2pc to 3pc now, he be­lieves.

“There has to come a point where un­em­ploy­ment gets low enough that you do get stronger wage growth, but given what we’ve seen in past few years I am not hold­ing out much hope it is go­ing to hap­pen in 2018,” he said.

Work­ers’ own ex­pec­ta­tions are im­por­tant when set­ting pay, be­cause it af­fects how much bosses of­fer each year, and it in­flu­ences em­ploy­ees’ de­ci­sions to stay in their jobs or to look for a bet­ter deal else­where.

It also comes at a time when in­fla­tion is run­ning above the Bank of Eng­land’s 2pc tar­get. Prices rose by 3.1pc in the 12 months to Novem­ber, in­di­cat­ing that work­ers are be­com­ing worse off in real terms. Those with the largest pay pack­ets typ­i­cally re­ceived the largest raises in 2017 – those on more than £75,000 won pay rises of al­most 3.5pc on av­er­age, BAML fig­ures showed. Mean­while, those on less than £10,000 per year re­ceived an in­crease of only 1.5pc.

How­ever, those with deeper pock­ets also ex­pect the big­gest slow­down, with pay growth set to fall to around 3pc in 2018. Those at the bot­tom of the heap ex­pect barely any change to the pace of growth.

The higher rate of pay growth at the top may skew the over­all fig­ures.

Look­ing at the av­er­age con­sumer’s pre­dic­tions, the typ­i­cal Bri­ton an­tic­i­pates a slow­down in pay growth from 2pc in 2017 to 1.9pc this year.

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