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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

Jobs market recovers...but pay doesn't

22 May 2015

The latest labour market figures were released towards the end of April and showed that the employment rate continued to rise in early 2015 – reaching a record high of 73.4% – and the recovery in real wages strengthened, due mainly to inflation falling to zero in February. However, nominal pay growth has remained fairly stagnant, hovering between 1.5% - 2% since autumn 2014. Pre-crisis nominal pay averaged around 4%, according to the independent think tank, the Resolution Foundation.

Inflation is not expected to fall further – it has been at zero for two months – the Resolution Foundation therefore believes that far higher nominal pay growth is needed to strengthen the real pay recovery and sustain it.

So what is the reason for this discrepancy? The think tank attributes it to the relative increase over the course of 2014 in the proportion of jobs accounted for by lower-skilled occupations which is driving down pay growth. It also believes that the unemployment rate may have to fall far below its pre-crisis level in order to drive significant increases in nominal pay.