UK employees might just be about to get a pay rise of 5% this year.
Yes, despite the misery of the cost of living crisis, the flatlining of the economy, an incredibly stretched UK workforce and double-digit inflation, it seems like there just might be a spot of good news on the horizon.
Of course, it comes after the Labour Party found that real wages across every UK region are now lower than they were in 2010.
Real wages dropped by 5.5% in the public sector compared to 1.9% in the private sector.
Still, the Chartered Institute of Personnel and Development (CIPD), which represents employers, found that more than half were considering raising the bas salary or variable pay in 2023 to recruit and retain staff.
And the suggestion of a 5% rise is the highest rate sine at least 2012, when CIPD’s quarterly survey of more than 2,000 businesses began.
But, it’s not perfect. Five percent would still not be enough to counteract the real-terms pay cut seen since 2010, especially as inflation is at 10.5%.
Expectations for a public sector pay rise are lower too, at just 2% – which CIPD said explains why there have been so many strikes within these sectors.
Think tank Resolution Foundation also pointed out that the pay gap between the two sectors was almost at a record-high in November.
Then there’s the depleted workforce to factor in, too. Unemployment has also stayed at near record low levels at 3.7%,with many people taking themselves out of active employment either during or just after the pandemic.
But, that means there’s plenty of unfilled vacancies.
The think tank explained back in November: “With vacancy levels still at close to a record high, the labour market remains tight, which is feeding through into the stronger pay growth.
“Vacancies in the private sector have been falling for several months, but continue to hit new highs in the public sector – with 330,000 vacancies across the public administration, education, health and defence industries.”
The UK has also just dodged a technical recession as output stayed almost unchanged towards the end of 2022.
“Skill and labour remain scarce in the face of a labour market which continues to be surprisingly buoyant given the economic backdrop of rising inflation and the associated cost of living crisis,” Jon Boys, CIPD’s senior labour market economist said.
According to the CIPD, around 57% of employers were saying they have hard-to-fill vacancies and of those, two in five said they would raise wages this year to attract workers.