Real wages in Great Britain increased by almost 3% year on year, excluding bonuses, when comparing the period March to May 2015 with the same months in 2014, according to figures by the Office for National Statistics (ONS).
The ONS UK labour market, July 2015 report found that average weekly pay (excluding bonuses) rose by 2.38% between March to May 2014 and March to May 2015, while average weekly total pay (including bonuses) increased by 3.2%.
In both cases, this represents the highest annual growth rate since July to September 2007.
For May 2015, average regular pay for employees was £462 per week before tax and other salary deductions. Average total pay, meanwhile, stood at £492 per week before tax and other deductions from salary.
Priti Patel, employment minister, said: ”The strength of the UK labour market is something we should take great pride in. Today’s figures show real wages growing at the fastest rate since 2007, and near record numbers of women in work.”
Mark Beatson, chief economist at the Chartered Institute of Personnel and Development (CIPD), added: “The three-month average rate of wage growth remains unchanged at 2.7%.
”However, this disguises a ‘tale of two workforces’; where the living standards of workers in sectors such as manufacturing and public sector are falling further behind other booming sectors such as construction and finance.
”Inflation is unusually low and many firms are still not having pay reviews either because they see no need to put wages up, or are awarding low pay rises because they say they can’t afford to pay more. Looking ahead, there is also a question of whether some employers might change how they set pay in anticipation of the proposed national living wage, especially in low-paid sectors.”
There are two clear messages that are emerging from the results of auto-enrolment thus far.
The first is, as we might have expected, that the overall effect of automatically enrolling millions of new savers into a workplace pension scheme would be to increase the numbers contributing but, on the basis of minimum contribution levels, reduce the median amounts being saved.
This will inevitably increase as the minimum levels increase when the “phasing-in” process is complete, although for most savers they will still be inadequate to give them the levels of pension saving they might need. This problem needs to be addressed by the use of some system of auto-escalation of contributions or other means as soon as possible.
The second message to me from the figures is the need for the Government to tread carefully with any major changes to tax reliefs that they may be considering. If it were to be decided to go the whole hog and reverse the arrangements for giving tax relief on contributions to one where instead the proceeds were allowed tax-free instead many years hence this would reduce still further the amounts being paid in under auto-enrolment and aggravate the current situation even more.
It could also put off many younger people from saving into a pension which is the exact opposite of what auto-enrolment was designed to achieve.