Yahoo Finance When will Britons get a pay rise?
Too scared to ask for a pay rise? You’re not alone. There are millions of people who would prefer to walk over hot coals than ask their manager to reward good work with extra cash.
Last week a report found that millennials not only failed to claim a larger slice of the wages pie in their current workplace, they also moved job with less frequency, denying themselves the opportunity to negotiate a boost with a new employer. The combined effect is to make millenials much worse off than the previous generation.
Across the rest of the working population, the picture is disturbingly similar.
The last six or seven years were supposed to be different. There was going to be a quick bounce back from the crash of 2008 offering bumper pay rises all round, quickly pushing up the average wage to new highs.
It was this rosy view that encouraged the Bank of England to forecast in every year since 2010 a rise in wages of such force that it said higher interest rates would be needed within two years to calm things down. It never happened. Not even the British “jobs miracle” of the last two years, which has seen the employment rate reach record levels, was able to bring about the expected jump in wages to 4%.
Last week MPs asked four Bank policymakers how they could be so wrong year after year. They asked the question after the Bank’s monetary policy committee revised down the natural level of unemployment from 5% to 4.5%
It is easy to see why they would be perplexed. The level was 7% in 2013 when the current governor Mark Carney arrived and declared that he would need to consider raising interest rates once unemployment dropped to 7%. The thinking behind the policy was that once unemployment hits its natural rate, the labour market will be so tight that workers can almost walk into a job and in their newly confident state, start to bid up their wages.
Today unemployment stands at 4.8%, which according to the 5% rule means wages should be starting to soar, but under the revised 4.5% target, it is reasonable to expect wages to inch forward at best.
MPs on the treasury select committee were more concerned with who among the Bank’s policymakers had voted to downgrade the target than why it had happened. This was a huge let-off for an institution that has persistently mis-read one of the most fundamental aspects of the economy.
Yet it would be churlish not to recognise that it has become a difficult nut to crack. The pace of change in the labour market has proved as alarming to those who want to measure it as those who must cope with its effects. If one thing is clear, it is that large groups of people are breaking the old rules.
A report that underscores how much the “get a career and push your way up the ladder until retirement” style of work has lost its allure can be found in a report by the National Institute for Economic & Social Research (NIESR) and the Recruitment & Employment Confederation into the state of the health service.
The report’s authors wanted to know what drove nurses and doctors to join agencies, presuming it was simply a case of higher pay. But the researchers found that agency workers in the NHS had similar pay. What they found interesting was that agency workers felt better off because they had escaped the internal politics, the bureaucracy and the stricture of rotas that rarely matched the demands of home. As agency workers they believed they had more control over their lives and put up with less bullying from their employer.
This search for a better work life balance is not new, but now seems to have profound effects on the job market. For instance, the Conservative Party MP Maria Miller warned last week that men also suffer from a lack of family support, as she unveiled an analysis by the parliamentary women and equalities committee of the government’s stance on closing the gender pay gap.
She said men were increasingly likely to follow women into low paid part-time work and jobs well below their qualifications in order to spend more time with their children. She warned this would be bad for families and the nation, as people retreated from workplaces that failed to recognise that workers had broader concerns.
Going back to the millenials, it is not difficult to see they fit into several camps rather than one avaricious mass of people in search of higher pay at all costs. Alongside the office worker who hopes to be a manager someday, there are the gig economy workers developing apps, possibly earning very little in the hope of a stellar payout in the future. There are the Deliveroo and Uber drivers and the care workers stuck on the minimum wage.
James Hick, a senior director at the recruitment agency Manpower, says the millennials’ predecessors – generations X and Y – “don’t look at life as previous generations did” and are more likely to choose a greater degree of control over more pay.
Some people can afford to opt for a better lifestyle because they live in a cheaper part of the country or benefit from family wealth that has paid for all or some of their home. Equally, they could be weighed down by student debts and feel insecure about their prospects, especially if they lack skills that are in demand, says Kevin Green, the head of the Recuitment & Employment Confederation.
The rise of self employment is another trend that proves the workforce is fractured into several camps and is as much about workers driving down their tax bill to make up for lost wage rises as it suggests a wave of entrepreneurialism.
Andy Haldane, the Bank of England’s chief economist, told MPs he had come to realise his analysis would need to change in order to better map the ebb and flow of an increasingly splintered working population.
Haldane has always erred on the side of caution when predicting strong wages growth, unlike his colleagues who appear to believe it will come back simply because it always has. Yet still the Bank’s collective view is that wage rises will return to 3.5% in the next 18 months.
Maybe an exodus of foreign workers will prove positive for wages. In the year to September 2016 the UK created 500,000 jobs and almost half went to foreign born workers. Manpower’s Hick is in no doubt this has influenced wages at the bottom end of the pay scale.
The latest migration figures show many are returning to their home countries. Maybe skill shortages will get worse and pay will rise. Yet that seems unlikely when so many employers appear to prefer keeping a job unfilled than train someone and pay them a decent wage. The use of cheap foreign workers is a habit they will find it hard to shake off.
