Is real wage growth here to stay? (City A.M.)

In a City A.M. debate on whether real wage growth is here to stay, Head of Economic Research Adam Memon argued it is not, Thursday 13 November 2014. 

Read the full debate on the City A.M. website

“Despite strong employment growth and easing inflation, real wage growth will be constrained through continued labour market slack, poor productivity and rising pension contributions. Unemployment, part-time employment and self-employment all have further to fall before wage pressures start in earnest.

The dreadful performance of labour productivity is a big impediment to employers giving wage rises. There should be some demand-led improvements in output per hour, but it is unlikely to grow at pre-crisis levels any time soon without more supply-side reforms.

Also, the expansion of auto-enrolment, while being welcome in itself, means that the difference between what employers pay and workers receive is bigger – another constraint on real wages. The Bank of England was wrong in January when it forecast real wage growth in 2014, and it is quite possible that it’ll be wrong again.”

Read the full debate on the City A.M. website

Date Added: Friday 14th November 2014