Thursday 14 August 2014

Wages are falling in this booming economy

Britain's economy is growing faster than any other developed nation, but you wouldn't know it by looking at your pay packet.

Latest official figures show total pay, including bonuses, shrank by 0.2% in the three months ended in June, even as unemployment continued to fall sharply.
"Wages growth declined on the quarter for the first time in five years, which is a warning sign that the economic recovery, although on the right track, is still fragile," said David Kern, chief economist at the British Chambers of Commerce.
The U.K. economy shrank by 7% during the Great Recession and has taken longer than most to recover, surpassing its pre-crisis level only in recent months.
Thanks to a housing boom and consumer spending, it's now motoring: the Bank of England on Wednesday upped its growth forecast for 2014 to 3.5%.
But the central bank also halved its forecast for wage growth to just 1.25%.
With inflation running at 1.9%, that means household incomes are still going backwards.
Bank of England Governor Mark Carney described pay growth as "remarkably weak."
So with record growth in employment -- more than 800,000 jobs have been created in the past year -- why aren't people making more money?
There are several possible reasons. Salaries tend to lag. Most pay reviews happen only once a year and many workers haven't had one since unemployment started falling rapidly in late 2013.
Then there are changes in the labor market. Economists say more people are looking for work, including some who are putting off their retirement.
That could be because of changes to state pension rules, or because they're worried about servicing debts. Others on part-time contracts might want more hours.

No comments:

Post a Comment