Sunday, June 26, 2022

Tight labour market drives bonuses up but wider wage squeeze deepens

A tightening labour market and an increasingly mobile workforce is driving up bonuses to hire and retain staff, but the wage squeeze for the wider workforce continues to deepen off the back of rising inflation, the Resolution Foundation said today (Tuesday) in response to the latest labour market statistics.

The UK labour market continues to tighten, with unemployment falling to 3.7 per cent (the lowest since 1974) and the number of vacancies rising to almost 1.3 million, taking vacancy numbers above unemployment levels for the time ever.

Workers are taking advantage of this tight labour market by moving jobs – almost a million did so in the first three months of the year. There are signs firms are using bonuses to respond to the hiring and retention challenges posed by this mass movement, with total pay including bonuses rising 7 per cent. Bonuses are up 30 per cent on last year, but remain concentrated in finance and business sectors which account for almost 60 per cent of all bonuses.

There is less good news for those not receiving bonuses, with regular pay not responding to rising inflation. Real regular pay growth has fallen sharply by 1.2 per cent – the fastest rate in almost a decade. The Foundation notes that the true scale of Britain’s real wage squeeze is likely to be even deeper as the headline rate is flattered by the effects of last year’s furlough.

Finally, the Foundation notes that the UK labour market remains smaller than it was pre-pandemic.

While long-term unemployment is falling, there are no signs that the pandemic-induced rise in inactivity is reversing, with half a million people – largely older workers – having completely disengaged from work. As a result, we are working 10 million fewer hours a month than before the pandemic, which will lead to a smaller economy overall.

Hannah Slaughter, senior economist at the Resolution Foundation, said: “The UK labour market continues to tighten, with the number of unemployed people having fallen below the number of job vacancies for the first time ever. People are taking advantage of these conditions to move jobs, and employers are responding by paying bonuses to hire or retain key staff.

“But for the vast majority of the workforce, the labour market may feel far less hot. There is little sign of wider pay pressures building and real wages are getting squeezed even tighter.

“With inflation having shot up in recent months, the scale of Britain’s wage squeeze is going to get far worse.”

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemic having a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £33.60 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.

Latest news

Related news

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.