CIPD research: Pay squeezes reduce impact of economy on employment

The Chartered Institute of Personnel and Development (CIPD) has revised its forecast for UK economic and employment growth but expects pay cuts and freezes to moderate the impact.

The downward revision is due in part to lower-than-expected unemployment in the first quarter of 2011, and also to the expectation that a combination of weak growth in labour productivity and modest pay rises will continue to moderate the impact of weak output growth on employment.

Dr John Philpott, chief economic adviser at the CIPD, said: “Just as pay freezes and pay cuts protected jobs in the recession, the ongoing pay squeeze is helping our anaemic economy support employment.

“This is clearly preferable to a further very sharp rise in unemployment. But a combination of falling real wages and the likelihood of unemployment well above the pre-recession level for several years to come represents an equivalent amount of labour market distress. 

“While the specific labour market symptoms of economic austerity are different than initially expected the ongoing pain is no less severe as the UK workforce continues to suffer an implicit trade-off between jobs and real living standards.”

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