Starting Earnings languish as Wage Growth remains low, says CIPD

Starting earnings for new employees are languishing behind inflation despite increasing levels of employment, as wage growth across the UK dwindles.
According to a survey released by the Chartered Institute of Personnel Development (CIPD), only 20 employers out of a sample of 1000 conceded they had beefed up the starting salary for a new recruit. 
That a scant 2% of employers felt compelled to sweeten the deal for new workers is worrying, as those with specific skill sets continue to be marginalised despite their integral roles to companies. Moreover, despite falling levels of unemployment, the average weekly salary of employees, excluding bonuses, has only risen by 0.7% over the past year.
Wage growth has been a pressing topic in recent times, with experts having predicted that the UK would see gradual increases in real wages from April this year onwards. This, however, has not transpired as real wages are speculated to have fallen in June.
Following a price hike in apparel and food & drink prices in June, the UK inflation rate rose to 1.9% by 0.4% by the end of the month. The rise in inflation rate coupled with a reduction in average wage increases from 0.8% to 0.3% further sullies the state of affairs, giving an indication of the challenge facing the Bank of England in catalysing the much needed upsurge in real wages.
However, many economists believe data to be released on Wednesday, by the Office for National Statistics (ONS) will display a 0.1% in real term wages for the month of June. 
Although this statistic has been questioned, because of the sharp rise in the number of bonuses given out by employers last year. Given the cut to the top tax bracket from 50% to 45%, replacing portions of income with added bonuses was an effective way of sparing employees who had been dragged into the 45% tax bracket from paying more in tax.
The CIPDs findings on starting earnings are particularly worrying as it was hoped a notable rise in them would boost real wage growth. However, with private firms seeking to only part with a 2% rise in average rises, and public sector employers expecting to pay half that, the Bank of England will have to reign in any aspirations it had of average wage rises reaching 2.5% this year.
ëMuted Pay Pictureí ñ CIPD findings
The CIPD stressed its surveysí superior breadth and scope when compared with others due to its inclusion of all employers, regardless of their position on wages. For instance, employers who had a policy whereby all wages were frozen since 2013.
The body, concerned with HR management professionals, said: “Despite reports from various business surveys hailing a rise in starting salaries, figures from the CIPD’s Labour Market Outlook reveals that only 2% of employers report a significant increase in starting salaries.”
“The muted pay picture is further supported by the survey, which shows that among those workers who have enjoyed a pay rise this year, the median increase has fallen to 2% this year from 2.5% in 2013,” it continued. 
Additionally, the CIPD recorded a staggeringly high number of employers who had not carried out a pay review. 38% of employers had overseen a pay review since the beginning of the year, a figure made all the more startling given the heightened number of pay settlements conducted during the first 6 months of the year.
Knock-on impact on Interest Rates
The Chancellor, George Osborne, has backed rising employment levels to stimulate wage growth in the near future. However, recently compiled data shows hesitancy on the part of employers when it comes to boosting worker pay, as overall business costs climb.
The BoEís monetary policy committee (MPC) will receive fresh calls to hold off on the projected interest rate hike until next year unless wages rise above the 2.6% RPI. Although the MPC convened earlier this month and agreed to hold off adjusting their base rate, certain members of the committee are said to believe the current economic upturn is the perfect climate in which to raise the base rate.
The chancellorís viewpoint is reinforced by Mr. Beatsonsí comments regarding the job market, where he emphasises the need for ëproductivity growthí alongside rising employment levels.
Mr. Beatson said: “Recruitment intentions are high, SMEs provide much of the fuel and we are seeing this all over the UK, with employers in the Midlands and the North having the highest short-term employment optimism.
“This is great news for job seekers, but we urgently need to see jobs growth accompanied by productivity growth for workers to feel the benefits of the recovery too.”

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